How to Compare Cash Back Credit Cards

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Cash back credit cards reward their cardholders with money back for their credit card spending.

Cash back is one of the simplest and most flexible credit card reward scheme, and with the right card, it can be one of the most lucrative too!

This guide embarks on the task of helping you to understand how to compare cash back credit cards and will hopefully allow you to make a more informed decision when you compare cash back credit cards.

These cards are best for...

- Responsible spendaholics!
If you are one of the very good credit card users amongst us, and always clear your spending in full each month, firstly well done! Secondly, now is the time to start claiming something back for your good credit card use.

Cash back credit cards, like any reward credit card, are best suited to people who can regularly spend on their credit card and repay their spending in full.

You don't have to be a shopaholic to benefit from a cash back credit card though, just by moving all your everyday spending to a cash back credit card can really clock-up a good amount of money back.

Shopping such as groceries and petrol are usually where we spend the majority of our money. Obviously the more you spend the more cash back you will earn, but even if you just use a cash back credit card for these items you'll be well on your way to receiving a decent sum of cash back.

- Good financial managers
It must be stressed that any reward credit card must be used with frugality in mind.

The rewards on offer are never so lucrative that they would outweigh even one single swipe of an interest charge.

So to really receive any actual 'money' back on your cash back credit card spending - you will need to be a good financial manager with your spending and always make sure to repay your balance in full.

- Earning flexible rewards
While most credit card reward schemes are far from restricting - cash back is the option for the frivolous - the person who likes to claim the rewards they want - and not just what is available.

Cash back is just that, straight-up hard cash in your pocket. Once the cash back you've earned has been credited to your account - or sent to you as a cheque - the money can be spent on absolutely anything you like!

These cards are not suitable for...

- Leaving balances outstanding on your credit card
Although it may seem nice to have a nice sum of cash back accruing on your account, waiting to be sent to you on the next cash back payout date. If you're also coughing up any money in interest charges you're probably losing money for using a cash back credit card.

Interest rates aren't at the lowest that we've seen them, and credit cards usually add on another 10% just for themselves. Leaving a balance outstanding on a cash back credit card will incur interest charges easily more than ten times what you would of earned from the credit card issuer in cash back.

Because interest charges will always far outweigh any reward you could earn on a credit card, if you do tend to find yourself rolling a balance over from month to month on your credit card, you would save a lot more money by opting for a low interest rate credit card, or even a 0% purchase credit card instead.

A low interest rate credit card will offer a lower rate of interest on outstanding balances and leave you with much more money in your pocket than if you were leaving a balance on a cash back credit card.

- A poor credit history
If you know yourself to have a poor credit history you may find your application is turned down if you apply for a cash back credit card.

The best thing you can do is to set your priorities on improving your credit score, so that you can enjoy a cash back credit card once you've strengthened your credit rating.

There are many credit cards available that have been designed especially for helping people to rebuild and strengthen a poor credit history.

See credit cards for a poor credit history here.

Knowing what's on offer...

Cash back credit cards can vary in the how much cash back they offer on your spending, and also what you can earn cash back on.

To really make the most of a cash back credit card - and to be making the most of a card that's right for your spending - it's a good idea to fully understand how cash back schemes work and the different schemes available to you.

- How much cash back will I earn and what will I earn it on?
Firstly, cash back is only ever earned on purchases - that is goods or services bought from retailers or companies. Cash back is never awarded on cash withdrawals, buying foreign currency or traveller's cheques, gambling transactions or balance transfers. Cash back will also never be awarded on interest, fees or default charges.

Cash back credit cards all offer different schemes set up by their bank or building society. As well as percentages of cash back varying, also which purchases you can earn cash back on - and how much - can also differ between cash back schemes.

There are 3 main types of cash back credit card scheme - flat rate schemes, tiered schemes, and selected retailer schemes. Choosing the right cash back credit card for your spending is fundamental in helping you to earn the most cash back for your money

Flat rate cash back credit card schemes
Flat rate cash back schemes are the simplest schemes; they offer one percentage amount of cash back awarded on all your spending.

For example, with a flat rate cash back credit card you may earn say 1% cash back on all your purchases - so you'll be earning cash back whenever you use your credit card to pay for a purchase.

The benefit of a flat rate cash back credit card is that you can earn cash back on all your spending. The i24 credit card from Goldfish offers a good flat rate cash back scheme, though it does carry a pretty steep annual fee and is aimed squarely at the premium travel market.

Tiered cash back credit card schemes
Tiered cash back schemes offer a certain percentage of cash back on spending up to a certain amount, and then another percentage of cash back on spending above that amount.

There are two types of tiered cash back credit cards; those that offer more cash back on lower levels of spending, and those that offer more cash back on higher levels of spending.

To decide which tiered cash back scheme is best for you, you need to work out how much you spend on average in a year.

If your yearly spending is over £3,500, then you should go for the American Express platinum credit card. This credit card offers 1% cash back on spending over £3,501, and 1.5% cash back on spending over £10,000. However, spending up to £3,500 will only earn you 0.5% cash back.

Cash back with selected retailers
Cash back with selected retailers is where a cash back credit card rewards you with cash back when you shop with certain retailers or companies specified by the card.

The benefit of these cash back credit cards is that you can earn huge sums of cash back, sometimes up to 20% of your purchase spend.

The amount of cash back you can earn with these cards is very tempting, but it's important you know which retailers you can earn with, and also that you already shop with them! If you don't shop with them, you would be much better off with a 'cash back on all spending' card.

The selected retailers on offer do vary from card to card, the best cash back credit card for selected retailers is the Egg credit card, which offers up to 20% cash back and shopping discounts when you shop online with your Egg credit card via the Egg web site.

The Barclaycard Platinum Cashback credit card offers a flat 1% cash back on any supermarket and petrol spending and then 0.5% on all purchases everywhere else. While this is limited to an earning of £15 on both rates (£30 in total) per month, that equates to spending £1,500 on groceries and petrol a month, and £3,000 at other stores - so the limits are fairly high and outside of an introductory bonus period it's the only card that offers a good rate of cash back continuously on the shopping you do every month without fail.

Introductory cash back bonuses
A slightly more recent addition to the cash back credit card market is introductory bonuses - or joining incentives. Some cash back credit cards are now offering a much higher percentage of cash back during the first so many months of being a cardholder.

These intro bonuses can be a great way to kick-start your cash back earnings and are perfect if you have a large or several large purchases to make in the near future.

The current best introductory cash back credit card is the American Express Platinum credit card, which offers a massive 5% cash back during the first 3 months. After this is a tiered cash back scheme though, so you have to be a high credit card spender to really benefit - the first £3,500 spent a year will only earn 0.5%, but then spending over £3,500 will earn 1% and then 1.5% is earned on spending over £10,000.

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