What Is Cashback? | comparethemarket.com

A simples guide

What is cashback?

If you’re looking for a new credit card, there’s a significant amount of choice available to you.


As well as standard cards, there are some cards offering 0% balance transfers, some offering 0% on new purchases and some that offer both! There are also cards on the market that offer cashback when you use your card to make purchases.

Why get a cashback credit card?

Let’s face it, the credit card providers offer cashback to encourage you to spend more money. But, if you use the card as part of making your everyday purchases and receive cashback, then clearly that can only be a good thing.

The cashback is usually paid to you monthly, though this does vary by card provider. In some cases, the cashback may be sent to you by cheque.

With a cashback card you’ll need to careful and disciplined in the use of it to make it work best. There are a number of things to consider when taking out a cashback credit card, so be sure, to read and understand all the terms and conditions.

For example, make sure you ….

What is cashback?

Look beyond the headline rate

Advertisers will seek to portray their product in the most positive light, and a credit card offering 3% cashback might sound great. However, it’s not usually so straightforward.

In February 2016 with a Santander 1/2/3 card for example, there is indeed 3% cashback on transport spend, but then 2% on department stores spend and 1% in supermarkets. Cashback is also capped at £9 maximum per month. Oh, and there’s a £3 monthly fee too!

Others will offer more generous rates, sometimes as much as 5% for a limited period before falling to 1.25% thereafter. You need to understand the restrictions beyond the highlighted rate before deciding if the card is right for you.

headline APR rate

Understand where you can use it to get cashback

As you can see in the example above, different types of purchases sometimes attract different rates of cashback.

Some cards are issued by supermarkets or other commercial organisations, and will pay a higher percentage on purchases with them and a lower percentage when used elsewhere

Is there an annual fee?

A number of cards offering cashback also charge an annual fee.  These fees can range from £25 to over £40 a year. If you’re earning 1% cash back that means you’d need to spend between £2,500 and £4,000 a year on the card just to cover the cost of your fee

Look at the interest rate quoted

Cashback offering cards don’t always have the most competitive interest rates. You can compare these by looking at the APR charged. This figure will also include the cost of any fees. Of course if you clear your balance each month this doesn’t matter but there could still be a monthly fee charged so it’s best to check your account details to be sure.

In summary, a credit card offering cash back can make sense if you spend regularly on your credit card and clear the balance each month. In essence you’ll be getting a reward for what you would spend anyway.

Beware though, if you don’t clear your balance each month, the additional interest you will pay will soon consume the cashback you’ve earned.


It is important to consider all your requirements in a card and make sure it is best for you. To help you do that, we have comprehensive listings of credit card deals and comparing could not be easier, so get going and see how much you could save! 

interest rates on cashback credit cards

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