Money Insider: Cashback offers are back ...but are they worth it?

Desperate to boost market share, credit-card companies and banks are once again trying to win us over with headline-grabbing cashback incentives.

The economy may be slowly starting to recover, but for many people money is still tight, so dangling the carrot of "free cash" is a smart marketing ploy from the banks.

The problem is that these deals may look quite appealing at first glance, but when you dig a bit deeper and manage to make sense of some of the small print and restrictions they're often not all they're cracked up to be.

Credit cards

When it comes to new plastic, many of the promotions try to tempt you with impressive-looking returns for the first three months, but once the reward rate plummets they lose their appeal, particularly if you're not a big spender.

For example, to take full advantage of the rewards on offer from Barclaycard and its High 5 cashback deal you need to use your card at least 15 times a month to get the highest cashback rate, and even then it's only paid on your five biggest purchases.

The Santander 123 card cashback scheme operates in a totally different manner in that you earn at varying reward rates depending on where you spend. The percentages look pretty impressive, but remember there will be some big-ticket items that don't fall into any of the predefined categories, so you'll miss out on some big earning opportunities.

The number one rule with credit card cashback offers is: don't even think about signing up unless you repay your statement balance in full every month, otherwise the interest charges will more than wipe out any benefits earned.

Also remember that cashback is only payable on purchases, so balance transfers, cash advances and gambling transactions don't count.

Also bear in mind that some reward cards charge £24 a year, so if you're not a big spender this will make a big hole in your payback.

We all have different shopping habits, so make sure you pick the card that works best for you based on the retailers where you tend to spend the most at over the course of a year.

Bank accounts

Now that it's possible to switch bank accounts in just seven working days, the banks are upping the ante to try to keep existing customers and entice new ones to sign up. In the past month, both NatWest and Halifax have announced new cashback programmes for current account customers.

However, I wouldn't get too excited as the number of retailers included in these schemes is quite limited and unless this changes you're unlikely to earn much in the way of a rebate.

The most popular current account cashback offer comes from Santander with its 123 offer. It's a unique but potentially rewarding scheme where you can earn cashback on your utility bill payments as well as interest on credit balances over £1,000.

Even though the account comes with a £24 annual fee, it's fairly easy to recoup this and more. There's a calculator on the Santander website where you can check how much you would earn based on your bill payments.

The Halifax reward current account is a long-standing offer and pays £5 every month as long as you remain in credit and pay in a minimum of £750 a month – again a nice little earner, pocketing you a handy £60 a year for your loyalty.

Although there's extra cash to be earned from these deals, the returns won't be life-changing. But they could come in handy at Christmas, for example, or perhaps used towards a once-a-year treat.

Andrew Hagger is an independent personal finance analyst at moneycomms.co.uk