How does a Cashback Credit Card Work?

Cashback credit cards have become some of the most popular credit cards in the world today and the plain simple truth of the matter is that in this particular respect, Australia is no different.

There are cashback credit cards dominating their particular fields in terms of statistics in Australia and that is definitely something that people enjoy extensively because it allows them the chance to talk to their friends about exactly what they can get out of their cashback credit cards. There has been more consumer enthusiasm about cashback cards than any other credit card type when it debuted on the market, practically leveling in popularly with frequent flyer credit cards.

Cashback Credit Card Basics

Most credit cards with cashback offers feature them as redeemable rewards in their rewards program catalogue. For instance, you may be able to redeem:

• 10,000 points for $50
• 15,000 points for $75

This hypothetical rewards program is using 200:1 ratio of points:dollars. This is a fairly common cash-back ratio in Australia. If you plan to use your credit card to ‘profit from cash-back’, you’ll need to spend approximately $12,500 a year simply to compensate for the annual fee. For gold and platinum credit cards, you’ll need to spend about $30,000 (assuming the average prestige credit card annual fee sits around $150).

Details: Rebate Rate

If cashback credit cards were as simple as the above paragraph implies, there would be no need for competing cards. However, there are many details that come into it that make different cards good for different people and that is why more discussion is needed before you find the card that is best for you. The first of these details has to do with the rebate rate and it is perhaps the most impressive aspect of the card and the one that deserves the most discussion.

Simply put, the rebate rate is the rate at which you get money back when you make purchases on the credit card. When cashback credit cards first came out onto the market, most of the rebate rates were simple. That is to say that they were a straight percentage of everything you spent on the card in a year’s time and the rebate cheque was cut to you at the end of the year. Therefore, a credit card that had a cashback rebate rate of 1% would pay you 1% of what you spent on a yearly basis, no questions asked. If you spent $20,000 over the course of a year on your credit card, you would receive a rebate cheque for $200 at the end of the year.

As more cashback credit cards came onto the market however, companies realized that in the very long term they didn’t like their profit margin with this type of rebate rate. To that end, the rebate rate was amended with a maximum and therefore companies did not have to pay people beyond a certain point. This type of maximum is still in use today and in the case of most companies that employ it the maximum is $500 in the rebate, meaning that you don’t get credit for every purchase above $50,000 that you make on that particular credit card.

Graduated Rebate

Finally, the most recent addition to the rebate rate debate has been the graduate rebate rate system. A typical graduated rebate rate might look something like this:

• $0 – $10,000: 0.25%
• $10,000 – $25,000: 0.5%
• $25,000 – $50,000: 0.75%
• $50,000+: 1%

The numerical ranges represent purchase amounts on your credit card while the percentages represent the rebate rate that you would get in that particular level. This is the most advantageous way of doing things for the credit card company and for that reason many people try to avoid these cashback card types if at all possible. It is not always possible however, so keep in mind that if you are 100% set on cashback credit card you might end up stuck with that type of deal.

What is the Best Cashback Credit Card?

Featured Cashback Credit Card

With the Citibank BP MasterCard you can benefit from a very good Cashback Offer. Plus this card offers a good balance transfer deal for 6 months.

• $89 annual fee
• 20.89% p.a. on purchases
• 0% p.a. for 6 months on balance transfers
• Cash Advance Rate of 21.39% p.a.
• 55 days interest free
• Minimum Income Requirement of $30,000 p.a.

Read the Citibank BP Credit Card terms and conditions.

See the current best cashback credit cards available on the Australian market for online application.

Check out today's featured offers:

Westpac Low Rate	Citibank Clear Platinum	Qantas AMEX Discovery	ANZ Platinum
0% p.a. for 6 months on purchases & balance transfers	2.9% p.a. for 12 months on balance transfers	$0 annual fee Up to 10,000 Bonus QFF Points	0% p.a. for 6 months on purchases & balance transfers

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Popular Credit Card Offers

			Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Cash Advance Rate (p.a.)
	Westpac Low Rate Card - 0% Offer	A credit card with a low rate offer on both balance transfers and purchases, plus a low annual fee.	0% for 6 months (reverts to 13.49% )	0% for 6 months	$45	21.49%
	Citibank Clear Platinum Card	Competitive interest rate on purchases and balance transfers offer.	11.99%	2.9% for 12 months	$99	21.74%
	St George Vertigo	Take advantage of this great offer from St.George with a low rate on purchases and a low balance transfer offer.	13.24%	0.99% for 12 months	$55	21.49%
	ANZ Platinum Credit Card	An introductory interest rate offer on balance transfers and purchases, plus a $0 first year annual fee.	0% for 6 months (reverts to 19.24% )	0% for 6 months	$0 annual fee for the first year( $87 thereafter)	20.99%