Christmas shopping in a cashback wonderland: The credit cards that reward people who clear their debts each month

You can give yourself a present this Christmas. Over 80 "incentive" credit cards are on offer in the run-up to the festive season, many with cashback on all purchases.

Every pound you spend on these cards is totted up at the end of a year and a proportion of that total - usually 0.5 to 1 per cent - is returned to you by way of a cheque or credit.

In a recent survey by card provider Morgan Stanley, perks such as cashback were found to be the prime consideration of nearly a third (29 per cent) of cardholders who had switched or were considering switching their plastic - up from 7 per cent in last year's annual survey.

This change of heart is partly down to more people paying their balances off in full each month, so they can look beyond the rate of interest charged by the card provider.

Figures from Apacs, the payments body, suggest that 59 per cent of cardholders cleared their debt every month last year - up from 56 per cent in 2004.

There are some real benefits available to "non-borrowing" cardholders. For example, near the top of the "best buy" tables of both Moneyfacts and price-comparison website Money- sits Morgan Stanley's Platinum Cashback card. This offers "triple" cashback from the day you open the account to 1 February 2007. Over the festive season and all through the January sales, you will get 3 per cent back on the first £2,000 of purchases and 1.5 per cent thereafter up to your personal credit limit. So put £2,500 of Christmas purchases on the card and you would receive £67.50.

But if you're one of the remaining 41 per cent who carry a balance on their credit cards, you shouldn't even be considering a cashback deal, says Andrew Hagger of financial analyst Moneyfacts. "For these customers, finding the cheapest rate or taking an initial 0 per cent deal should still be the first consideration. You have to spend a fair amount to receive any significant cashback, and the monthly interest you pay with a balance will wipe it out anyway."

Equally relevant is the old adage that you don't get something for nothing, and there are several snags with cashback credit cards.

First, the initial rate of cashback usually applies only up to a certain spending cap. "Card providers offer 'teaser' deals to get customers interested for the first purchases, and then reduce the rate," says Robert Kenley, head of credit cards at

"For example, the Yorkshire building society Classic card offers 1 per cent cashback on the first £2,000, but if you spend more than this during the year, the level is reduced to 0.5 per cent [on the rest]."

Some cards impose a minimum you must spend before the benefit kicks in. Lloyds TSB Platinum offers 1 per cent within the first three months of the account opening - but only if you spend over £250 in this time.

Although it is unlikely to worry many Christmas shoppers, a spending cap can also apply. Morgan Stanley's card stops paying cashback on purchases that take your balance over £20,000.

And there are very few cashback credit cards that offer introductory 0 per cent interest for any significant period.

"The maximum will be six months, which is pretty poor by today's standards," says Mr Kenley.

Those that do come with a six-month interest-free period are Yorkshire's Classic Visa card and the MasterCard from Leeds building society, which pays 0.5 per cent in cashback on all purchases made.

As card providers rein in their generosity, balance-transfer fees are becoming common on 0 per cent deals. Yorkshire's Classic Visa charges 2 per cent on balance transfers, with a cap of £50.

Bear in mind also that cashback applies only to new purchases made, not the balances carried over, and that the interest rates on cashback cards are generally not as competitive as those on standard cards.

A warning to all cardholders: try not to take cash out of the wall on any credit card. The average APR on a withdrawal is a hefty 21.27 per cent, according to financial advice website, with only 11 providers charging under 15 per cent. The average minimum fee for a single withdrawal, says, is £2.60.

newsVideo targets undecided voters
Arts and Entertainment
Singer Pixie Lott will take part in Strictly Come Dancing 2014, the BBC has confirmed
Life and Style
Cooked up: reducing dietary animal fat might not be as healthy as government advice has led millions of people to believe
healthA look at how governments started advising incorrectly on diets
Evan Spiegel, the founder of Snapchat, dropped out of Stanford University just before graduation to develop his app
techAnd yes, it is quite a lot
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Calypso Developer

    £500 - £700 per day: Harrington Starr: Calypso Developer Calypso, J2SE, XML, ...

    IT Developer/Analyst

    £35000 - £36000 per annum + benefits: Ashdown Group: A market leading financia...

    Pricing Manager, Finance, Edinburgh, £250-350p/d

    £250 - £350 per annum + competitive: Orgtel: My client, a leading bank, is cur...

    Client Services Executive / Account Executive - SW London

    £23000 - £26000 per annum: Ashdown Group: Account Executive / Client Services ...

    Day In a Page

    Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

    Kate Bush shows a voice untroubled by time

    A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
    Robot sheepdog technology could be used to save people from burning buildings

    The science of herding is cracked

    Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
    Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

    This tyrant doesn’t rule

    It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?
    Rachael Lander interview: From strung out to playing strings

    From strung out to playing strings

    Award-winning cellist Rachael Lander’s career was almost destroyed by the alcohol she drank to fight stage fright. Now she’s playing with Elbow and Ellie Goulding
    The science of saturated fat: A big fat surprise about nutrition?

    A big fat surprise about nutrition?

    The science linking saturated fats to heart disease and other health issues has never been sound. Nina Teicholz looks at how governments started advising incorrectly on diets
    Emmys 2014 review: Can they genuinely compete with the Oscars

    Can they genuinely compete with the Oscars?

    The recent Emmy Awards are certainly glamorous, but they can't beat their movie cousins
    On the road to nowhere: A Routemaster trip to remember

    On the road to nowhere

    A Routemaster trip to remember
    Hotel India: Mumbai's Taj Mahal Palace leaves its darker days behind

    Hotel India

    Mumbai's Taj Mahal Palace leaves its darker days behind
    10 best pencil cases

    Back to school: 10 best pencil cases

    Whether it’s their first day at school, uni or a new project, treat the student in your life to some smart stationery
    Arsenal vs Besiktas Champions League qualifier: Gunners know battle with Turks is a season-defining fixture

    Arsenal know battle with Besiktas is a season-defining fixture

    Arsene Wenger admits his below-strength side will have to improve on last week’s show to pass tough test
    Pete Jenson: Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought

    Pete Jenson: A Different League

    Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought
    This guitar riff has been voted greatest of all time

    The Greatest Guitar Riff of all time

    Whole Lotta Votes from Radio 2 listeners
    Britain’s superstar ballerina

    Britain’s superstar ballerina

    Alicia Markova danced... every night of the week and twice on Saturdays
    Berlin's Furrie invasion

    Berlin's Furrie invasion

    2000 fans attended Eurofeurence
    ‘It was a tidal wave of terror’

    ‘It was a tidal wave of terror’

    Driven to the edge by postpartum psychosis