Five Questions About: Cashback credit cards

How do cashback cards work?

They give you a percentage of money back every time you spend, providing a way for you to earn something for nothing.

Who do they suit?

Anyone who uses a credit card for everyday spending and is able to clear the balance in full every month. If you can't pay it off, however, they are best avoided, as the interest you owe is likely to end up costing you more than the cashback you've earned.

Do all cards pay the same amount of cashback?

No, terms and conditions vary widely, so always read the small print carefully. Many cards pay a more generous cashback rate during the first few months, and then a lower rate subsequently. American Express, for example, has just doubled the cashback it pays during the first three months from 2.5 per cent to 5 per cent. The maximum you can earn at this rate is £100, ad after that you earn the lower, standard rate of 1.25 per cent.

Do I earn cashback on everything I spend?

Not necessarily – some cashback cards restrict their deals to specific spending. Santander's 123 credit card, for example, offers 3 per cent cashback on fuel spending, 2 per cent at department stores and 1 per cent at supermarkets, but you won't earn cashback anywhere else.

What if I go into debt with a cashback card?

Switch your balance to a card offering a lengthy, 0 per cent introductory rate on balance transfers. There is no point having a cashback card unless you can pay off what you owe in full every month, as interest charged on these cards tends to be high.