With living costs rising exponentially and inflation hitting 9%, it’s only right if you’d like a bit of extra money in your pocket. One way you can do that is with a cashback card!
A cashback credit card is a type of rewards card that you can use to earn cash on purchases. But there are a few things you need to know about them before you start spending. If you’re wondering whether a cashback card is right for you, read on to find out all you need to know about cashback cards, including how they work.
What is a cashback card and how do they work?
A cashback card offers works by paying you back a percentage of what you spend each month in reward points. For example, many cashback cards pay you 1% back on your purchases. Therefore, if you spend £1000 yearly, you could get £10 back. Normally cashback is paid annually, but some cards will pay monthly.
What are the benefits of a cashback card?
Most of us could do with some extra cash in our pockets. Some of the benefits of a cashback card include:
- They offer good rewards – Compared to some travel credit cards for example, cashback cards that offer 1-2% cashback are considered good rewards, so you’ll get more for your money.
- Freedom to spend – With cashback cards, you can spend the rewards as you please, as they will be in cash. This is different to travel credit cards for example, as they can only be used for flights, hotels and car hires.
- You may even get more perks – Some cashback cards won’t charge you annual fees and some may even offer 0% interest on balance transfers too. Some cards will also offer you preferential cashback rates if you shop at partner retailers.
What are the cons of a cashback card?
Although cashback cards can be great, they aren’t without their drawbacks. They include:
- High APR – Some cashback cards offer a high APR, which means that if you don’t pay your balance in full each month, the amount you will pay in fees will outweigh the benefits of cashback.
- Earnings caps – If you like to spend and are hoping to earn a nice wad of cash, you may be disappointed. Some cards have earnings caps which limit how much cashback you can receive.
- Limited earning potential – If you choose the wrong card, you may limit how much you can earn. For example, if you only get rewards on groceries but you tend to spend most of your money on fashion, you may not get the full benefit of having the card.
If you’re one of the 39% of adults that don’t feel confident managing your money, then help is at hand. Although a cashback credit card may not be for you, if you can afford it and have carefully considered your finances, you could earn money every time you spend.
Will you take the plunge?