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Cashback cards growing in popularity

7 November2021

The average overdraft interest rate is now nearly 20%, the Daily Mail reports, and this could have contributed to the rise in 'cashback' credit cards, which have doubled in number in two years.

As the BBC tells us, a report commissioned by Capital One and carried out by Defaqto found there are around 245 different credit cards that customers can choose from in the UK at the moment.

  • 20% of them offer customer rewards - like rewards for shopping, or point schemes.
  • 10% feature air miles.
  • 9% have cashback rewards.

Cashback cards are the only kind of credit card really growing at the moment, with rewards reaching as high as 36 for every 100 spent on the card each month. According to the report: "To make the card truly worthwhile a customer would need to spend well in excess of 1,000 per month, so these cards are most likely to appeal to the higher spenders."

If you used a cashback credit card to pay for your groceries and fuel on a regular basis, it could give you money back on the purchases you would have made anyway.

But financial experts warn that rewards aren't the only thing to look for when choosing a credit card.

Sarah Pennells of Savvywoman.co.uk noted that 'Cashback would only prove to be a benefit if borrowers paid off their credit card each month, or took advantage of longer interest-free periods.'

A spokesperson for All About Money commented: "People looking for short-term credit could avoid paying interest on a credit card by repaying the balance in full every month. Those looking for longer-term borrowing may find a loan is more suitable. However, before taking on any kind of credit, it's really important to consider how it will be repaid and the impact it'll have on your financial future."

Fees payable when continuing service is provided. Repaying debt over a longer period may increase the total amount to be repaid. Calls are recorded and are usually free from UK landlines. Mobile phone users may be charged and should check with their service provider. Cards are provided by third parties and are subject to eligibility, status and terms and conditions. Applicants must be UK residents aged 18 or over.

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