Cashback credit cards are an excellent reward scheme for intended purchases. Customers can buy everyday purchases on a reward card. A consumer survey by the Abbey National found that cashback credit card schemes are considered the most important reason for choosing a card.
What are Cashback Credit Cards?
A customer is able to earn about a 1% loyalty bonus on all purchases. The money earned on a reward card accumulates before being paid to customers every 12 months. It essentially amounts to a 1% discount on all spending so constitutes an excellent way of saving money.
Further Cash Back Card Reward Discounts
A number of retailers offer additional rewards on cashback credit cards. It is possible to earn as much as 5% as a loyalty bonus from certain business network programmes. Identify the specifics of a reward scheme before signing up.
Advantages of Cashback Credit Cards
- Free money. Everybody has to buy things so it makes sense to benefit from a reward scheme and use a cash back card;
- It's possible to identify higher cashback credit card deals. Some card providers pay a higher loyalty bonus than others. Rates tend to be between 0.5% and 2% so it pays to use a credit card comparison service;
- Improved credit rating. Those who pay for goods using a card and settle their balance in full will benefit from an enhanced credit rating.
Disadvantages of Cashback Credit Cards
- Credit card debt. Cashback credit cards can encourage customers to make unnecessary purchases making it difficult to settle the balance in full;
- Higher rates of APR. Although customers earn money from a loyalty bonus, many card providers charge customers a higher rate of APR which serves to exacerbate debt problems for those who don't pay their full balance off each month;
- Cash back card limits. Some cards limit the amount of money that can be earned on a cash back card so it is important that a customer reads the T&C's before signing up.
- Gambling transactions. Most providers treat gambling transactions as a cash advance which only serves to incur new charges.
According to MoneyExpert.com, more card providers are now offering cashback credit card schemes, but the average rate offered is only 0.72%.
Reward schemes allow a customer to benefit from a loyalty bonus and earn money. However, it is imperative that someone who takes advantage of a cash back card settles their balance in full to avoid high APR and credit card debt. Always check the T&C's for any cashback limits before signing up.
Those that found this article useful may also be interested in finding out about earning airmiles on credit cards and identifying ways to reduce credit card balances.
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