Are Cashback Credit Cards Worthwhile?

There are some credit cards which offer cashback to those that use them. These might seem like a really good opportunity to get some extra money, but you need to make sure that you are fully aware of all the facts about them and the risks of having a card like this so that you can decide whether it is a good idea for you to take out a card like this or not.

Advantages of cashback cards

A cashback card will give you money back when you spend money on the card. The more you use the credit card, the more cashback you will get. This means that if you use a credit card a lot, you will really benefit from being able to get some money back from it due to getting this cashback. So, you will get rewarded for spending money. There are some cards which will reward your in vouchers or air miles or other items as well and these are similar as well as you will get rewarded for spending money and get something back as a result.

Disadvantages of cashback cards

The card sounds almost irresistible, but it is wise to be extremely careful with one of these. It is important to start by realising that the cashback will only be a very small amount. It tends to be less than 1% of what you spend so you will not get very much money form it. The cashback that you get is credited back onto the card so that you have it paid off your next bill so it is not really available for you to spend. You will also usually find that the interest you get charged on the card if you do not repay it right away often tends to be higher than that charged on regular credit cards. This means that you need to be very careful. If you are likely not to repay the balance in full each month then you could find that you will have to pay more in interest than you would on a regular card and this could make it not worth having the cashback card at all. This is because the small amount of cashback you get may not make up for the high amount of interest you are paying. It can be quite complex to work out as well so might seem confusing.

You might also be tempted to use the card more because of the cashback. If you just use if for purchases you would have made anyway and you make sure that you can afford to repay it in full, then this is okay. However, if you are the sort of person that likes an excuse to spend some money and treat yourself to a few things, then you could find that you will use the card as an excuse for spending on yourself. Then you could find that you will end up owing more money than you can afford to repay. You therefore need to make sure that you only take out this card if you feel that you can trust yourself with it and you will not use it as a way to justify too much spending. You also need to make sure that you only use this card if you are sure that it will not be too expensive for you. Make sure that if you are not intending to repay the full balance that the interest rate is competitive and that it is still worth using or consider whether it would actually be cheaper for you to use a more conventional card.

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