Survival guide to cashback credit cards

Want to earn money while you shop? Here’s how

Disciplined shoppers could earn 5 per cent back on spending (PA)

Cashback credit cards are not for everyone but if you can play by the rules then you can get a percentage of your spending back.

They’re definitely not the best option if you leave a balance on the card month to month. But if you have a good credit score, you’re self disciplined and you know you can pay off the balance on time each month then they can be a great way to earn up to 5 per cent cash back on everything you spend.

How are they offering free money?

They’re not. Some card providers charge retailers a higher fee when you use the card to shop with them and most have a high APR so shoppers who do leave a balance pay handsomely for the privilege.

Why isn’t everyone doing it?

Cashback credit cards are a great innovation… for customers who know how to use them.

In order for a cashback card to earn you money you need to clear the balance completely and on time every single month, because otherwise the interest you will pay will far outstrip the money you will earn. If you need a credit card to leave a balance on then these are emphatically not the right deals for you, you need a card with a low rate or long interest-free period.

Also, cashback cards are usually reserved for applicants who have squeaky clean credit histories, so they aren’t available to a lot of people.

How competitive are they?

Sadly for cardholders these deals are going the way of the dodo, with American Express cutting the rates of two of its best cashback cards just this week.

Analysts are warning that these deals are not especially lucrative for providers and it could be that rates are cut across the board in the future as the sector becomes less competitive.

Having said that, there’s no reason not to make a few extra pounds on your shopping if a cashback card is an option for you.

How much can I earn?

Let’s talk numbers so you can see if it’s worth the effort. The market-leading American Express Platinum Cashback Everyday card offers an impressive 5 per cent cashback for the first three months, capped at £100.

After that you can earn up to 1 per cent cashback, which is still a decent rate for simply remembering to clear your card each month. Do remember, however, because the representative APR is 22.9 per cent, so you need to get it cleared.

That Amex offering may be only available to customers with a perfect credit score, but even people with a more chequered credit history can use a cashback card if they pick the right one. For example, the Aqua cashback card earns shoppers 0.5 per cent cashback and encourages them to improve their credit rating by clearing the debt each month.

But with a variable interest rate of 34.9 per cent, it’s also not the best card to leave a balance on.

If you like the idea of cashback but you also want to shop, you could take a look at the TSB Platinum Purchase Card. You can earn 1 per cent cashback on the first £500 of eligible spending each month, as long as you also have a TSB Classic Plus current account.

There’s also 0 per cent interest for up to 20 months on purchases and balance transfers, although there’s a standard 2.95 per cent fee for the transfer.