Consumers who fund their everyday expenditure on a cashback credit card and deposit their salary in an interest-bearing account could bag themselves £549 extra per year, according to analysis from comparison site,
moneysupermarket.com.
Cashback credit cards give customers a cash bonus every time they spend on their card, and for the most disciplined of borrowers, they can be a great way of generating some extra bang for their buck, says
moneysupermarket.com.
Someone spending £2,500 per month on the American Express Platinum Cashback card would earn an extra £424 per year in cash back - nearly enough for a new iPad.
But there is another bonus for anyone spending in this way; if they leave their salary untouched in their current account or savings account, they could earn extra interest at the same time.
For example, moneysupermarket.com ays if someone paid £2,500 each month into the Santander In-credit Account paying five per cent credit interest, and left it untouched, they would earn an additional £125 in interest over the course of a year.
Provided the balance is paid in full on the credit card and payments aren't missed, this ‘double header' of interest and cashback won't cost the customer a penny, says
moneysupermarket.com.
Someone with £4,000 coming into their account every month could earn £769 pounds per year - enough for a holiday - purely by spending through a cashback card rather than their current account and enjoying the interest from it.
"There are so many ways to earn more from your savings; consumers just need to be clever with their finances, and take advantage of free cash said Kevin Mountford, head of banking at moneysupermarket.com.
“Simply using a cash back credit card to fund your spending whilst saving your wages is a simple and effective way of earning extra cash.
"Whilst the decision to borrow should never be taken lightly, when used responsibly, a cashback credit card can be a great way to make your money work harder. The beauty of cash as a reward, as opposed to say clubcard points, is that you can redeem it however and whenever you like, without being limited to one supplier.
“However, for many borrowers, taking out a reward card could be a good alternative option, especially if you regularly shop at a retailer who offers additional perks for spending in their store. For example, the John Lewis Partnership card pays double rewards points for shopping at John Lewis or Waitrose store, which can then be redeemed for vouchers to spend in store.
"But while a cashback card can work well for organised, disciplined customers, anyone failing to pay off the full balance each month will end up with large interest payments, negating any financial gain.
“The best bet is to set up a Direct Debit and pay off your balance in full each month to ensure you'll never miss a payment. Of course you will also have to resist the temptation of dipping into your salary which is sat in your current account otherwise you could find yourself being unable to repay the card in full."
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