Get 5% cashback on your Christmas shopping
Christmas may be the season of goodwill but for most of us it's also the season to spend, spend, spend. However, with the right choice of credit card it is possible to get a reward for your financial exuberance.
Cashback credit cards repay you a percentage of every pound you spend on your card. Currently, the card that is topping the cash back tables is the American Express Platinum Cashback which is paying a whopping 5% back for all spending in the first three months – up to a maximum of £100 (which would require a £2,000 spend).
After the initial three months the cash back rate reverts to 0.5% for an annual spend up to £3,500, 1% for spends between £3501 and £7500 and 1.25% for those spending even more. The card also offers 0% on new purchases for six months allowing you to spread the cost of Christmas.
This deal compares with a standard 1% cashback from Capital One and Egg, 0.5% from Bank of Ireland and a miserly 0.25% from Smile.
but, they aren't for everyone. For example once any 0% interest free period expires interest rates (typically between 13%- 20% a year) will quickly wipe out any cashback rewards.
This means they are only suitable for those spenders who clear their bill every month or, in the case of interest free deals, are able to pay off the debt within the offer period.
You should also check out the terms and conditions which will explain when a cash back may not be paid. American Express for example stipulates that no rebates will be paid in any month that the minimum payment is not received or on cash withdrawals.
If you are loyal to a particular supermarket you may also want to consider a reward credit card. Tesco for example offers an extra Clubcard point for every £4 spent.
The card also doubles as a Clubcard so when you spend in Tesco you get one point for every £4 spent in an addition to your standard Clubcard points. The Sainsburys Nectar Credit card offers double Nectar points when you shop in Sainsburys or £1 for every point you spend elsewhere.
Those borrowers that require more time to clear their balance should ignore rewards and focus on the cards with a longer interest-free period. The best deal at the moment is the Tesco credit card – currently offering 0% on new purchases for 13 months, while the Sainsburys credit card – not the Sainsbury's Nectar deal - offers 0% for 12 months.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
Cashback credit cards
These reward you with a small percentage of cash back on your total spend on the card, either each month or annually. Cashback cards carry high APRs and ONLY work if you pay your balance off in full every month. If you miss payments and have existing credit card debts, leave these well alone.