Cashback can be earned in a few different ways and can be an easy way for you to earn some extra money whenever you spend. So, if you want to know more about how it works and how you can boost your cashback earnings, read on.
What is cashback and how does it work?
Cashback is a sum of money you can receive when you spend in certain ways and/or at certain retailers. Essentially, it can be free money – you receive it as a reward from your card provider, a bank or a website for your everyday purchases.
When you make your purchase, you receive a percentage of that spending back. Depending on the type of cashback, it can be credited to your credit card or your bank account.
Cashback percentages aren’t usually particularly high – you might only get 0.5% to 3% back, so on a £100 spend, you could earn from 50p to £3. But over time this can soon add up.
Receive 1% cashback on everyday purchases capped at £15.
The Chase account is free to open and pays 1% cashback on the first £1,500 of your everyday debit card spending for the first 12 months. This means you can earn up to £15 a month - or £180 a year. Cashback can be earned on your spending in both the UK and abroad, plus there are no fees for foreign card transactions. Further account benefits include a linked easy access savings account and a round-ups feature where your spending is rounded up to the nearest £1 and the difference is transferred to a savings pot paying 5% interest.
Earn £5 cashback a month for six months when making 20 or more debit card payments each month.
With the TSB Spend and Save account, you can earn £5 cashback each month you make at least 20 debit card payments, for the first 6 months. There's no monthly fee for the account and you'll have access to an arranged overdraft. You can also set money aside in different savings pots to help you get better at budgeting and saving, while the Save the Pennies feature rounds up all debit card payments to the nearest £1 and transfers the difference into your savings. The account also comes with TSB Rewards to help you save on everything from cinema tickets to holidays.
Representative example: If you use an arranged overdraft of £1,200, you'll be charged interest at 39.9% EAR variable.
Pros
Earn cashback as you spend
Competitive Monthly Saver
Save the Pennies feature
Overdraft available
Cons
Cashback on Save and Spend account expires after six months
Interest charged on overdrafts
Minimum opening balance
£0
Minimum operating balance
£0
Switch service guarantee
Yes
Account fees
£0
Overseas card transactions
Europe: 2.99% Elsewhere: 2.99% plus flat fee of £1
Earn up to 1.2% cashback plus get a £20 sign-up bonus with Revolut Pro.
The Revolut Pro plan is designed for freelancers and pays cashback on your Pro card payments. To open the Revolut Pro account you need to have a regular Revolut account as well - your Pro account is set up within this account. There are 5 Revolut plans to choose from, one of which has no monthly fee, and the amount of cashback you earn depends on the account you have - it ranges from 0.4% to 1.2%. You can switch between your two accounts with ease, making it easy to juggle both your business and personal finances.
Cashback credit cards pay you cash in proportion to the amount you spend on them. The percentage you earn can vary depending on the card, but you’ll usually find that the cards with the highest rates charge an annual fee.
Before choosing a cashback credit card with an annual fee, you need to work out whether you’ll spend enough on the card and earn enough cashback to make the fee worth paying. If you’re not careful, the fee could far outweigh any cashback earned.
Another big watchout with cashback cards is that many charge high rates of interest. This means that if you don’t manage to pay off your balance in full each month, the amount of interest you pay could again be higher than the amount you earn in cashback. So essentially these cards are best suited to those who can afford to pay off their balance in full every single month.
Some cashback credit cards will pay a higher introductory rate which will then drop off after a set time, say 3 months. Others might pay higher rates depending on how much you spend and where you spend. You might earn more when you buy petrol than when you spend on groceries, for instance. This makes it crucial to compare cashback credit cards carefully so that you pick one that best suits your spending habits.
Also keep in mind that transactions such as cash advances and bill payments won’t usually be eligible for cashback. And most cards limit the amount of cashback you can earn per month or year, so check before you apply.
Cashback earned will either be credited to your credit card or your bank account. If it’s credited to your card, this can reduce any existing balance you have to pay off.
Cashback from a bank account
As well as credit cards, some bank accounts will pay you cashback. Again, you might be able to earn cashback when you use your debit card to make purchases, or you might earn cashback for certain direct debits and standing orders that you’ve set up to pay bills, such as your utility bills and mortgage payments.
Other bank accounts can pay you a fixed sum of cashback each month if you meet certain criteria, and some might pay you a cash sum simply for switching your old bank account to them.
When comparing cashback bank accounts, you need to consider which type of account is likely to earn you the most income.
Best strategy to use and get the most out of cashback
Whether you’re using a cashback credit card or opening a cashback bank account, it’s important to look for one that best suits your spending habits.
To get the most out of a cashback credit card, you should use it for all your everyday spending – including food bills, clothes and socialising. It’s important to pay back your balance in full each month, so you should avoid using your card for large purchases you might struggle to repay. Yes, you might earn more cashback, but if you start paying interest on your balance, this will likely cost more than the amount you earned in cashback.
If you’re using a bank account that offers cashback, be sure to read the terms and conditions thoroughly so that you meet all the qualifying criteria.
Using cashback apps when shopping
As well as earning cashback on a credit card or with your bank account, there are cashback websites and apps you can use to earn money back when you shop at certain retailers.
TopCashback and Quidco are two of the biggest cashback sites. If you sign up to one of these, you’ll earn a small percentage of their commission when you shop on other websites. As well as retailers, you can earn cashback on some mobile or broadband contracts, some insurance products and your groceries.
These websites are usually free to use, but you can opt to pay a membership fee to earn a higher rate of cashback. It’s an easy way to earn a little extra on the spending you were going to do anyway. You just need to remember to use them!
Bottom line
Earning cashback can be a hassle-free way to get a little back on your everyday purchases. But before signing up for a cashback credit card or opening a new bank account, it’s important to read the small print, checking for fees and interest charges, and reading the qualifying criteria so that you’re not caught out. Also be sure to pick a card or account that is likely to work best for you – in other words, one that matches your usual spending habits and offers cashback in the places you usually shop.
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Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time. See full bio
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