Last updated: 23/07/2020 | Estimated Reading Time: 3 minutes
Cash back current accounts
In an effort to improve their services and make themselves more attractive for new customers, many banks are now offering current accounts that reward the holders with cash back in various ways.
Read on to find out about what cash back current accounts are on offer, how they work, and how you could go about getting one.
In This Guide:
- Will I have to pay for a cash back current account?
- Types of cash back account
- Things you should consider when opening a cash back account
Will I have to pay for a cash back current account?
Some cash back current accounts will require a monthly fee but not all will.
For the most part, you’ll just need to satisfy certain conditions regarding monthly deposit amounts. You’ll also generally need to meet certain criteria like having your main salary paid into the account in question and having all of your direct debits and bill payments come out of that same one.
Those that do charge a fee generally offer cash back at a higher rate but it’s important that you work out how much you’d earn based on your income and expenditure. You don’t want to end up paying more for the bank account than you’d actually earn in cash back.
Types of cash back account
The various cash back current accounts on offer reward the account holders in different ways.
Some will pay a small percentage of cash back on direct debits and bill payments made from the account in question. Others will reward you for money you spend on the associated debit card.
Further, some banks will reward you with a lump sum when you switch to them from your existing current account provider and will then pay out cash back monthly so long as you keep a high enough positive balance in your account. Those that do require a switch in order to benefit from the reward schemes may have certain requirements in place regarding how exactly you go through the switching process, so always check the small print to make sure that you actually get the benefits you desire.
Typical cash back rates are around 1-2% but this will vary depending on the account in question.
Compare reward based current accounts with Money Expert to see what kind of cash back rates you could expect to enjoy as you spend.
Things you should consider when opening a cash back account
You should always make sure that you’re able to meet all of the requirements necessary in order to benefit fully from the cash back reward scheme associated with your chosen current account.
If the account charges a monthly fee, then you should make sure that you’ll be spending enough in the appropriate way so that you don’t just break even or, worse, spend more for the account than you receive back.
In general, cash back current accounts will not pay out any interest on your balance, though this is not always the case. You should compare conventional or higher interest current accounts with cash back accounts to see which would actually make you more money overall.
You should also take note of any overdraft rates or penalty charges as they tend to be pretty high for these cash back current accounts.