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If you’re looking for the best cashback credit card, examining the cashback yield is a great place to start. But we’ve taken many variables into account when determining our ratings. Here are MyWalletHero’s picks for the best cashback credit cards:
In this section:
What is a cashback credit card?
A cashback credit card is a type of rewards credit card. But where most rewards credit cards give you ‘points’ of some sort when you spend, cashback cards give you cash.
The advantage of a cashback card should be pretty clear then. Instead of having to worry about how, when and where you can convert points, you get cash that you can spend any way you like.
How do cashback credit cards work?
Simplicity is the name of the game with cashback cards. The rewards (cash) are simple and straightforward. And so is how to use them.
‘True’ cashback cards are generally not tied to a particular store brand. So that means that wherever you spend, you get rewarded with cashback. That is, when you swipe your card, you will get whatever percentage cashback that card provides.
Do take note. Some cards that provide rewards in the form of points, may refer to those rewards as ‘cashback’, but we don’t consider those cashback cards (they’re still rewards cards though!). Also, some cards may vary the level of cashback that you get. For example, a higher cashback rate when you first get the card. In these cases, it could make sense to shift existing spend — that is, spend that you’d do anyway — to that card. But be careful not to overspend, because the cashback won’t make up for that.
Finally, some cashback cards may offer higher cashback rates in exchange for an annual fee. This can make sense. However, do the maths to see whether the amount you’ll expect to spend will lead to cashback rewards that will make up for the annual fee. And again, don’t overspend just to ‘take advantage of’ the cashback rewards.
How we picked the winners
We’ve selected what we think are the best cashback credit cards available. Here are the main factors we considered when compiling our shortlist.
- Cashback rate – The cashback you will earn on your purchases as a percentage of spending.
- Sign-up bonus – Whether a card offers a sign-up bonus in the form of higher cashback rewards for an introductory period.
- Annual fees that make sense – Annual fees are sometimes worthwhile in order to unlock the most rewarding offers, but for the majority of our picks we looked for cards with no annual fees.
- Introductory 0% interest periods – Included in our shortlist are cards that also offer an introductory 0% interest period for either purchases, balance transfers or both.
What are cashback rates?
Each cashback card has its own cashback rate, and this may vary for different types of spending, for different periods of time and for how much you spend on your card.
Some cards have a different cashback rate for spending at different retailers. For example, you could receive 1.5% cashback for spending at a selected store, but only 0.5% for spending elsewhere.
Other cards may offer you a higher cashback rate for an introductory period. You might earn 5% cashback on purchases for the first three months after account opening, and 1% thereafter.
Finally, some cards may also have a spending threshold in order to unlock a higher cashback rate. An example of this is if you spend £3,000 then you might be able to earn 1.25% in cashback on purchases, rather the card’s standard rate of 0.5%.
How is cashback calculated?
Cashback is typically calculated by rounding up to the nearest penny or pound (you can find this out in your card’s terms and conditions). For example, if you have a cashback card with a cashback rate of 0.5% and you made a purchase worth £100, you would receive 50p worth of cashback in either your monthly or annual statement, depending on your card.
Cards typically cap the amount of cashback you can earn. You might, for example, receive 5% cashback on purchases for the first three months, but you could only ever earn up to £125 in cashback rewards within that period as the card has a limit in place. There are cards available that allow unlimited potential for earning cashback rewards, but they typically have lower cashback rates as a result.
Things to consider when choosing a cashback card
It may seem like a great idea to make your credit card work for you and reward you for spending, but it is worth taking the time to consider what you really need from a cashback card. Here are the top things that we think you need to consider when choosing a cashback card.
Cashback rewards – You need to consider what type of cashback rewards will work for you, based on your current spending habits. If you are going to receive higher cashback rates for shopping at a supermarket that you already shop at, then you will be able to earn more cashback rewards. On the flip side, if a card rewards you with higher levels of cashback for shopping at Asda but you do your weekly food shop at Sainsbury’s, it may not be the card for you.
Minimum spending requirement – The idea of a cashback card is to make your money work for you. If you are not planning to put a lot of purchases on your credit card, then look for a card that has no (or a very low) spending requirement. However, if you frequently use your credit card and put most of your spending on it, maybe consider a card that offers a higher cashback rate for a certain level of spending.
New cardholder bonus – Look to see whether there are any introductory offers that may work for you. If offers are limited to spending with the first three months, for example, consider your budget and whether you would be able to achieve the level of spending required in the time period in order to unlock the higher cashback rate. Be careful about taking on too much debt. Unless you have a 0% interest on purchases offer in place, then you will need to pay your balance in full each month in order to avoid racking up interest charges and offsetting any gains you would have made with the cashback offer.
Introductory 0% interest offers – As mentioned in the previous point, look to see whether the card has a 0% interest on purchases introductory offer. If you are planning to make a large purchase and pay it off over a period of time, this could help you do this while also earning cashback on the amount you have spent. Just take note of when the 0% introductory period ends, so that you do not get caught out when the card returns to its standard APR.
Annual fees – It is also worth considering whether the card has an annual fee. If it does, calculate whether you would actually benefit from the cashback: is the amount of cashback you might earn in a year greater than the fee?
Other benefits – Look to see whether you could get any other benefits with your card, such as no fees for overseas usage.
5 ways to maximise your cashback rewards
Imagine you have selected your cashback credit card. Now it’s time to start making some money. Here are five things you can do to maximise your potential cashback yield.
- Use your card like a debit card – If you are looking to really maximise the amount of cashback you earn, the best way to do so is to spend lots of your card. What that doesn’t mean is out-of-control spending and racking up lots of debt you can’t afford to repay! Instead, simply use your credit card like a debit card. If you make your credit card your main form of payment then either pay off the amount you spend immediately or budget to pay off the full amount at the end of the month, you can maximise the amount of cashback you earn. Obviously, take into account whether your card has a cashback cap, as there will be little point in spending on your card if you have already gone over your cashback limit.
- Add an additional user – Some cards allow you to add a partner or close family member to your account for free. This means that both of you can use the card and you will also earn cashback on the additional cardholder’s spending. Something to note, though, is that adding an additional user makes you responsible for their debt. Additionally, any mistakes you make, like a late payment, will show up on their credit report and vice versa.
- Put large expenses on your card – If you have some home improvements coming up or are looking to book a holiday, you could put the cost on your credit card and earn cashback as a result. This is best done only if the card also offers an introductory 0% interest period on purchases, otherwise you could run the risk of incurring interest charges on your balance and wiping out any cashback yield you have earned. Obviously, bear in mind whether there is a cap on the amount of cashback you can earn, as if it is capped at a certain limit then it may not make sense to put a large expenditure on your card.
- Select cashback that will suit you – As mentioned previously, some cards offer higher cashback rates for spending at specific retailers. Consider your existing shopping habits and therefore whether the cashback offer reflects them.
- Use the sign-up offer – If you select a card that has a sign-up offer of a higher cashback rate for an introductory period, make the most of it! If you can receive 5% cashback for the first three months, direct as much spend as you can to the card during that period. Again, that doesn’t mean taking on new debt. Instead, if there are things you need to purchase and would normally use cash or debit, consider swiping your card instead. If you have another credit card that you normally use, you could also switch spending from that to the new one during the promotional period. Make sure you are not overspending, as if you cannot pay the balance off in full any cashback you earn could be wiped out by high interest charges.
What’s the catch?
As with anything, there is always a downside. The idea of earning cashback for using your card is great in principle, but here are a few things to bear in mind.
- Cashback cards typically have higher APRs, therefore they are best suited to borrowers who can repay their balance in full each month. Any balance left on your card could accrue high interest charges, unless you have a 0% interest on purchases offer in place, and wipe out any cashback rewards you earn.
- Cashback limits are quite common. You may be prepared to change your spending habits to maximise your cashback reward, but your card provider may have different ideas! Always look to see whether the amount of cashback you can earn is capped and at what amount.
- Annual fees could offset any cashback you earn. Look to see whether your card has an annual fee and, if it does, whether it is worth paying in order to unlock higher cashback rates.
- There are sometimes restrictions on what spending you can earn cashback on. For example, some cards will not pay cashback on purchases abroad, or you may not be able to earn cashback on balance transfers. It is worth checking the card’s cashback terms and conditions, which can usually be found on the card provider’s website.
Is a cashback card right for me?
As with any card, whether a cashback card is right for you depends on your individual circumstances. If you are looking to take out a cashback credit card, it is worth considering how much you spend each month and where you spend it. That will help give you a picture of what cashback rewards you could actually earn with the cashback offer available.
Cashback cards typically require you to have a good/excellent credit score. All our reviews on MyWalletHero give a guide on what credit score requirements each card has, to help you make your decision. Due to the nature of the reward, cashback cards are more suited to borrowers who can repay their balance in full each month. If you plan to carry a balance, a cashback card may not be the card for you, as any potential cashback you earn could be wiped out by high interest charges (unless you have a 0% interest on purchases offer in place).