What cashback means and how it works

A cashback credit card is a type of rewards credit card that earns you cashback with every purchase you make with that card. The amount you earn is usually a percentage of each purchase.

A smiling man on his laptop

Like most credit cards, cashback credit cards charge interest, have a credit limit, come with an APR and issue a monthly statement. The big difference between a cashback credit card and a normal credit card is that it rewards you each time you use the card. Depending on your needs and spending habits, this kind of card can have real benefits – especially if you use your cashback credit card for everyday spending and major purchases.

What is cashback?

Cashback is what you earn when you make a purchase with your cashback credit card. For example, if your cashback credit card offers 1% cashback on every purchase you make, you’ll earn £1 when you make a purchase of £100 with that card. If you use the card a lot, this can really add up to over time.

How cashback cards work

The more you spend, the more you earn. So each time you use your cashback credit card, you earn cashback. Depending on the card, the cashback will either be credited to your card or to your bank account. If it’s paid to your credit card and you have an outstanding balance, the cashback will reduce the amount owing on the card. If you have no balance due, the cashback will be available for you to spend.

Some cards pay you back monthly, while other cards pay you back once a year. Some cashback credit cards also offer an initial cashback when you get a card. If you choose the right card for your needs, a cashback credit card can be a useful financial tool – maximising your spending power by earning a bit extra with every purchase you make.

There may be a maximum limit or cap on how much cashback you can earn in a month or year, so it’s important to check this carefully before applying

Not all cards are built the same

The rate of cashback you earn with each purchase can vary considerably, so it really pays to find the card that suits your needs. Most cards pay a fixed rate of cashback on every purchase. That’s how the Barclaycard Rewards Card works.

Representative example

Representative APR
22.9% APR (variable)
Purchase rate
22.9% p.a. (variable)
Based on a
£1,200
credit limit
Annual Fee
No annual fee

The approval of your application depends on financial circumstances and borrowing history, so do the terms you may be offered. The interest rates may differ from those shown.

That way, it’s easy to keep track of your spending and how much cashback you’ll earn. You can also choose a card that pays tiered rates of cashback depending on the type of purchase you make. For example, they may pay 1% cashback on groceries, but 2% in clothing stores or petrol stations.

You may also find cashback credit cards that offer a higher rate of cashback if your yearly spending exceeds a certain amount. For example, a card may pay 0.5% cashback on purchases up to an annual spending of £5,000, but 1% if you spend more than that. So it’s important to choose a card that suits your lifestyle and spending habits.

Choosing the card that’s right for you

When it comes to picking the right cashback credit card, it pays to read the fine print before you sign on the bottom line. That’s because cashback cards often have an introductory offer with a higher rate of cashback. So make sure you know how long the introductory period is, and what the permanent cashback rate will be. Both these rates will be specified before you apply for a card. So make sure you know the facts, check the APR for the card, and take time to consider your own needs and financial situation.

Here are a few things to consider if you want to get the most from your credit card. That way, you can be confident you’re choosing the card that suits your needs.

It pays to shop for the right card

Like any financial tool, a cashback credit card can pay off nicely if it fits your needs. But these cards aren’t for everyone. If you’re one those people who reliably pays off your monthly balance, and plan to use your credit card a lot, a cashback credit card may be right for you.

But if you tend to keep a balance, you might end up paying more in interest charges and fees than you save with the cashback. So it’s important to figure out how you plan to use the card and how much you can earn through cashback before committing to a particular credit card.

So take the time to shop for a cashback card that suits your needs, and consider your purchasing and repayment habits.

What’s next?

If you’re looking for a way to earn cashback on your purchases, discover our Barclaycard Rewards credit card.

Discover our Barclaycard Rewards credit card