Cash Back Credit Cards

How to choose a cash back credit card...

If you are a diligent credit card user that prefers the convenience of plastic to cash and you consistently pay off your statement balance in full each month, then a cash back credit card would make for an excellent shopping companion.

Spend on a cash back credit card as you would a debit card, and you could make a small amount of money every month, for nothing.

:: These cards are good for:

Anyone who always pays off their monthly balance in full. The standard interest rate on any credit card will always be much higher than any cash back percentage - so leave an outstanding balance on your cash back credit card and the interest charge will swallow up any potential cash back earnings.

The ideal candidate for a cash back credit card is someone who uses his or her credit card a lot. The more you spend the more you earn. By switching transactions, such as food shopping and petrol from a debit card to a cash back credit card will drastically increase your yearly spending total and therefore increase the amount of money you earn back.

:: These cards are unsuitable for:

- Regularly carrying a balance over
It cannot be over emphasized how important it is to pay off the balance in full every month.

If you do not always manage to pay off your current card, or you have an irregular income, it may be wise to set up a direct debit instructed to pay off the full balance every month.

If you have any concerns that you won't be able to do this or you already struggle to repay your current card each month, you should opt for a low interest rate credit card instead - you'll save more money by paying cheap interest rates than you would paying average or higher rates and earning cash back.

- Balance transfers
Generally, spending doesn't sit all that well with balance transfers anyway. Due to the way card issuers 'allocate' your payments, the multi-use of a credit card for transfers and spending can become more costly than money saving.

Cash back credit cards are no different, and if you have a balance to transfer you should always choose a specific 'balance transfer' credit card for the purpose.

- Cash Withdrawals
Cash withdrawals won't earn you any cash back and they will usually be subject to higher interest rates and handling fees - so it's always best to use your debit card if you need to get hold of some cash.

Look for:

Quite simply, the best cash back credit card is the one that offers the highest percentage of your spending back.

- How much do you actually spend?
The amount of money you actually spend on your credit card can be the main deciding factor in which cash back credit card is right for you.

Cash back credit cards are sometimes tailored to suit a particular level of spending - offering tiered payouts with the highest cash back percentage being awarded to either initial spending or higher, accrued levels of spending.

Whether you spend a couple of thousand a year, or a couple of tens of thousands a year, just by choosing the right cash back credit card for your individual spending could easily see your potential earnings double.

Deciding which cash back credit card is the best for your spending is easier than it sounds - simple use ChooseMoney's cash back credit card comparison and we will calculate it for you.

- Cards with good introductory offers
As competition in the credit card market increases credit card companies are constantly dreaming up new and improved offers to coerce you on board. Choosing a cash back credit card that offers a higher cash back percentage for the first few months is a good way to quickly clock up the cash.

However, whilst it is great to get an initial bonus, if you are looking to fill a long-term placement in your wallet, the overall payout level should be your first consideration.

- What about the rates and fees?
If you use your cash back credit card as you should - paying off your balance in full each month - you need not worry too much about the 'APR' or interest rate of the credit card.

However, you may want to look at the interest free period on offer - the longer this period, the more time you have to repay your purchases in full before you are charged any interest.

Watch out for:

- Check for hidden fees
The usual suspect to watch out for when comparing reward credit cards is the 'annual fee' - an account management fee charged yearly for not much else than holding the account. Don’t be too alarmed though, this fee is usually limited to flyer mile credit cards.

- Is there a maximum limit on your cash back earnings?
Some cash back credit cards may set a limit on the amount of cash back you can earn - sometimes this limit is placed on the total amount of purchases that cash back will be awarded on.

However, if a cash back earning limit does exist, it will usually be pretty high and won't affect the majority of spenders. For example, a 'typical' limit would be something like "cash back can only be earned on purchases up to £20,000 each year" - much more than the average spender is likely to splash out.

If you do spend much in excess of £20,000 each year, there are cash back credit cards available that award the highest cash back percentages on higher spending levels and do not impose any earning limitations.

Don't forget:

- Only spending will make you money
Cash back is only paid out on purchase spending - basically any goods or services.

You cannot earn cash back on cash advances - including ATM withdrawals, getting 'cash back' at the supermarket, buying foreign currency or traveller's cheques and on some cards gambling transactions.

Nor can you earn cash back on balance transfers - plus, if you do have a balance to transfer your best bet will always be to transfer it to a specific 'balance transfer' credit card, most of which, are not suitable for spending.

- Don't lose out!
Like most attractive credit card deals, there are always terms and conditions in place for the card issuer to remove your benefits rather quickly if you don't play fair.

Keep your cash back earnings safe by following these two simple rules:

1. Always pay your statement balance in full and on time (if you don't pay off the full amount, while your cash back will remain safe, you will effectively lose it to interest charges instead).

2. Do not go over your credit limit

Compare cash back credit cards