How to Use a Cash Back Credit Card

Cash Back Credit Card Best Buys Cash Back Credit Card FAQ's Have a question? Send in your question and we'll do all we can to help answer it. Where appropriate user questions will be added to the FAQ's for future use. Most recent questions: Q. When and how will I receive the cash back I've earned? Q. Why is it important to repay my spending in full when earning cash back? More frequently asked questions »

Ever wanted to earn something back from all your spending? To have the bank pay you for using their card?

Well with the introduction of cash back credit cards you can!

By using a cash back credit card wisely, you could well find yourself enjoying a nice little rebate on your credit card spending.

Wisely is the operative word here. Using a cash back credit card unwisely could result in you paying more to your credit card company than you'll earn back - and we don't want that, do we!

So let's see how you really can make the most of a cash back credit card.

Make the most of your cash back credit card...

- Use your cash back credit card like your debit card
Most of us have debit cards from our banks and tend to pay for many of our purchases with those debit cards. But the best way to get some of that money back from those purchases is to use a cash back credit card instead.

Now we are not advocating you start buying lots of goods that you don't really need just to earn cash back rewards on your credit card. Rather we are suggesting you look at paying for your purchases in a different way.

Think of all the things you pay for with a debit card on a daily basis, for example groceries, petrol, meals out, cinema or theatre tickets, sports events. If you paid for them with a cash back credit card you could be earning anything from 0.5% to 5% back.

Then there are the bigger one-off purchases such as holidays, flights, furniture, fridge, freezer, computer and so on. These are all purchases that could be earning you money just by changing the method (or plastic) that you use to pay for them.

Don't forget - for those larger items you’ll also receive more protection against non-delivery or damage on arrival if you pay by credit card.

While the majority of cash back credit cards allow you to earn cash back on all purchases - wherever you choose to spend your money, some cash back credit cards only offer cash back with selected retailers. If that is the case, just make sure you use the card whenever you shop at those retailers to make the most of your savings.

The key to making this work is to think of your cash back credit card as a type of debit card.

Just as a debit card takes the money straight out of your bank account, so you should always keep in mind that whatever you spend on your cash back credit card, that amount needs to be paid for in full when your statement arrives.

If you don't do so then your cash back credit card could actually start costing you money. But more on that later.

- Increase your cash back earnings...
OK, so we've highlighted above some of the easiest ways to take advantage of your cash back credit card such as paying for groceries, petrol etc. Whilst these are probably our biggest regular expenses after mortgage or rent, there are many more ways to increase our credit card cash back rewards. Clothes, shoes, days out, presents, things for the home... the list is endless.

If your utilities such as electric, gas, water, phone, mobile, Internet provider, allow you to pay by credit card, then do it. You have to pay them anyway, but now you’ll enjoy what’s effectively an additional discount.

It's a simple equation - The more you spend with your cash back credit card - the more cash you get back!

Many cash back credit cards also offer additional cards for immediate family members free of charge, such as your partner. Any spending on this additional card would also attract the same rate of cash back rewards as the main card user, thereby potentially increasing your cash back credit card rewards significantly.

However, one word of warning, whoever holds the main cash back credit card account, is responsible for the repayment of all purchases made on any of the cards allocated to that account. Your spend-a-holic teenage son or daughter may earn you lots of cash back - but they may not be so great at paying you back!

Things to watch out for...

- Keep abreast of your spending and repayments
You'll recall the comment at the beginning of this article - "By using a cash back credit card wisely, you could well find yourself enjoying a nice little rebate on your credit card spending." So let's look at what we meant by that.

By changing the way you pay for your purchases will definitely earn you cash back rewards if you use a cash back credit card. However, it may be a little more difficult keeping track of your everyday spending.

You may see a healthy balance remaining in your current account at the bank, because you haven’t been spending it! But you may also get a shock when that credit card statement drops through the letterbox.

To ensure you benefit from a cash back credit card it requires a certain amount of discipline. If you regularly pay off your full balance when your credit card statement arrives, then this shouldn't be too much of a problem.

Most banks provide on-line account management systems that can be very useful in keeping track of your spending, if used on a daily basis, ensuring you don't exceed your spending or credit limits.

You need to keep in mind that for this to work, you need to make sure you always have sufficient funds available to pay off the cash back credit card account in full and on time every month.

Setting up a direct debit to pay the cash back credit card account every month when it becomes due is a good idea. That way you won't forget and end up paying interest charges. Alternatively, an email alert or alarm on your computer or mobile phone could act as a reminder when the payment is due.

- Cash withdrawals and foreign currency
Withdrawing cash from an ATM machine, either here or abroad, usually attracts a much higher rate of interest and is excluded from any cash back reward schemes.

Similarly, buying foreign currency, traveler's cheques and gambling transactions also carry higher rates of interest and handling fees when paid with a credit card.

Nor do most credit cards allow an interest free period (the time you have between statements to repay your balance in full without being charged interest) on these types of transactions.

It is, therefore, not a good idea to use a cash back credit card for these types of transactions. You won’t earn any cash back on them, but you will probably end up paying a high rate of interest and possibly a handling charge, which obviously defeats the object of the exercise.

Ideally, it would be better to use a debit card for these types of payments. However, if you do need to use a credit card for these types of transactions, it may be worth looking at the standard credit cards available for the best rate of interest on such transactions, making sure it is suitable for making those types of payments - see low cash advance rate credit cards here.

As with everything in life, there are now many different cash back credit cards available with varying features and benefits. It certainly pays to do your homework and compare cash back credit cards to see which is the most advantageous for you.

Some cash back credit cards have extremely good introductory offers for a limited period, such as American Express offering a huge 5% cash back for the first 3 months - ideal if you have a large purchase coming up! Certainly doing a cash back credit card comparison is a worthwhile exercise.

Used wisely, cash back credit cards can save you a lot of money off your purchases. Just remember to select the cash back credit card most suitable for your lifestyle and spending habits, always ensure you have funds available to pay the cash back credit card bill when it arrives and pay it on time.

Happy spending!

Compare cash back credit cards