Cash back is one of the most popular rewards when it comes to redeeming credit card reward points.
Reward yourself from your credit card spending by earning exciting cash back rewards. To find a cash back credit card, it is worth looking at the annual fees vs the rewards return, to choose the cheapest & best credit card for your spending habits. To find out more about cash back offers and the type of consumers they suit, read on for the guide below:
Compare Credit Cards with Rewards Program that allow you to redeem points for Cashback
Rates last updated July 6th, 2015
Compare Debit Cards with Cashback on Purchases
Rates last updated July 6th, 2015
Compare Credit Cards with gift cards or vouchers as part of their rewards program
Rates last updated July 6th, 2015
What are cash back credit cards?
Cash back credit cards are credit cards that give you money back on purchases made with the credit card. At the time of writing, the only type of cash back credit cards on the market in Australia are indirect cash back cards — which allow customers to choose cash back options from their reward points from a range of other shopping options.
How do cash back cards work?
Australian cash back credit cards all accrue cash back value according to how much money you spend on your card on eligible purchases. There are, generally, two different types of cash back programs. They are:
- Indirect earn:
This is just a regular rewards program, where points can be used to redeem cash back, along with many other rewards options.
- Direct earn:
These cards, none of which were on the market at the time of writing, earn cash back directly as a percentage of eligible purchases made on the card — say, one percent, for example.
To redeem cash back, use your rewards programs’ online store to redeem a cash back value. Cash back will either be paid directly into you account or into a nominated account.
Pros and Cons of cash back credit cards
Pros of cash back credit cards
- Earning cash rewards gives you money in your back pocket to spend as you choose.
- Most cash back credit cards give you flexibility to choose normal rewards options as well, such as shopping vouchers, merchandise and frequent flyer points.
- There are a range of extra benefits are included with cash back credit cards, such as complimentary travel insurance and other benefits you’d expect with premium rewards cards
Cons of cash back credit cards
- Annual fees tend to be higher with rewards cards than they are with low interest credit cards and the like. Cash back card users need to spend enough money on their card to earn more in rewards than they pay for the annual fee.
- Interest rates on cash back credit cards are higher than interest on credit cards without rewards. Consumers who don’t pay their balance in full each month may save money by choosing a low interest credit card.
- It is hard to compare cash back credit cards, not to mention any credit cards with rewards. Rewards are confusing — perhaps intentionally so. It is hard to work out the value of rewards points.
Choosing the right Cashback Credit Card
How much cash back can I receive?
How much cash back you receive depends mainly on the type of card that you decide to use and whether there is points capping. Your credit card provider will give you all of the details when you sign up for your card.
The general rule is that Australian cash back customers can earn up to 1.4% cash back, after the annual fee is deducted, as a percentage of purchases according to analysis from Credit Card Finder.
What spending can I earn cash back on?
When you use your credit card, you are only eligible to receive cash back on purchases. The amount of points you can earn will depend on the earn rates on your card. Earn rates can be higher for spending overseas and at supermarkets and partner organisations.
What spending can’t I earn cash back on?
You won’t receive cash back on any cash withdrawals, balance transfers, credit card fees and charges, paying your credit card interest or transactions related to gambling.
Important factors to compare cash back programs
The net percentage of cash back per dollar spent is probably the biggest objective factor you can evaluate when deciding upon a cash back credit card. Although, another consideration is that cash back is often of less value that shopping vouchers or other rewards that can be purchased with rewards points. So it is worth thinking carefully about whether you value cash or the full gamut of a reward program’s offerings.
Making money on cash back credit cards: Dos and don’ts
- Do pay off your debt in full each month. If you overspend and can not repay the debt you have cancelled out any potential cash benefit you will receive.
- Don’t use your credit card for cash advances. Cash advances begin accruing interest immediately and aren’t eligible for any interest free days.
- Do use your cash back credit card for everyday purchases to earn the most cash back possible.
- Don’t purchase something that you will not be able to pay off by your statement due date. If you need to carry a balance, consider using a low interest credit card.
Beware of these…
Capped cash back
These are one of the biggest deterrents when you are searching for the perfect cash back credit card. These ‘caps’ are limits on how much cash back you can earn on your card. It is also referred to as a ‘capped rewards points’’
Not every card has capped cash back, but some of them do. If you are likely to spend enough on the card so that you exceed the cash back cap, it may be worth looking for a card with a higher cap or a card with uncapped cash back.
Balance transfers are GREAT, but they should not be done on cash back credit cards. The reason for this is because of the hierarchy of payments.
Let’s say you chose to move a balance over from a higher interest credit card over to your cash back credit card. This may seem like a good idea at first but after you start making your payments, you will begin to see why this is not such a great idea.
The payments will be applied to the balances that have the lowest interest rates first. That means if you have high balance at a low interest rate, you will pay on that balance first while all of your purchases will continue to accrue at the higher interest rate. Not only will your cash back revenue be cancelled out but you will end up paying even more in interest.
Your safest bet is to find a good balance transfer card and move your balance over to that card and use your cash back credit card for purchases only. There are many great balance transfer offers out there and you will likely save a lot more money if you take this option instead.
Have more than one card will cost you more in annual fees, but it could save you interest in this situation.
What’s the cash back catch?
Essentially, there’s no real catch to cash back. You can redeem it just as much as any other reward. However, you’ll find that the value of cash back is slightly less than what can be bought with rewards points, such as shopping vouchers. Using cash back, therefore, should be a conscious decision with this in mind.
Is it worth aiming for cash back rewards in the end?
Just like any regular rewards credit card, if you don’t spend enough per annum to offset the value of your annual fee, or pay excessive interest, the value of your rewards will be nil or less. Be smart and ensure you are actually going to get any ‘cash back’
How to apply and use a cash back credit card
1. Apply for a cash back card – The good thing is that you can do all of this online these days — directly from the comparison table above. Click ‘Apply’ on the card you’ve chosen.
You will need to have some information ready. For example, your address, your salary before taxes and other personal information. If the details are in close proximity, you will be able to finish your application in no time.
Once you have applied, the credit card company will respond to you to confirm your application. If necessary, you will be asked to provide additional information to assist your application. Once you’ve received approval for your credit card, you’ll receive your brand new credit card via post, often a week or so later.
2. Keep your old card open until all direct debit payments are switched over – You do not want to be stuck being penalised for missed payments. The surefire way to combat this is by keeping your old credit card account open for an extra couple of months until you are sure all your direct debits are transferred over to your new card. If you fail to make a minimum payment, you stand to lose money in fees and charges.
3. Spend!! – It is time to earn cash back! You will not earn any cash back rewards if you do not spend so you need to spend. We all have to spend money each month. Bills and expenses stop for no one. The nice thing is that you can be rewarded for making these basic and fundamental purchases.
So, with that said, buy your groceries, fill your car with petrol, buy some flowers for your sweetheart. Whatever you do, just be sure you are paying with your cash back credit card. Just be sure that all of your purchases are eligible. Note: gambling and cash advances are never eligible for cash back rewards.
4. Know when promotional offers end – If you have a card that has a promotional offer, then you will want keep track of when that promotional offer ends. Make a calendar reminder alerting you of the end date as soon as you get the card.
* The credit card offers compared on this page are chosen from a range of credit cards CreditCardFinder.com.au has access to track details from. ‘Best and ‘Top’ are ratings which are subject to our consideration and is not rated against all Australian credit cards. We recommend you take this information into account when comparing credit cards.