UK Accounting Glossary
Cashback credit cards offer a straightforward cash reward for using them. These loyalty schemes return a percentage of your spending to you in the form of a cash rebate. The exact percentage on offer varies and most cash back credit cards tempt potential users with an introductory period offering a higher percentage return.
A cashback credit card is worth considering if and only if you pay off your outstanding credit card bill in full each month. If you don’t clear your credit card debt then any cash back you earn will be more than outweighed by the interest charges you incur.
If you are going to carry a balance forward on your credit card you would be better off looking for a long term low-interest rate credit card. If you have no credit card debt and you don’t intend to have any then a cashback credit card could make sense.
If you can be disciplined enough to use your credit card for your day-to-day purchases, while keeping the money aside to repay your statement at the end of each month, then it can be a win-win situation. A savvy consumer can earn interest on savings for the month while receiving cashback or incentives ‘free of charge’ from their credit card.
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This glossary post was last updated: 15th February 2020.