How do cash back cards work?

The principle behind cash back credit cards is exactly as it sounds - by spending money on the credit card, you earn cash back.

This simple format has proven highly popular since the first cash back credit card launched in the UK a few years ago. Cash back cards offer great flexibility - you're not restricted to the range of rewards offered by a particular affinity card, nor to having to reach certain targets.

Cash back credit card issuers

Popular cash back credit cards in the UK include the following:

American Express Platinum Credit Card - up to 5% cashback : apply now.
MBNA - combination credit card offers points or cash back : apply now.

Cash back credit card rules

Rates and conditions differ from card to card, but some rules are generally common to all cash back credit cards:

1. Cash back rewards are calculated as a percentage of how much you spend on the card. This calculation usually excludes cash advances, balance transfers, interest charges, fees and any spending that is recredited to the account due to refunds.

2. Cash back is usually paid as a credit into your card account once a year, on the anniversary of the account being opened. You might say this means that "cash back" is a little misleading - and we'd agree! However, it doesn't really make much difference - the money is still given back to you to spend. You could either use your card to spend that money on something specific or simply take a matching amount of cash out of your bank account to spend as cash.

3. There are usually limits to how much cash back you can earn on any given cash back credit card. Some cards impose a set limit (eg £2,000), whilst others pay out on spending up to the level of your credit limit in each month.

4. Often, there is a minimum amount that must be earned before a cash back payment will be made. This might be set, for example, at a minumum of £5 over the course of a year. This requirement is usually very easy to reach and is intended to encourage people to get into the habit of using their new cash back credit card for all their regular transactions.

Cash back vs charity and reward-based affinity cards

It is possible that you could raise more money for your chosen charity by opting for a cash back credit card instead of an affinity card. More...

Before applying for an affinity credit card offering miles or other points-based rewards, it could also be worth considering the relative merits of a cash back card. More...