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Cashback Credit Cards- Are they right for you?

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Too good to be true?

A credit card that actually pays you to spend money – It sounds too good to be true and more like something we can only dream of. But the amount of cashback credit cards on the market today has doubled in the last 2 years, and is continuing to increase. But before you go rushing out to spend, spend, spend, cashback credit cards aren’t as straight forward as you may want to believe and certainly shouldn’t be encouraging you to get into debt.

Earn rewards for everyday spending

A cashback credit card will pay you cash or reward points for everything you spend on it and are another temptation on offer that companies are using to attract customers. They are hoping that the interest you pay on the balance will outweigh any cash or reward they give you, but providing you use Cashback credit cards in the correct way, you can advantage from.

Pay your cashback credit card balance off in full every month

You should think of your cashback credit card as you would your debit card, and only spend what you would normally with your debit card and paying off the balance in full at the end of each month. As long as you pay off the full amount you spent every month, you can ensure you are paying no interest and reaping the cashback reward. If you fail to pay off the full balance, the interest you will pay will offset any advantages and you may end up paying more.  The best way of paying off your balance in full is by setting up a direct debit, specifically stating you wish the full amount to be repaid each month. Some lenders may omit the ‘pay in full’ from their direct debit forms, in which case you should write ‘pay in full’ on the form and check that it has been honoured. You should always ensure you have enough money in your account to pay off the card each month so you aren’t hit with additional charges that outweigh the cashback benefit.

Cashback credit cards

Don’t transfer credit card balances

You should avoid transferring credit card balances onto a cashback card. The balance transfer won’t offer any cashback and will take up a large chunk of your credit limit, meaning less room for earning cash back. Keep the card for every day spending (and repay in full every month) and transfer any balance to a 0% card to make the most from your credit cards. The same applies for drawing cash out; not only will you receive no cashback benefit, but you will probably be charged a large fee for withdrawals and then increased interest on the amount withdrawn, so this should be avoided at all costs.

Best cashback credit card deals for good credit rating

Like with most credit cards, the best deals are reserved for those with the best credit rating and you should take your own circumstances into consideration when applying for a cashback card. If you aren’t sure you will be able to repay the full amount every month then consider if a cashback card will benefit you at all, or concentrate on looking for cards with a low interest rate. Remember that every credit application has an impact to your credit score and that most will have an annual fee which will need to be taken into account when offsetting the costs and benefits.

Always pay off your balance or you won’t save

If you are prepared to use and repay your card every month then you really can receive money for spending, but be careful not to fall into traps which could not only cancel out any benefit of a cashback card, but leave you further in debt.

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About Rebecca Robinson

About Rebecca Robinson

After spending the last 8 years juggling life as a mum of two, wife and working full time as a Project Manager for a global telecommunications company, Rebecca Robinson made the decision to follow her love of writing and took the plunge; turning her passion into a full time career. Since becoming a full time writer, Rebecca has worked with various media and copy-writing companies and with the ability to make any topic relevant and interesting to the reader, now contributes to The Working Parent on articles ranging from credit cards to teenage relationships. Ever the optimist, Rebecca's dreams for the future include a house in the country filled with children, dogs and horses in the field!

Website: Rebecca Robinson

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