Whether you’re a married woman shopping to feed your family of 5 at home or you’re a working lady struggling through your 9 to 5 job and having only enough energy to grab packets of ready to cook food on your way home, we all spend a huge amount grocery shopping.
A survey conducted in 2018 estimates the annual food cost of an average UK household exceeds £4,753.
With such expenses on food alone, it makes sense to look for points, bonuses or cash back on the shopping you are already doing. A year from now you will most likely still need to buy your groceries but with now in addition to your money, you’ll also have amazing rewards and additional bonuses and points through Cashback Credit Cards.
How Does Cashback Credit Card Work?
Cashback is a term that refers to a sort of reward plan that returns to you a percentage of what you spend shopping. The percentage according to which you are returned your spending depends on what card you are using as well as the place from which you are shopping. Generally, it is around 0.5% to 5%.
True cashback refers to cold, hard, tax-free cash you receive either monthly or annually depending on your credit. Although sometimes the cashback is paid to you in terms of vouchers or store coupons.
Why do You Need a Reward Card?
A common question many of us have is why do we need to go through the hassle of signing up for a cashback credit card when I make my ends meet easily? Well we will put your concerns to rest with a little math’s.
Household food and beverages cost an average of £93.16 per person per week. This accounts for roughly £4,753 per year. If we assume that the cash back card that you selected returns at a rate of 2% payback. 2% will equal to £95.06 per year, this may not seem much but after 2 years it will become £190.12 while after 3 it will be equal to £285.18. See where we are headed?
So, to put it simply, with a cashback credit card having 2% return rate, you will be getting £95.06 per year from your grocery shopping. While this may not seem much, overtime this amount can cumulate to warrant a vacation every few years. Or you can perform that home renovation that you desperately wanted to do, or it can even help you pay off a little of your credit card bills!
Do Cash Back Cards Pros Outweigh Their Cons?
This might seem counter intuitive considering the way this has been progressing. But before applying for a Cashback reward program, one must know all the details about it and this includes its drawbacks as well as some other minor details.
There is no doubt that cashback programs might seem like a dream come true, especially if you are one who cannot afford saving a fixed amount every month from your budget.
Before applying for a reward credit card, you need to ask yourself a few questions:
Can I Payback my Credit Card dues Timely?
The major catch in cash back programs is that the interest rates accompanying these are very high. If there is any balance left over at the end of the month the company charges high amounts of interests which typically cost more than your annual reward altogether.
Does the Card Come with an Annual Fee?
Before signing up for a reward program, you should pay close attention to the fees if any that it might have. Some of the companies charge annual fees that is covered up by your cashback rewards provided you shop quite a lot. So before signing up for any card decide whether you will be able to afford the annual fees and still save some cash, otherwise it’s just not worth it.
Will I Really be able to Use it?
While this might confuse the majority, it is an important factor to consider. Cashback credit cards should not be utilized in your traditional credit card way. They come with high-interest rates and the balance if left over for more than a month typically covers your annual reward easily. While there is no doubting the allure that is present in the 5% cashback reward, it is by no means an excuse to buy those expensive pair of footwear that are clearly out of your budget.
Stick to your plan, do not get sucked in by the thrill of shopping and you just might be able to afford those brand set of sneakers or those shiny heels eventually without going in more debt.
What are the Terms and Conditions Accompanying my Choice?
In addition to the high-interest rates and annual fees, you should look over the fine printed T&C’s before signing up. Some cards offer varying levels of cashback rates as you use it, e.g.: 5% in the first few months then 2% afterwards etc.
Others offer different rates in the purchase of different utilities, for e.g.: 2% on dining, 3% on travel, 1.5% on groceries etc. While others limit the total amount that you can earn or spend in a year.
To put it simply, always read the terms and conditions of your relevant reward program to see if it really suits you.
If you believe you have the answers to these questions and think that you can keep yourself from unnecessary shopping sprees then a cashback program is extremely helpful in earning a little something extra over the years without going through financial crisis.
5 Best Cashback Credit Cards
Considering the charges of an average household, the following offers the best rewards depending on your use.
|Platinum Cashback Card from American Express|
|Platinum Cashback Everyday Card from American Express|
|Asda Cashback Plus Credit Card|
|Costco TrueEarnings American Express Credit Card|
|Aqua Rewards Credit Card|
Platinum Cashback Card from American Express
The Platinum Cashback Card from American Express is by far the most popular cashback card due to its high payback rate. The card boasts an introductory payback rate of 5% during the first 3 months (capping at £125) and a payback rate of 1.5% afterwards. Although it does require an annual fee of £25, it is relatively modest considering that an average UK household can save roughly £535 in the first two years.
|1% payback rate at annual purchase rate of £10,000||Amex not accepted everywhere|
|1.5% payback rate at annual purchase rate of more than £10,001||Requires annual fee|
|5% introductory payback rates|
Platinum Cashback Everyday Card from American Express
For those individuals that spend less than £10,000 the Platinum Cashback Everyday Card from American Express is the perfect cashback card for all your shopping’s. Like its sister card, this one also possesses an introductory rate of 5% in the first 3 months (capping at £100 reward), and then reducing to 0.5-1.0%. The major benefit of this card is that it requires no annual fees.
|0.5% payback rate at annual purchase rate of £5,000||Amex not accepted everywhere|
|1.0% payback rate at annual purchase rate of more than £5,001|
|5% introductory payback rates|
|No annual fee|
Asda Cashback Plus Credit Card
As the name suggests, Asda Cashback Plus Credit Card offers 2% cashback rewards on shopping in Asda stores and 0.5% elsewhere. While the card does have high cashback rate, it is marred a little by the £3 monthly fees. On an average, the individual or family possessing an Asda Cashback Plus Credit Card will have to spend roughly £150 a month in Asda Stores.
|High cashback rate of 2%||0.5% payback rates on shopping elsewhere than Asda|
|0% interest on purchases of at least £200 in George.com||Rewards in terms of Asda Vouchers, not statement credits or check|
|10% discount on some of the Asda products||Monthly fee of £3|
Costco TrueEarnings American Express Credit Card
The Costco TrueEarnings American Express Credit Card provides a startling 3% cashback rate on dining with a 2% payback rate on travel and 1% on shopping! This card is a must have for those who dine out frequently. An average UK household could save a whopping £225 annually with this card, the only major problem is that it gives out the earnings in the form of Costco vouchers
|3% cashback rate for dine-in||Annual cap of £300 on general spending|
|2% payback on travel and 1% on shopping||Rewards given in the form of voucher|
|Rewards given in the form of voucher||Requires membership|
|No annual fee||Amex not accepted everywhere|
Aqua Rewards Credit Card
It is a general fact that many of us do not have outstanding credit card history and majority of you might have become saddened after looking at all these rewards and knowing that your credit history won’t allow you these luxuries. Fear not, Aqua Rewards Credit Card was launched specifically for those of us having weak credit history.
The cashback rate, although not much, is at 0.5% on all purchases. This card provides an opportunity for the less fortunate amongst us to settle their credit history bit by bit. Although it comes with a catch, the card possesses a high interest rate that will cancel out all of your annual earnings if any balance is left over at the end of the month.
|0.5% payback rates on all purchases||High interest rates|
|Rewards are delivered as statement credits annually||Missing a payment may cause you to lose all your annual rewards.|
|No annual fees|
While there might be dozens of enticing offers from several credit card companies that may try to woo you into signing up for their cashback program. Only you can accurately judge which reward program may be suitable for you depending on your monthly expenditure and your budget.
The success of these programs solely depends on the user, if the customer uses them wisely, clears all their balances at the end of the month, does not spend more than what their budget can afford, then these programs offer THE best way to save a little bit of money annually without any hassle.