Cashback cards explained:
These cards are similar to rewards cards. They are a great option for those that can be sure to be able to pay back their balance in full each month, allowing you to actually earn money with your card in some cases. This is particularly the case for those that spend a lot, where the cashback exceeds the annual rate charged. Her we’ll discuss some of the benefits and drawbacks of these cards.
The advantages are straightforward: you get a percentage amount back on the amount that you spend. This percentage rate varies by card, you can expect between 0.5% and as high as 6% in some rare cases. This will depend on your spending and also might be a little more complex to calculate – sometimes there will be a higher introductory cashback rate which reduces over time, and sometimes there will be a combination of rates depending on the type of purchase and amount spent.
While they are a great option for the reasons outlined above, there are some other things to keep in mind when using them.
The main thing to be concerned about with cashback cards is the high interest rates that can be levied in the event that you cannot clear the amount owed each month. These cards are designed with clearing of the debt each month in mind, so typically the interest rate levied will be higher than for other types of card in the event you can’t pay off the balance each month. This also increases the risk of charges accruing on the account in the long-term.