Are Cashback Credit Cards Worth The Hassle?

Cashback credit cards are a neat way of recouping a little of the money you spend on your credit card. That may not amount to much – usually 1% – but it’s certainly better than the proverbial poke in the eye with a sharp stick. You will need to possess a good credit rating to qualify for one of these credit cards.

Most Australian credit card reward programs will allow you to redeem your reward points for cashback increments, usually of $25, $50 or $100. The idea of receiving cash is far more appealing than some of the offers out there. You must be careful, though, not to pay a price for your cashback if it is contained within a rewards program. Some programs will require that an annual fee is paid on top of any fee for the credit card itself. For a $100 fee, you would need to be spending $20,000 just to get the fee back. Equally, cashback may be more expensive to redeem than other rewards of the same value, making it a less appealing option.

The true cashback credit cards are those that do not provide the cashback as part of a rewards program, simply providing cashback at usually 1% of the amount spent. However, you need to check if there is an upper annual limit on the amount of cashback that can be claimed. Cashback credit cards will rarely have a maximum rebate allowance higher than $500, which means, at 1%, you would not be rewarded for spending more than $50,000 annually. That, of course, is a huge annual credit card spend for most people, so being capped at that limit should not be a worry.

You should also be aware that certain cashback credit cards offer both immediate discounts on certain goods and services from particular businesses on top of the cashback program. Investigation on your part is obviously required to determine how each cashback credit card works, and whether it is worth the application. Make sure you are not being penalised elsewhere; for example, with a higher than normal annual fee or interest rate. Cashback credit cards exist to elicit new customers, not because the credit card industry has come over all philanthropic. They can certainly be made to work in your favour, provided you keep an eye on the other features of the card. As with any credit card, you should always endeavour to settle your debt in full every month.

If you can find a cashback credit card without an annual fee, and you can avoid interest charges by clearing your balance every month, then you will be winning.

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