card guide
Are You Paying For Your Cash Back Credit Card?
The offer seems to be too good to be true.  Spend money on your credit card and your provider will give you cash back on the card as part of your credit card loyalty program.  The more you spend, the more cash back you become entitled to. This all sounds well and good, but if you’re not careful you may very well find out that it is you who are paying for the cash back bonus you’re getting, not your UK credit card provider.

In order for your cash back reward program to work in your favor you need to be a disciplined credit card user.  This does not mean that you should not use your credit card, or only use it in certain circumstances.  In fact, you really should be using the card as often and as much as you can if you want to take the full benefit of the loyalty program.  What it does mean, however, is that you need to make sure that you clear your credit card balance at the end of each credit card statement billing date.  If you fail to clear your credit card balance on the statement due date, and you carry-over your credit card balance to the next month, then you start to become the person paying for your cash back rewards, not your credit card provider.

The reason why it is so important that you do not carry over a credit card balance to the next payment statement date is because you need to avoid incurring any interest or fees if you want to benefit from the cash back loyalty program.  As soon as you lose this, any benefit you would have got from your cash back credit card loyalty program will be cancelled out by the interest and fees you need to pay for carrying over a balance on the card.  Indeed, you may well find that the interest and fees you pay each month for carrying over the balance on your credit card will exceed any cash back you would be entitled to.  Unfortunately, this aspect of cash back credit cards is something that UK credit card providers are relying on in order to fund the cash back they’re offering you in the first place.

Consequently, if you are the type of UK credit card user who pays off their credit card statement balance at the end of each billing cycle, then having a cash back credit card loyalty program can prove to be very lucrative for you.  However, if like 60% or so of the other users of UK credit cards you are a borrower on your credit card, then it is very likely that you should look for some form of alternative loyalty program or, more importantly, a credit card that offers you a lower monthly interest rate than your current card provider offers, as, in the long run, this is very likely going to save you more money.

If you are in any doubt as to whether or not a UK cash back credit card is for you, be honest with yourself and ask yourself whether or not you have the discipline to pay off your credit card statement each month.  If the answer to this question is yes, then this card is working for you.  If the answer is no, you are paying for your credit card cash back loyalty program offer – and then some.

Compare our cash back credit cards now!

Richard Smith
13th May 2018

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Posted on: [ May 13, 2018 ]       Add to   Digg it   Add to Blinklist   Add to FUrl   StumbleUpon