Cashback
11 min read

Finding the Best Cash Rewards Credit Card in the UK: A Comprehensive Guide

Emma Davis · Personal Finance Expert

Cashback credit cards are a popular choice for many in the UK, offering a simple way to earn money back on everyday spending. But with so many options available, finding the best cash rewards credit card can feel like navigating a maze. This comprehensive guide will break down everything you need to know, from understanding how cashback works to comparing different providers and maximizing your rewards. We'll delve into the specifics of the UK market, examining the eligibility criteria, credit score requirements, and current deals you need to be aware of in 2023 and 2024.

Understanding Cash Rewards Credit Cards

Before diving into specific cards, it's crucial to grasp the fundamentals of how cash rewards credit cards function. Essentially, these cards give you a percentage of your spending back, typically as a credit on your account or as a direct deposit. Unlike points-based rewards, cash rewards offer direct financial benefits, making them a popular choice for those who prefer straightforward savings.

How Cashback Works

The core principle of a best cash rewards credit card is straightforward: you spend, and the card issuer pays you back a small portion of that spend. This is usually expressed as a percentage, for example, 0.5%, 1%, or even higher for certain introductory periods. The cashback you earn is then either credited to your account, sent as a cheque, or paid into a bank account. Many cards accumulate your cashback, paying it out once a year or at set intervals, while others offer more frequent payments.

Types of Cashback Structures

  • Flat Rate: This is the most common type, offering the same cashback percentage on all eligible purchases, regardless of where you spend.
  • Tiered Rate: Some cards offer different cashback percentages based on the category of spending. For example, you might earn a higher percentage at supermarkets and petrol stations and a lower rate on general spending.
  • Introductory Bonuses: Many cards offer higher cashback rates or a lump-sum bonus for a limited period, often within the first few months or year. These can significantly boost your rewards early on but revert to lower rates afterwards.
  • Spending Caps: Some cards might limit the total amount of cashback you can earn within a given period or on specific spending categories.

The Benefits of Choosing a Cash Rewards Card

  • Direct Financial Gain: Unlike other reward schemes, cash back provides a direct reduction in your expenses.
  • Simplicity: The cashback process is usually straightforward and easy to understand.
  • Flexibility: You can use the earned cash back for any purpose you wish.
  • Potential for Long-Term Savings: If used responsibly, cashback can save you a significant amount over time.

Key Factors When Choosing the Best Cash Rewards Credit Card

Choosing the right card involves more than just looking at the advertised cashback rate. Here are some critical factors to consider:

Cashback Rate & Structure

The first thing you'll likely notice is the cashback rate. As mentioned above, understand whether the rate is flat, tiered, or an introductory offer. The best cash rewards credit card for you depends on your spending habits. If you have consistent spending across categories, a flat rate may suit you. If you spend heavily in particular areas, such as groceries, you might want a card with a tiered rate. Don't be swayed by high introductory offers if the subsequent rates are low.

Annual Fees

Many cashback cards come with an annual fee. Although the cashback rate might seem lucrative, the annual fee can significantly erode your savings. Before applying, calculate whether the expected cashback will outweigh the cost of the annual fee. Sometimes a card with no annual fee and a slightly lower cashback rate might be better for light spenders.

Interest Rates (APR)

The APR (Annual Percentage Rate) is the interest rate you pay if you don't clear your balance each month. A high APR will quickly negate any cashback rewards earned, making your card a very expensive form of credit. The best cash rewards credit card is useless if you end up paying more in interest than you earn in cash back. Ideally, you should always pay off your balance in full each month to avoid interest charges and truly benefit from the cashback. According to recent UK finance reports, in 2023, the average credit card APR hovered around 20-25%.

Additional Benefits

Some cashback cards offer additional perks like travel insurance, purchase protection, or access to exclusive deals and discounts. These additional benefits can add significant value and might be a deciding factor in your choice. It is important to weigh these perks alongside the cashback rate when choosing the best option.

Foreign Transaction Fees

If you frequently travel or make purchases in foreign currencies, pay close attention to foreign transaction fees. These fees can eat into your savings quickly. Some cards are designed with no foreign transaction fees specifically for those who travel regularly. Be sure the consider this when selecting the best cash rewards credit card for you.

Credit Score Requirements and Eligibility

Your credit score is a significant determinant of whether you'll be approved for a credit card, especially for cards with higher cashback rates. According to Experian, one of the main credit reference agencies in the UK, a "good" to "excellent" credit score is typically required to access the best cash rewards credit card deals. Here's a breakdown:

  • Excellent Credit (961-999): This gives you access to the most competitive rates and rewards.
  • Good Credit (881-960): You'll likely be approved for a good selection of cashback cards, but the highest rates may be reserved for those with excellent credit.
  • Fair Credit (721-880): You might find some options, but you might face lower cashback rates and higher APRs.
  • Poor Credit (Below 720): Options will be limited, and you might need to explore credit-building cards.

Beyond your credit score, lenders also consider your income, employment status, and debt-to-income ratio when determining your eligibility for a credit card.

Top Cash Rewards Credit Cards in the UK (2023-2024)

It's crucial to note that offerings and eligibility criteria can change. This provides a snapshot of providers as of late 2023 and early 2024:

American Express

American Express cards are known for their generous rewards programs, but they often come with annual fees. One of their main benefits is the wide range of offers and incentives available.

  • American Express Platinum Cashback Everyday Credit Card: This is a good option with no annual fee and a straightforward 5% introductory cashback rate for the first three months (up to £100) then a tiered rate of 0.5% for the first £10,000 of annual spending, then 1% above that. Key Features: No annual fee, tiered cashback, decent introductory offer. Who it's for: Everyday spenders who value simplicity.
  • American Express Preferred Rewards Gold Credit Card: While this card rewards points that can be redeemed for statement credit (akin to cashback), it often offers a very high introductory bonus. Key Features: High introductory bonus, many rewards options, annual fee. Who it's for: Big spenders who want maximum returns.

Santander

Santander provides a range of cashback cards with varying benefits, often offering competitive rates and lower fees.

  • Santander All in One Credit Card: This card offers a cashback of 0.5% on all purchases and is relatively straightforward to use. Key Features: Flat cashback rate, reasonable eligibility criteria, no annual fee. Who it's for: Those with good credit seeking a reliable option for consistent cashback.
  • Santander Zero Credit Card: Whilst not directly cashback, this card has no fees for purchases abroad and is often favoured for those who need a card while travelling. Key Features: No FX fees, decent interest rates, suitable for travellers. Who it's for: Frequent travellers.

NatWest

NatWest also offer their customers cashback options.

  • NatWest Credit Card Reward: Provides a variable reward of cashback on purchases. Key Features: Flat cashback rate on purchases, decent interest rates, no annual fee. Who it's for: Those with consistent spending seeking easy cashback.
  • NatWest Reward Black Card: Offers higher cashback on supermarket shopping but comes with an annual fee. Key Features: Higher cashback on groceries, additional travel perks, annual fee. Who it's for: Those who spend heavily at supermarkets, willing to pay an annual fee.

Other Notable Providers:

  • Barclaycard: They offer a range of cashback cards with varying features, such as travel and insurance benefits.
  • HSBC: Often provide deals for existing customers, though their general card options are diverse.
  • Lloyds: Lloyds has some good cashback rewards cards that are worth considering for some.

Note: Always verify the most up-to-date terms and conditions before applying, as these details can change.

Maximising Your Cash Rewards

Even with the best cash rewards credit card, it’s crucial to use it strategically to get the most out of it. Here are some actionable tips:

Pay Your Balance in Full and On Time

This is the golden rule of using a credit card for rewards. Interest charges will quickly negate any cashback you earn. Set up a direct debit to ensure you never miss a payment and avoid late payment fees. According to UK Finance data, in 2023, late payment fees averaged around £12 per month per missed payment.

Track Your Spending

Keep a close eye on your spending to understand how your spending is tracking to the cashback scheme. Knowing your spending habits can help you choose a card that fits your lifestyle. Also, tracking will help you avoid any surprises when it's time to pay your bill.

Avoid Overspending

It’s important to spend what you would otherwise spend, without the incentive. Don't fall into the trap of overspending just to get cashback, or you might find yourself spending more than you actually save. Be careful not to spend money you wouldn’t otherwise spend just to accrue more cashback.

Understand Bonus Categories

If your card has tiered cashback, focus on spending in the categories where you earn the highest rate. Adjust your spending habits so you’re getting the most value for your purchases.

Use Introductory Offers Wisely

Take full advantage of introductory cashback offers, but be aware when they end. Plan your spending accordingly to maximize rewards during the introductory period. Be ready to adjust to the standard rates, or seek a new card if necessary.

Combine With Other Savings

If you are savvy, you can combine the use of your cashback card with other savings, such as loyalty or discount schemes. Use your card to benefit from the cashback, whilst also benefiting from any other additional savings on the purchase.

Check Cashback Terms and Conditions

Make sure you understand all the terms and conditions related to your cashback card, including minimum redemption amounts, expiration dates for rewards, or any specific purchase exclusions. This will help you avoid any surprises and ensure you maximize your earning potential.

Conclusion

Choosing the best cash rewards credit card in the UK requires careful consideration of your spending habits, financial situation, and what providers have to offer. There is no one-size-fits-all solution, and the best card for you depends on your circumstances. Don’t be swayed by introductory offers alone and always pay close attention to the card's standard rates, annual fees, and overall terms and conditions.

By comparing different providers and understanding how cashback works, you can find a card that best suits your needs and start earning rewards on your everyday spending. Make sure to always pay your balance in full and on time to avoid interest charges and really reap the rewards. Remember that a good credit score is essential, and you can improve this by making regular, prompt payments. Take advantage of any additional perks offered by the card provider, but use these responsibly and within your means.

This guide offers an in-depth look at cashback cards, but always double-check the most current terms and conditions before making any decisions. By following this guidance, you’ll be well on your way to finding the ideal cash rewards credit card that works best for you and your finances.