It's often said that there is 'no such thing as a free lunch.' In other words, every gain ends up costing us something, somehow, either immediately or later on. Generally, I agree with this old saying, but there are some exceptions to this rule.
For example, I will pocket upwards of £100 later this month for doing absolutely nothing. Where does this 'money for nothing' come from? Quite simply, it's a no-strings reward for using my cashback credit card!
Wherever I go and whatever I'm buying, I try to pay for all my purchases using my cashback credit card. This is because my flexible friend gives me a yearly rebate of 1% of the value of all my spending. As I've spent at least £10,000 on this card over the past 12 months, I'm due a cashback payment in excess of £100 very soon.
However, many people may not like to spend as much as I do on their plastic cards. Therefore, in order to find the ultimate cashback credit cards, I've crunched the numbers for monthly spending levels of £200, £400 and £800 in the first year.
The three top cashback cards
These three are the table-topping cashback cards:
The Capital One World MasterCard pays 5% cashback for the first 99 days, up to a maximum reward of £100. After this, it pays 0.5% on the next £6,000 spent, then 1% on £6,000 to £10,000 and 1.25% on spending over £10,000. To apply, you need to have a spotless credit rating, own your home and earn at least £20,000 a year. The typical yearly rate on purchases is 19.9% APR.
The American Express Platinum Cashback Card pays 2.5% cashback for the first three months, capped at £100. After this, it pays 1.25% on all spending. There is a £25 yearly fee, plus a yearly bonus rate of 2.5% for one month each anniversary. To apply, you need a household income of at least £30,000 a year, and the typical yearly rate on purchases is 14.9% APR.
The Santander 123 Cashback MasterCard pays 1% on supermarket spending, 2% in department stores and 3% on fuel spending (capped at £9 a month).
There is a £24 yearly fee and the typical yearly rate on purchases is 18.9% APR. To apply, you'll need a minimum yearly income of £7,500.
For each of the cards I have highlighted the typical interest rates charged. However, cashback cards are only really appropriate for those of you who pay off your balance in full each month, thereby avoiding paying interest. Otherwise your interest payments will soon wipe out any cashback you may earn.