Cashback Credit Cards

The UK spent £122 billion on credit cards in  2006. This equates to an average spend of over £2,000 for every man, woman and child.  Are aware that you can get some of this back in the form of a Cashback or Rebate?

What is a Cashback Credit Card?

When you buy items on your credit card, the shop you buy from normally pays commission to a bank or merchant service provider for the service of using that credit machine. Some credit card companies have decided to share this commission with their customers, the spending public.  Most cashback credit cards typically give anything between 0.5% and 2% of the net spending. This rebate, or cashback, is usually credited back to your credit card account, or paid separately by cheque. Depending on the credit card, some will pay this cashback monthly while others will pay annually.  For example, if you choose a cashback credit card with 2% rebate, for every £100 you spend, you get £2 back.

Who should use Cashback Credit Cards?

Cashback credit cards can be a good option if you always pay off your credit card balance in full every month. It is a great way to accumulate free cash to invest the money elsewhere (hopefully into your children’s savings account).

Who should NOT use Cashback Credit Cards?

There are many negatives to having a Cashback Credit Card, namely the same negatives associated with having credit cards in general.  If you don’t clear your balance each month, you could be in line for a double whammy of high interest and fee charges. You should only consider using these cards if you know you have the discipline and systems in place to do so. For example, by setting a monthly direct debit from your current account, you will reduce your chance of receiving these hefty charges. In addition, if you have a poor credit record, these cards are definitely not for you.    

Bad Credit Record

If you have a bad credit history, it won't necessarily prevent you from getting a cashback credit card but banks and lending institutions will probably penalise you with a higher rate of interest. 

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If you are having difficulties obtaining credit then it is always worth checking that you actually appear on the voters roll at your current address. If you don't, you'll be lucky to get credit anywhere. You can check this by reference to Experian or Equifax.

Cashback Credit Cards as a mechanism for children's savings

For those disciplined enough to have one, cashback credit cards can be a useful additional tool to save for your children’s future. If you view the cashback as free cash, any money accumulated can go straight into your children’s savings account. You will be surprised how quickly this savings can add up.

Important information you should know

Under Section 75 of the Consumer Credit Act, when you buy an item on your credit card between £100 and £30,000, you are entering into a contract with the both the merchant and the card issuer. Essentially, that means that if the items are faulty or defective, you can take action against either party to claim back compensation. However, Section 75 does not generally cover purchases made overseas.

Tips for consumers on purchases made in the UK 

• Thanks to the consumer protection of Section 75, money that once was lost from a disputed credit card purchase can now be claimed back; this excludes purchases made with debit cards 
• If you pay by credit card you can claim your money back from the card company if the seller fails to honour the contract, wrongly describes it or goes out of business with your money before the item is delivered 
• If you are buying an item costing over £100 and are required to pay a deposit valued at under the Section 75 £100 threshold, still use your credit card.  Even though this low value deposit falls below the £100 minimum, it will be covered because it is linked to the over-£100 item you are purchasing   
• You have the same protection whether you buy in the UK from a shop, by mail-order, by telephone or internet

Compare the Best Buys Cashback Credit Cards

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Other related articles from MyEggNest

How to use a cashback debit card
Cashback Shopping
Charity Donations
Money Saving Tips
Free Gifts with your Children Savings Account

Join in the cashback discussion forum

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