15 min Read
12 Nov 2019

Written by Andy

Compare the best cashback and reward credit cards

Best cashback credit cardsWhat is a cashback/reward credit card and how does it work?

A cashback or reward credit card enables you to earn cashback or rewards as you spend. So, every time you spend on the card, you can earn rewards and cashback, subject to the details set out in the terms and conditions. The rewards you receive may be limited to how often you shop, who you shop with or how much you spend. The maximum you can earn is usually capped and is paid as credit on your card balance either monthly or annually.

It is important to note that cashback credit cards should only be considered if you are able to pay off the balance in full each month. Ideally, you would treat a cashback credit card in the same way as you would a debit card, using it to purchase essentials as well as your usual, budgeted discretionary monthly spend. Cashback credit cards tend to have a higher rate of interest payable which is why it is especially important to pay it in full each month and not use it to build up debt. If you are thinking of applying for a card to make new purchases (outside of your usual monthly spend) then check out our article 'Compare the best 0% purchase credit cards'.

What are the best cashback credit cards?

When looking for the best cashback credit card you should consider the following:

  • The total reward (eg. 3% cashback for 3 months is not as good 1% cashback for 12 months)
  • Whether there are any account charges levied (monthly or annual fees)
  • What is the APR

Having completed a full review of the best cashback credit cards here are my top 3 (based on spending £1,000 per month)

Card Cashback Breakdown Total Reward (less fees) Smallprint Fee Representative APR Good For
American Express Platinum 5% cashback (first 3 months up to £2.5k) then 1% on up to £10k then 1.25% on over £10k £200 You have to pay an annual fee £25 28.20% Big spenders
American Express Platinum Everyday 5% cashback (first 3 months up to £2k) then 0.5% on up to £5k then 1% on over £5k £185 Spend at least £3,000 per year to earn any cashback £0 22.90% Those who do not want to pay a fee
Tandem 0.5% cashback £60 Have to sign up for a Tandem bank account £0 18.90% Those who want simplicity

 

Amex cashback card     American Express Platinum

    • 0% interest up to 56 days
    • 3% fee on cash advances
    • Annual fee of £25
    • Would receive £200 cashback per anum (net of fees) based on spending £1,000 per month
    • Minimum repayment of £25 or 2% of the outstanding balance plus interest, plus fees, plus any insurance premium, plus the amount of any arrears which are payable immediately.
    • Representative APR 28.2%
    • Pay the balance in full each month to ensure no interest is charged

Amex cashback card     American Express Platinum Everyday

    • 0% interest up to 56 days
    • 3% fee on cash advances
    • No annual fee
    • Must spend at least £3,000 in order to qualify for cashback
    • Would receive £185 cashback per anum based on spending £1,000 per month
    • Minimum repayment of £25 or 2% of the outstanding balance plus interest, plus fees, plus any insurance premium, plus the amount of any arrears which are payable immediately.
    • Representative APR 22.9%
    • Pay the balance in full each month to ensure no interest is charged

Tandem cashback card     Tandem

    • No interest charged so long as you pay your balance in full by the payment date each month
    • 2.5% fee on cash advances
    • No annual fee
    • Would receive £200 cashback per anum (net of fees) based on spending £1,000 per month
    • £12 fee if you make a late payment
    • Minimum repayment of £5 or 1% of the remaining balance, whichever is higher
    • Representative APR 18.9%
    • Pay the balance in full each month to ensure no interest is charged

What are the best reward credit cards?

When looking for the best reward credit card you should consider the following:

  • The total reward and the qualifying criteria to achieve the total reward
  • Whether there are any account charges levied (monthly or annual fees)
  • What is the APR

Having completed a full review of the best reward credit cards here are my top 3

Card Reward Breakdown Total Reward (less fees) Smallprint Fee Representative APR Good For
American Express Nectar Spend £2k within first 3 months and earn 20,000 bonus Nectar points worth at least £100 £100 You have to pay an annual fee £25 (free for the first year) 28.20% Those who shop at Sainsbury's
M&S Bank £20 voucher when you first spend plus £5 worth of points. Two points per £1 spent at M&S in first year, then 1 point per £1 spent thereafter £25 (plus more if regularly spending at M&S) Points expire after 2 years £0 19.9%% Those who shop at M&S
John Lewis / Waitrose Partnership Spend £250 within 90 days at either store and earn points worth £30 to spend at John Lewis or Waitrose. £30 (plus more based on monthly spending) Points expire after 2 years £0 18.90% Those who shop at John Lewis / Waitrose

 

Amex Nectar     American Express Nectar reward card

    • 0% interest up to 56 days
    • 3% fee on cash advances
    • Annual fee of £25 (free for the first year)
    • Spend £2k within first 3 months and earn points worth £100
    • Minimum repayment of £25 or 2% of the outstanding balance plus interest, plus fees, plus any insurance premium, plus the amount of any arrears which are payable immediately.
    • Representative APR 28.2%
    • Pay the balance in full each month to ensure no interest is charged

M&S reward card     M&S Bank reward credit card

    • 0% interest up to 6 months
    • 0% on balance transfers for 6 months (2.9% fee applies)
    • 2.99% fee on cash advances
    • No annual fee
    • £25 vouchers to spend at M&S (plus more as you spend each month)
    • Minimum repayment of the greater of the following: £5, 1% of the full amount you owe not including any interest or charges or 2.5% of the full amount you owe including interest and charges
    • Representative APR 19.9%
    • Pay the balance in full each month to ensure no interest is charged

John Lewis reward credit card     John Lewis / Waitrose reward credit card

    • 0% interest up to 9 months
    • 0% on balance transfers for 18 months (2.9% fee applies)
    • 2.5% fee on cash advances
    • No annual fee
    • £30 vouchers to spend at John Lewis / Waitrose (plus more as you spend each month)
    • Minimum repayment of the greater of the following: £5, 1% of the full amount you owe not including any interest or charges or 3% of the full amount you owe including interest and charges
    • Representative APR 18.9%
    • Pay the balance in full each month to ensure no interest is charged

Advantages of a cashback / reward purchase credit card

Cashback and reward credit cards enable you to earn cashback and rewards as part of your normal monthly spend. If you time it right then you can benefit from an initial 30-60 day interest-free period which can free up cash flow and help with expensive months, such as Christmas. This will only work if you intend to continue using your credit card each month going forward (while paying your balance in full and on time). For example, a credit card statement may run from 16th to the 15th of the month, with payment due by the 29th. Theoretically, you could use your cashback / reward credit card from 16th of the month, meaning you are no longer spending through your current account. The credit card payment would not be due until the end of the following month and, as you are likely to have been paid again by then, you should find that you can easily pay the balance. Managing your money in this way to take advantage of the interest-free period requires good planning and preparation and so make sure you are aware of the statement and payment dates and always ensure you set up a direct debit to pay the balance in full each month.

Things to consider before getting a cashback or reward credit card

Always consider your financial circumstances before applying for any credit card. Getting caught up in the excitement of cashback deals and rewards can sometimes cloud your judgement and leave you struggling to clear the credit card balance, especially as cashback credit cards tend to charge higher interest than other cards.

It is absolutely vital that you clear the outstanding debt each month to ensure you use the card to its full potential. The advertised cashback rewards and bonuses are often subject to your own personal circumstances and so be prepared to either be rejected or offered alternative terms if your finances are not in good shape.

All applications are subject to credit checks so make sure you know your chances of being accepted before you apply. Most companies will allow you to check your eligibility before you apply, resulting in a 'soft search' that doesn't impact your credit score.

Cashback credit card vs using your current account

It is often far simpler to use a debit card for purchases as it ensures that you only ever spend the money you have, and, subject to overdraft charges, means you won't be charged. While some banks and online services offer cashback deals through debit cards, these are often restricted to just a few merchants and so a cashback credit card is often the best way to maximise cashback and rewards for everyday spending. Those who struggle to control their spending may be better off using their existing debit card and looking at other ways to earn cashback and rewards, such as cashback sites.

Cashback/reward credit card FAQs

How much can I earn by using a cashback credit card?

Cashback and rewards will depend firstly on who you apply through and then how much you spend. The more you spend with someone like American Express, the more you earn. Someone spending £50,000 a year with an Amex Platinum cashback card could earn as much as £675, however this is probably unrealistic for most. If we look at an amount of £12,000 per year, which when you consider grocery costs and discretionary spending is far more realistic, then you can expect to earn £200 in the first year.

How do I pay off a cashback credit card?

Each card provider will set out the repayment terms in its terms and conditions document. With a cashback or reward credit card, it is advisable to repay the balance in full each month.

Can I use a cashback credit card for new purchases?

Yes, it is the way the card is designed, however to use a cashback card most effectively you should clear the balance in full each month. Never use a cashback or reward card to build up debt as it can be very expensive. Some reward cards do offer slightly longer interest free periods, however you are likely to be better off applying for a 0% purchase credit card, rather than a cashback or reward card. Check out our article 'Compare the best 0% purchase credit cards'.

Can I use a cashback credit card for balance transfers?

It is not advisable. Some providers will allow you to make a balance transfer, however the interest period will usually be quite short when compared to a balance transfer credit card, a product that is designed specifically for that purpose. Check out our article 'Best 0% transfer credit card deals'.

What happens when the interest-free period ends?

If you still have a balance remaining at the end of the interest-free period, the interest rate charged will be at the current rate for the card. This may be higher or lower than the rate advertised on the application, always check to make sure you know the rates being charged. Cashback and reward credit cards tend to have short interest free periods and high-interest rates and so make sure that a cashback credit card is right for you before you apply.

Looking for a financial adviser near you?

Do you need financial advice? An independent financial adviser can show you how to make the most of your money.

Simply find your nearest qualified and regulated adviser using the UK’s largest adviser search.