One of the best ways to protect your money from the impact of inflation is to move your cash to a high-interest-rate savings account. Another strategy is to look to earn cashback on the money you spend.
Selecting the right financial product or adapting the way you shop can ensure that virtually every time you spend money you get a portion back in the form of cashback.
Below we run through the best options for picking up cashback when spending on credit cards, current accounts and through cashback websites.
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Earn cashback from your credit card
One of the easiest ways to earn cashback is by using the right credit card. A range of different cards reward shoppers with cashback simply for using the card for purchases.
Cashback is calculated as a percentage of the money spent, and it’s paid either monthly, quarterly or annually, depending on the individual credit card.
In some cases, the card will pay a higher rate in the first couple of months.
For example, one of the best cashback cards around is the American Express Platinum Cashback Credit Card, which pays a rate of 5% in the first three months, with the cashback capped at £125. After that, you earn a rate of 0.75% if you spend less than £10,000 in a year or 1.25% above that level. The Platinum Cashback card comes with a £25 annual fee.
While fees are not unusual for cashback credit cards, there are some which do not charge them. American Express offers a Platinum Everyday Cashback Credit Card which is fee-free, and still offers 5% in the first three months, albeit with a lower cap of £100. This is then followed by a cashback rate of either 0.5% or 1% based on whether you spend above £10,000 in a year.
The downside to American Express credit cards is they are not accepted by all retailers. As a result, you may be unable to maximise the cashback earned on your spending.
One non-Amex alternative is the Santander All-in-One credit card. It pays a flat rate of 0.5% cashback on your spending, though there is a £3 monthly fee.
To get the best value from a cashback credit card, it’s important to put as much of your regular spending on the card as possible. That way you earn cashback on the maximum amount each month. Though it’s important not to use this as an excuse to overspend.
Cashback credit cards, and other forms of reward credit cards, are really only suitable for shoppers who can clear their balance in full every month. Otherwise, the interest charged on the outstanding balance will swiftly erode the cashback earned, leaving you with little to nothing in the form of rewards.
Earn cashback from your bank account
A host of current accounts now offer customers cashback when spending through their current accounts.
This is generally focused on the payment of household bills through direct debits. For example, the Santander Edge account pays 1% cashback (capped at £10 a month) on a range of household bills like council tax, water bills and energy bills.
Another option is the NatWest Reward account which pays £4 a month so long as you have at least two direct debits active from your account.
Some accounts also offer some form of cashback for spending with your debit card. With NatWest for example you get 1% back when you shop with certain partner retailers, while the Santander Edge account pays 1% (capped at £10 a month) when you spend at supermarkets, on fuel or public transport.
There are no such restrictions with the Chase current account, however, which pays 1% cashback on debit card spending, irrespective of where it takes place.
The Halifax Reward account pays cashback no matter how you spend your money. It pays account holders £5 a month so long as they stay in credit, pay in at least £1,500 a month and then either spend £500 with the debit card or keep their balance above £5,000.
As most cashback current accounts charge a monthly fee, it’s important to take this into account when deciding if the product is the right one for you.
For example, the Santander Edge account has a £3 monthly fee, while NatWest charges £2 a month for its Reward account. The Chase account is fee-free, as is the Halifax account so long as you pay in at least £1,500 a month.
If you want to get a larger lump sum from your current account, then you might prefer to opt for one which pays a switching bonus. Some banks currently pay as much as £200 to new customers just for opening an account.
Earn cashback from your online shopping
Finally, it’s worth flagging up the potential to earn cashback every time you shop online through cashback websites.
Cashback websites like TopCashback and Quidco have partnerships with thousands of retailers. The idea is that if you head to the retailer’s website via a tracked link on the cashback website, and then spend money with that retailer, you will get a portion of that spend back in cashback.
For example, at the time of writing if you shop with the Body Shop through TopCashback you can get up to 16% back, while shopping with AO.com through Quidco can pocket you 3% cashback.
Essentially, these sites get paid a referral fee for your custom, and then hand over some or even all of that fee to users in the form of cashback.
Generally cashback sites have a free membership tier, with a premium tier that will set you back around £5 a month but means you get faster cashback, and perhaps a higher rate of cashback too.
The sums you get may seem small when you look at individual purchases, but can add up substantially over time if you get into the habit of using a cashback site every time you shop online.
Cashback sites may offer browser plug-ins so that whenever you visit a retailer you are reminded of the ability to earn cashback, or mobile apps allowing you to earn cashback even when shopping in person.
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John Fitzsimons has been writing about finance since 2007, and is a former editor of Mortgage Solutions and loveMONEY. Since going freelance in 2016 he has written for publications including The Sunday Times, The Mirror, The Sun, The Daily Mail and Forbes, and is committed to helping readers make more informed decisions about their money.
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