Cashback
credit cards offer you a small amount of money
back for each currency unit you spend. But, the
interest rates are normally higher, so how do you
know if a cashback credit card is the best
option for you?
How do cashback
credit cards work?
The credit card
market is competitive, with many options for
consumers, so how can credit card companies lure
you? One of their incentives is cashback credit
cards. The concept is simple. For every pound
or dollar you spend on your credit card, you receive
a percentage back. For instance, you might receive
£1 for every £100 that you spend. You normally
receive this annually.
Should I get a
cashback credit card?
This depends on
how you use your credit card. A cashback credit card
is a good option if you pay your balance off in full
every month and never pay interest. Why? Because
cashback cards often have higher interest rates, but
since you don’t pay interest, you should look for
other incentives such as cashback.
Not quite so
organised or frugal? If you do incur interest on
your credit card balance, it is unlikely that a
cashback card will be as cost effective as getting a
low-interest rate credit card.
Cashback credit cards are of little benefit for
transferring a credit card balance.
Instead, you should be looking for a
card with a low
interest rate and a
0%
introductory offer.
