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Are cashback credit cards a good deal?

Are cashback credit cards a good deal?

By: Peter Stephens | 16th June 2020

Receiving a percentage of every £1 spent on a credit card could be highly appealing to a range of consumers. In fact, over the course of a year, 0.5% or even 1% of everything spent on a credit card could amount to a significant sum for many consumers. A cashback credit card may, therefore, appeal to a large proportion of the 32 million people in the UK who have a credit card.

Best of all, obtaining cashback requires no additional effort – simply use the credit card as normal and the cashback mounts up.

However, are cashback credit cards too good to be true? And might some consumers be better off avoiding them?

Cashback potential

With consumers spending an average of £538 per month on their credit cards, there seems to be a significant opportunity for them to benefit from cashback cards.

At the time of writing, the American Express Platinum Everyday Cashback credit card offers a 1% cashback rate on all spending, provided £5,000 or more is spent in total per year. This could equate to £5.38 per month, or £64.56 per year, based on the average spending on a credit card.

The Tandem Cashback Credit Card offers a 0.5% cashback rate at the time of writing. Since Tandem uses Mastercard, the card is more widely accepted than American Express. As such, the difference in cashback between the two credit cards may not be as high as their 1% and 0.5% rates suggest.

Both cards have no annual fee.


As with all credit cards, there are downsides to cashback cards.

A notable issue is the high rate of interest that cashback cards often charge when compared with cards that do not offer cashback. The 40% of credit card holders in the UK who do not pay off their balance in full each month could end up paying more interest than with other, non-cashback, cards. The interest payments may more than offset the potential cashback they receive. This may mean that cashback cards are not suitable for these people.

For some consumers, credit card features such as a 0% interest balance transfer period may be more attractive than cashback.

Similarly, an introductory 0% interest period could save some consumers a significant amount of money in interest charges if they need to make a large purchase. The saving could easily amount to more money than the cashback that could have been received.

Cashback cards may also charge fees, such as for foreign exchange transactions. This could mean that while they are appealing when spending in the UK, a second credit card is required while travelling internationally.


Cashback credit cards offer a good deal for those consumers who pay off their credit card in full each month.

The interest rates on cashback cards can be high compared with those on other cards, however. Therefore, cashback cards may not be a good deal for the 40% of consumers who have an existing credit card balance. Other consumers may find balance transfer offers or introductory 0% interest rates more appealing than cashback.

However, the simplicity and convenience of a cashback card means that for most consumers, they could be appealing. Over time, a cashback card could provide a sizeable amount of money in return for very little additional effort.

The Motley Fool receives compensation from some advertisers who provide products and services that may be covered by our editorial team. It’s one way we make money. But know that our editorial integrity and transparency matters most and our ratings aren’t influenced by compensation. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.