Credit Card Types: Cash Back Credit Cards

The credit card industry has changed dramatically in the last 20 years. Today there are far more providers all competing to try and get your business. To this end, both old and new credit card providers have had to come up with some ingenious offers to try and entice you to sign up for a UK credit card – and one of the more attractive rewards you can get is with the cash back credit cards.

As their name suggests, cash back credit cards give cardholders cash rewards when they make a purchase using the card. Typically, UK credit card providers offer the following:

an introductory rate (of 2-3%) during your first 3 to 6 months that is higher than the standard cash back rate
0% APR during the introductory period
a standard cash back rate of 1% once the introductory period has expired
higher rates at selected outlets
progressive threshold cash back rates; e.g. spend £500 and get 1%, spend £1,500 and get 1.5%, etc

Although it would be nice to think that you could get £5 cash back on a £500 cash withdrawal on your credit card, keep in mind that none of these rewards will be given on cash withdrawals on your card, nor do they accrue against any interest charges and fees that may be incurred on the card. For this reason, cash back credit cards are seen as being good reward cards for diligent credit cardholders who have the ability to repay their outstanding balance on the due date each month. After all, it does kind of defeat the object of having cash back credit cards if the cash you get back automatically has to be repaid to the credit card company in interest!

If you are thinking of applying to a UK credit card company for a cask back card, make sure you read the terms and conditions in the application form careful. In certain cases, the “cash back” offer is not ‘real’ cash, but a gift voucher to spend your reward at a certain outlet.

Finally, because of the costs incurred by credit card companies offering cash back credit cards, most issuers ask their cash back reward members to pay an annual membership fee. If the annual membership fee is higher than what you are likely to get in cash back rewards, you may want to think of applying for a different type of reward program.

This article is based on the writer’s own research and in no form constitutes financial advice. Readers should always conduct their own research into any financial option, based on their own specific circumstances.

Individual credit cards and their rates quoted are correct at time of writing, but may be withdrawn by the credit card company at any time. Always check with the company concerned for their current deal.