Cashback credit cards – Why are the banks fighting to give you money?

Information verified correct on October 24th, 2016

An increasing number of credit cards are offering cashback offers. Banks aren’t normally known for giving away money, so what’s the catch?

An increasing number of Australian credit card providers have been adding cashback offers or increasing the amounts they give away. So what’s the catch? Here we investigate how cashback works, show you which providers are offering them and explain how you can get the most from this feature.

What does cashback mean?

As the name suggests, cashback rewards cardholders with cash as they spend. There are two main ways that you can receive cash back on your card:

  • A percentage of eligible purchases. Some cards offer instant cashback when cardholders make eligible purchases. For example, if you buy something with the card for make a purchase of $1,000 and the card offers a 2% cashback promotion, the credit card provider will reward you with $20. The conditions might require you to make a specific kind of purchases (such as using contactless), spend a certain amount or buy from a specific retailer.
  • Rewards program. Many credit cards let you earn rewards points. While most of these schemes allow cardholders to redeem their points for merchandise, experiences or travel perks, some also offer cashback rewards where you can redeem points for money, either added to an account or for spending in specific stores. You’ll need to manually request a cashback with his option.

Cashback offers are often used as an incentive for new cardholder signups. Some promotional offers may reward you with the cash as soon as you sign up, whereas others will distribute the money once you have made an eligible purchase during the introductory period.

Below we’ve listed the active cashback offers in the Australian market as of September 7, 2015.

Citi Qantas Signature Credit Card

Citi Credit Card Offer

Earn 50,000 bonus Qantas Points with Citi Qantas Signature credit card, an introductory balance transfer offer and enjoy a discounted annual fee.

  • $199 p.a. annual fee for the first year ($395 p.a. thereafter) annual fee
  • 20.99% p.a. on purchases
  • 0% p.a. for 6 months on balance transfers
  • Cash Advance Rate of 21.74% p.a.
  • Up to 55 days interest free
  • Minimum Income Requirement of $75,000 p.a.

Cashback for purchases and contactless payments

If you want to get something back for using your  card, compare the following credit cards to discover which one presents you with the most value.

Citibank Double Cash Card cardholders can earn cashback twice on every eligible purchase. When making a purchase, you earn 1% cashback as you buy and 1% cashback as you pay off that transaction, equal to 2% per purchase. Take note that eligible purchases do not include balance transfers, cash advances and disputed or unauthorised transactions.

Virgin No Annual Fee credit card customers can take advantage of $100 cashback on their card when they spend $2,000 or more within the first three months. Read the terms and conditions to make sure you’re spending the $2,000 on eligible purchases. Transactions such as cash advances and balance transfers will not apply.

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Cashback Rewards

Rather than receiving cashback on purchases, these cards let you redeem rewards points for cashback amounts:

      • ANZ Rewards Cashback.

With 25,000 Reward Points, cardholders can request to have $100 cashback transferred to either their ANZ Rewards account or another ANZ account. If you haven’t quite clocked up that many points, you can also receive $50 cashback to your Rewards account or another ANZ account for 12,500 Rewards Points.

For a limited time, existing Westpac cardholders can redeem their Altitude Points as cashback on their statement. The offer is available until 18 September 2015 and cashback redemptions are applicable to $50, $100, $500 or $1,000 denominations. Once you’ve requested the cashback, you can expect the funds to appear in your account within 10 working days.

HSBC cardholders can also redeem their rewards points for cashback on the card connected to the rewards program. You can either redeem 75,000 points for $25, 15,000 points for $50 or 30,000 points for $100 cashback. The codes you’ll need to redeem these cashback rewards are available on the HSBC website.

Why are the banks fighting to give you money?

So, why are the banks falling over each other to give their customers money back? While there’s no specific reason, there are some clear trends. Many of these cashback offers are included as introductory or promotional offers for new cardholders, so cashback is being used as a marketing tool.

Recent controversies around excessive credit card interest rates, which resulted in the recent Senate inquiry, could also be a contributing factor. Simply put: if you’re accused of being greedy, giving money away is a simple remedy.

What do I need to be careful of when using a cashback credit card?

      • Annual spend. Many cashback credit cards charge an annual fee. If the cashback you’ll receive doesn’t outweigh this annual fee, you might find that you’re not getting enough value from the card and would do better with a different card with a lower or zero fee.
      • Eligible purchases. Cardholders can usually only receive cashback on eligible purchases, which generally excludes balance transfers, cash advances and unauthorised payments. Read the terms and conditions to ensure that your purchases will earn you these rewards.
      • Capped cashbacks. Some credit cards come with a cashback cap, which limits how much you can get back. If you’re likely to spend enough on the card that you exceed the cashback cap, you may want to consider a card with a higher cashback cap.

A cashback card can be a good way to receive rewards for your regular spending. Make sure to consider the conditions of the cashback carefully, as eligible purchase requirements and cashback caps could limit the potential value. As there are many cashback offers available on the market, compare your options to find the best one for you.

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Credit Cards Comparison

Rates last updated October 24th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ME Bank frank Credit Card
Enjoy a low and consistent interest rate on purchases and cash advances, combined with no annual fee.
11.99% p.a. $0 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info
NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months (reverts to 13.99% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $59 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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