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Cashback credit cards can be a worthwhile means of maximising the benefits from amounts spent on a variety of goods and services. As with any type of credit card, though, offers frequently change.
With that in mind, is now a good time to opt for a cashback credit card? Or are consumers better off seeking other types of credit card instead?
Current cashback offers
At the time of writing, the highest-paying cashback cards are offered by American Express. Its Platinum Cashback Credit Card offers a cashback rate of 1.25% for spending above £10,000 per annum, with a 1% rate applicable to consumers who spend less than £10,000 each year.
For consumers who would prefer not to pay the card’s annual fee of £25, American Express also currently offers a rate of 1% on its Platinum Cashback Everyday Card for amounts over £5,000 per year. Spending that amounts to less than £5,000 will accrue cashback at a rate of 0.5%.
While the American Express cashback cards are relatively appealing, the company’s cards are not as widely accepted as Mastercard or Visa cards. Therefore, consumers may decide they would rather have a lower cashback rate elsewhere but have confidence in their ability to use the card for the vast majority of their spending.
At the time of writing, the Tandem Mastercard Cashback Credit Card offers a 0.5% rate of cashback with no annual fee. The Tandem Mastercard Cashback Credit Card could be a realistic alternative to American Express cashback cards – especially for consumers who fail to reach the various thresholds in place for the latter.
While cashback cards may offer the opportunity to generate rewards for every £1 spent, they may be lacking in some areas compared with other credit cards. For example, their interest rates can be significantly higher than for other credit cards. Consumers who often fail to pay their balance in full each month may be better off considering a different type of card that offers a lower rate of interest.
Consumers who decide to apply for a cashback card may want to set up a direct debt so that the credit card balance is paid off in full each month. This will help them to avoid high rates of interest on balances.
For consumers who already have balances on existing credit cards, a balance transfer card could offer a larger financial gain versus a cashback card. A balance transfer card offers a 0% interest rate on debt transferred from an existing credit card for a set time period. This means that the interest costs saved over a balance transfer period may outweigh the rewards accrued on a cashback card.
Similarly, an individual who plans to make a large purchase in the near future that will not be paid off straight away may be better off applying for a card with an introductory 0% interest period on purchases. Such a card could provide a larger financial gain – even though some cashback cards may also have introductory bonus offers.
While there are still a number of appealing cashback cards available at the time of writing, how attractive they are depends on an individual’s personal circumstances. Someone who pays off their balance each month and has no existing credit card debt may benefit the most from a cashback card such as the Tandem Cashback card or American Express Platinum Cashback card. However, other consumers may find that the benefits of balance transfer cards or cards which offer an introductory 0% interest period on purchases outweigh the rewards available on a cashback card.
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