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25 July 2008
Rates as low as 6.7%

Cashback credit cards give you extra cash every time you spend

With cashback credit cards you get a set percentage of everything you spend allocated as a credit. Then once a year the total is applied to your account so for that month your credit card bill is reduced.

Nothing is free in the world of commerce. Every time you purchase with a debit or credit card then the retailer has to pay a set fee or percentage to the bank that provides them with a merchant account. Out of the merchant fee the credit card company can afford to offer cashback to their customer. So, in effect, it's your money anyway.

It's worth going for these cashback card only if you pay off your credit card in full. If you don't then any benefit of cashback is swallowed up by the extra interest you will be paying.

Paying off your credit card in full is straightforward if you set up a Direct Debit. All credit card companies will offer you the option of paying by Direct Debit and if they don't make sure you enquiry and get the right form. Select the option to pay off all the amount owed in full every month.

Although you're using a credit card, you are effectively using it as a debit card. With a credit card purchase over £100 you have extra protection if the retailer fails to deliver because the credit card company has a joint liability. This is not the case with a debit card.

Egg Money card is a credit card that pay 1% cashback on everything under £20,000 worth of spending. So there is £200 a year available.

American Express Platinum pays 5% cashback on purchases in your first three months (up to £4,000 of spend). Thereafter, earn 0.5% on the first £3,500, 1% on £3,001 to £10,000, and 1.5% after £10,001. Not all retailers take American Express. You can't blame them because American Express merchant fees tend to be very, very high.

Shell Mastercard pays a 3% rebate on Shell fuel purchases in Great Britain, 1% rebate when you use your card anywhere else.

Barclaycard Platinum pays 1% cashback on supermarket and petrol spend (up to £15 a month). 0.5% cashback on all other spending (up to £15 a month)

With Rewards cards, such as Airmiles or Nectar you get points instead of cash that are redeemable for a range of goods. The value generally isn't as good as a cashback card.

Remember the most important thing with cashback credit cards is to pay off your debts in full each month.