"Cash-back!" was once the iconic catch phrase of television’s Alan Partridge but it seems the credit card industry has taken his words of wisdom to heart. Over the last six months a number of the UK’s biggest credit card providers have launched cash-back cards. The competition is now heating up as providers look to out do each with higher and higher rates.
Cash in hand
When you make a purchase on a cash-back card the provider agrees to refund you a certain percentage of your purchase at the end of the month. So if you buy a £300 flight on a card with a cash back rate of 3% then you would get £9 returned to you. It’s a simple and interesting incentive to use your card which could come in handy, particularly in the run up to Christmas.
What’s on offer?
At present the leading cash-back rate comes from Citibank on their Shell MasterCard. The card offers 6% cash-back but only on the purchase of Shell fuel and for the first six months that you have the card. If you do drive a lot and were to spend £50 a week on fuel for six months this could earn you £78.
If you’re looking for something slightly less specific then American Express’ Platinum Card has the highest rate on everyday purchases, 5%. This rate only lasts for the first three months before dropping to 1.5%. The 5% will still come in handy for the festive period and will cover any Christmas shopping trips.
Abbey also offers a competitive deal, but again there are conditions. Their card offers 5% cash-back, but only on purchases made in major supermarkets. This offer lasts until January when Abbey will be launching a new 5% cash-back incentive.
How they match up?
If you’re considering a cash-back card then it’s worth checking that the card is competitive when compared to other types of card such as balance transfer cards, where you can move and then freeze the interest on an existing debt at minimal cost, or an introductory purchase card where you pay zero interest on all purchases for the first few months.
According to MoneyExpert.com research the average APR on purchases with a cash-back card is 17.7%. This figure isn’t necessarily that competitive, MBNA’s Platinum Plus card for example has a rate of 12.9%, so it’s worth factoring this in while making your decision.
Cash as long as…
While there are a number of headline grabbing cash-back deals available most of them come with specific conditions or the cash-back is limited to certain purchases. MoneyExpert.com have found that the average rate on cash-back deals is also just 0.72%, which means if you were to spend £4000 over the course of a year at 0.72% you would only actually make £28.20 back. That’s why it’s important to seek out the best rate possible if you decide you want to make the most of the "cash-back!" revolution.
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