Why cashback credit cards are the best cards

Too many people end up paying way too much money to their credit card provider. Get a cashback card and the roles are reversed - your credit card company will pay you.

We really love cashback credit cards at Lovemoney. They enable you to earn money just for using a credit card in your daily life. You don’t get ‘points’ or ‘rewards’, you get cold, hard cash on your credit card at the end of the year.

So let’s look at the best cashback cards on the market at the moment:

1. The Santander 123 credit card

The Santander 123 credit card pays up to 3% cashback on your spending. Here’s how the cashback offer works:

- 3% cashback on petrol and train fares (up to a maximum of £9 cashback per month)

- 2% on spending at department stores

- 1% on supermarket shopping

So if you’re someone who uses a car a lot, or who commutes on the train, and also spends a fair bit at the supermarket, this could be a really great card for you.

There are two drawbacks to this. Firstly, you won’t get cashback at all merchants and, secondly, you have to pay a £24 annual fee for this card. That said, if you move your current account to the Santander 123 current account, there’s no fee for the first year.

You can also earn cashback via the 123 current account – check out this calculator on the Santander website to see how much money you could save by using the credit card and current account together.

2. Barclaycard Cashback card

For the first three months you have the Barclaycard Cashback card it pays a cracking 6% introductory rate on your top five purchases each month, giving you the chance to earn up to £120.

After that, you’ll get 2% on your five biggest purchases each month, and 0.5% on everything else. The rate will double to 4% for one month each year. To qualify for cashback, you also have to make at least 15 purchases each month using the card.

Potentially you could earn a lot of cashback using this card, but the structure of the cashback is quite complicated. You’ll need to make sure that you use the card for most of your transactions – otherwise you might fail to use the card 15 times each month and not get any cashback at all.

You also need to be the kind of person who makes several ‘big buys’ each month – that way you’ll get the most value from the 2% cashback rate on your five biggest purchases each month.

The card also comes with a £24 annual fee.

3. American Express Platinum card

The American Express Platinum Cashback card pays almost as much as the Barclaycard Cashback card for the first three months you have the card – except it’s a 5% cashback rate with Amex.

After that, there’s a flat 1.25% cashback rate on all your spending after that, regardless of how much you spend. For one month each year, the rate goes up to 2.5%, assuming that you have spent at least £10,000 over the previous year.

The annual fee for this card is £25.

Personally I think the Amex card is better than the Barclaycard, simply because the cashback structure is simpler.

4. Aqua Reward card

The great thing about this card is that there’s no annual fee. It also offers a generous 3% cashback on everything you buy all year round.

However, the cashback is capped at £100 a year. So once you’ve spent £3,333, you won’t be able to earn any more cashback for that year.

If you’re wondering why this card has a rather low cashback limit, it’s probably because the card is designed for people with poor or non-existent credit ratings. So I imagine that Aqua doesn’t want to encourage folk with poor credit ratings to overspend.

That said, if you have a good credit rating, there’s no reason why you can’t apply, and you can take advantage of a decent cashback offer.

The importance of credit ratings

Although people with good credit ratings can apply for the Aqua card, people with weaker credit ratings shouldn’t apply for any of the cashback cards except the Aqua.

If you don’t have a spotless credit rating, read How to build an excellent credit history for tips on how to change your situation.

Which is best?

No one cashback card is best for everyone. Different cards work best for different people.

But if you’re a low spender, I’d say that the Aqua card is probably your best bet. The Santander card is probably best for families with young kids – they’re the ones who probably spend the most at the supermarket and may also use their car a lot too.

Be careful

Whichever card you go for, make sure you pay off your credit card bill in full every month. If you don’t pay off your bill in full, you’ll be hit by hefty interest payments which will cost you way more than any cashback you get from your spending.

As long as you do that though, cashback credit cards are fantastic financial weapons.

More on credit cards

The best cashback credit cards

The best 0% balance transfer credit cards

Why making credit card overpayments will actually cost you!

MBNA launches new Platinum 24-month balance transfer credit card