How does a tiered cash back scheme work?

Related FAQ's & Guides Q. Which is the highest paying cash back credit card? A. The percentage of cash back offered does vary between credit cards and can be limited to a certain amount each month. Many cash back credit cards also offer higher rates of cash back for an introductory period – usually around 2 to 3 months. Q. When and how will I receive the cash back I've earned? A. Cash back credit cards vary their means of when and how they make the reward payment. Usually cash back will be paid to the cardholder as a credit to their account or sometimes as a personal cheque. Q. Why is it important to repay my spending in full when earning cash back? A. Primarily because any interest charged - even on the lowest rate credit cards - will outweigh the financial gains of earning cash back. Does your Reward Credit Card Live Up to its Name? If you've previously been tempted by the lure of point based reward schemes, is your reward credit card earning you a plentitude or a pittance? How do Cash Back Credit Cards Work? Cash back credit cards allow you to earn a percentage of what you spend back as a cash reward.

A tiered cash back scheme on a credit card works by offering different amounts of cash back the more or less you spend on the card.

Tiered cash back schemes can either offer the most cash back when you reach higher levels of spending, or they can offer the most cash back when you only spend up to a certain amount.

The spending tiers are usually calculated on yearly spend.

Spending limits

Not all cash back credit cards are tiered. Some will offer a set level of cash back per pound spent no matter how much you spend. Similarly, don’t confuse tiered cash back schemes with cash back schemes that have spending limits.

A spending limit usually says that you will only earn cash back on spending up to a certain amount each month/year.

Whereas a tiered scheme will still offer cash back for different spending levels, but it will offer higher percentages when you reach certain tiers.

Would a tiered cash back scheme work for you?

If you are a big spender on your credit card then you could find that a tiered cash back scheme offering more cash back for higher levels of spending will enable you to earn more cash back.

However, tiered cash back credit cards will operate varying tiers on their cash back scheme, and the number of tiers and the level of cash back offered can vary from one provider to another.

For example, the American Express Platinum cash back credit card offers a cash back level of 0.5% for each pound spent up to £3,500 in a year. For each pound spent over £3,500 and up to £10,000 in a year a cash back level of 1% is offered. For every pound spent over the £10,000 mark in a year a cash back level of 1.5% is offered, thus the tiered cash back system.

Cash back credit cards will always be of most benefit to people who regularly keep their credit card balance repaid in full. The reason is simply that any interest charges incurred for rolling a balance over will always outweigh the money made from earning cash back.

If you do tend to keep a balance on your credit card, you may save more money opting for a low interest rate or 0% purchase credit card

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