Cashback credit cards are a popular way to earn rewards while spending
money. When used the right way, these cards can give a small percentage of your
money back on the things you buy every day, like groceries, fuel, or clothes.
It may sound too good to be true, but it works well—only if the card is used
carefully and with a plan.
Many people make the mistake of using credit cards without understanding
how they work. This can lead to debt, stress, and lost money. But when used the
right way, cashback credit cards are helpful tools that can improve financial
habits and even save money over time.
1. What Is a Cashback Credit Card?
A cashback credit card gives back a portion of what is spent using the
card. The amount returned is called "cashback." For example, a card
might give 1% back on all purchases. That means if someone spends £100, they
get £1 back. Some cards offer higher cashback for certain things like
supermarkets, petrol, or online shopping.
There are different types of cashback credit cards. Some give the same
percentage back on all purchases. Others give higher rewards for certain
categories. Some even have bonus offers when someone first signs up, like
getting £50 if they spend £500 in the first three months.
It is important to choose a card that fits your lifestyle. For instance, if someone spends a lot on groceries, a card that gives extra cashback for supermarket shopping will be a good match. Always check for annual fees.
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Some
cards with higher cashback also charge yearly fees, so it’s important to
compare the cost and the rewards.
2. Always Pay the Full Balance Every Month
One of the most important rules when using a cashback credit card is to
pay off the full balance each month. If only the minimum payment is made, the
bank will charge interest. These interest charges are often very high, which
can cancel out any cashback earned.
For example, imagine someone earns £10 in cashback in one month. But if
they don’t pay their balance in full and get charged £20 in interest, they’ve
lost money instead of earning it.
To avoid this, try to only spend what can be paid off by the end of the
month. Using a cashback credit card like a debit card is a good habit—spend
only money already in the bank. Setting up automatic payments from a current
account to pay the full balance can help avoid missed payments.
Paying in full also helps build a strong credit score. A good credit
score makes it easier to get loans, mortgages, and even better credit card
deals in the future.
3. Don’t Spend Just to Earn Cashback
A cashback credit card should never be a reason to spend more money.
Cashback is usually between 1% and 5%, which means that for every £100 spent,
the reward is only £1 to £5. If someone buys something they don’t need just to
earn cashback, they’re actually losing money.
Let’s take an example. A person named Peter saw that his card gave 5%
cashback at electronics shops for the month. He bought a £600 television he
didn’t really need, thinking he would get £30 back. While it’s true he earned
£30 in cashback, he still spent £600. If he didn’t have that money saved, and
he paid it back slowly, the interest charges would cost him more than the £30
earned.
The smart way to use cashback is on things that were going to be bought
anyway—like food, fuel, or bills. This way, cashback becomes a bonus for
everyday spending, not a reason to spend more.
4. Use the Right Card for the Right Purchase
Some credit cards offer more cashback in certain areas. For example, one
card might offer 3% on restaurants and 1% on everything else. Another card
might give 5% at supermarkets but only 0.5% on travel. Knowing which card gives
the best reward for each type of spending can increase the cashback earned.
Some cards even change their reward categories every few months. In this
case, it’s helpful to keep track of what categories are offering the highest
rewards. Many credit card companies show these details on their websites or
apps.
For people who have more than one cashback card, using each one for its
best category can lead to more cashback. But it’s important to stay organized.
Only take on multiple cards if they can be managed easily and the balances can
still be paid in full every month.
Here’s a simple example: If a card gives 5% cashback at petrol stations
and another gives 3% at supermarkets, the best plan is to use the petrol card
for filling up the tank and the supermarket card for grocery shopping. This
way, the highest cashback is earned without spending any extra money.
5. Redeem and Use Cashback Effectively
Cashback rewards don’t mean much if they are never used. Most credit
card companies allow users to redeem cashback in a few different ways. The most
common is as a statement credit, which reduces the amount owed on the next
bill. Other options include direct deposits, gift cards, or even discounts on
shopping websites.
It’s important to check how the cashback can be used and whether it
expires. Some companies have rules where rewards disappear if the card is not
used for a certain period. Others may only allow redemption once a certain
amount is earned, like £25 or £50.
Cashback rewards can be used in smart ways. Some people use the money to
pay down bills, save for holidays, or even put it into a savings account.
Choosing to use cashback on needs rather than wants can help with financial
goals.
Another helpful tip is to check if the credit card offers bonus cashback
when choosing gift cards. For example, some companies give 10% extra when
cashback is redeemed for a partner store’s gift card. This can be a great way
to stretch the value of the rewards even further.
In summary, cashback credit cards are helpful tools when used wisely. They offer small rewards on money already being spent. But the key to making them work well is to use them carefully: choose the right card, avoid debt, track spending, and redeem cashback smartly. Avoiding interest, not overspending, and being organized can lead to real savings over time. For those who stay in control, cashback credit cards can turn everyday shopping into a steady stream of small rewards that add up over the year.
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