Act now to grab high rates of credit card cashback on your Christmas spending. But you must tread carefully if you want to take maximum advantage of the best new cashback deals.
With lenders offering to repay as much as 5% of your spending into your account, it’s hardly surprising that cashback credit cards are now the most sought after type of plastic in the UK (according to a recent Abbey survey), but you need to follow some clear rules to make these cards pay.
For starters, you have to be able to repay your debt in full every month or the sky high interest rates will more than undo any potential savings - some have typical APRs as high as 18.9%.
Running a balance? Get a 0% deal
If you are still repaying credit card debt or won’t be able to move any upcoming Christmas debt immediately, you will be far better served with a card that offers 0% interest on either new purchases or balance transfers.
One of the best cards available for balance transfers at present is the Virgin credit card offering 0% for 15 months. If you need a card with 0% on purchases then consider the Halifax One credit card offering 0% on purchases for 12 months or the Halifax Purchase card offering 15 months at 0%.
Compare the best reward cards with our best buys
Spend and save a dangerous game
If you have unavoidable expenses looming, then making sure you get some money back on them is a great idea. But we think the ‘more you spend, more you save’ philosophy is a dangerous one, which can often lead to you spending more than you otherwise would.
For example, if you fall for the marketing ploy and end up spending, say £550 instead of £500, you will still be £25 worse off even with a 5% cashback deal. We also think that motivating customers to spend more often with their credit cards is a dangerous habit to develop.
Furthermore, cashback is generally paid out annually, so you’re forced to wait a long time before you actually see any of the benefits.
Choose the top Gold and Platinum credit cards with our comparison table
Fine print nasties alive and well
Finally, most cards come riddled with exclusions that limit how much cashback you earn and where you can shop with the card.
For example, the Citibank Shell cashback card offers 6% cashback on petrol bought at Shell in Great Britain for the first 60 days, 3% afterwards plus 2% on any other spending for the first 60 days and 1% afterwards, while the American Express Platinum Moneyback card has a £200 cashback limit during the first three months.
And the list of fine print restrictions goes on and on. What this means is the best cashback card for you won’t necessarily be the one with the highest headline rate, but depend more on your personal spending habits.
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Here is a breakdown of the various new cashback deals on the market
American Express Platinum Moneyback Card: Offers a 5% cashback offer on all purchases in the first three months, but this is restricted to the first £4,000 spend (equivalent to £200 cashback). Any money spent thereafter earns just 1%.
After the introductory period, the card reverts to a tiered system, paying 0.5% on the first £3,500; 1% on amounts between £3,501 and £10,000 and 1.5% on anything thereafter. It comes with a fairly hefty 18.9% APR, making it especially important that you pay off debt immediately.
Capital One World Mastercard: This card offers 4% cashback for all purchases made in the first three months, reverting to 1% thereafter. There are no limits to how much cashback you can earn, and it has a typical APR of 15.9%.
Sainsbury’s Nectar Credit Card: This card pays you Nectar points equivalent to 2% cashback on all purchases made at Sainsbury’s. Unfortunately, it offers a pathetic 0.1% on all other purchases, meaning this card is largely useless unless you’re an avid fan of the supermarket. On the up side, there is no limit to the amount of points you can earn, and you get 12 months interest free on Sainsbury’s purchases. It has a run-of-the-mill APR of 15.9%.
Abbey Cashback Card: This is probably the most restrictive offer. Sign up and you’ll get an impressive 5% rate, but it’s only applicable to supermarket purchases and is limited to the first £1,000, so you can’t get anymore than £50 back.
It also expires at the end of January, and carries a 15.9% APR.
Yorkshire BS Classic Visa: Offers 1% cashback on purchases on first £2000, and falls to 0.5% thereafter. Offers six months interest free on new purchases, with a 15.4% APR.
So there you have it, a breakdown of the newest and most popular cashback deals on the market today. As we said at the start, these can be a veritable minefield.
But provided you are financially astute, pay off the debt immediately and fully understand the fine print, you can save yourself a fair amount of cash.
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