Credit Card Cashback Class

Cashback credit cards, why I endorse them and how best to use them. Please feel free, (it is encouraged!) to comment!

The Credit Card Story So Far

I have written about credit cards before, explaining why I use a credit card and a discussion about whether it is ever worth paying for a cashback credit card. For more information I encourage you to read those articles.  Here is a quick synopsis of my opinion on credit cards:

• Use them
• They help build your credit rating
• They delay money going out of your account allowing you to earn more interest
• Your purchases have better protection
• You may be able to earn points or cashback
• They require careful money management, particularly with regard to knowing what money you have coming in and what money you have going out.

The Cashback Catch

Put simply, many cashback credit cards have clauses that put limits on the amount of cashback you can earn on them. For example I have a credit card that allows me to earn a whopping 3% market beating cashback on all purchases. However I only gain cashback up to £100 a year. This means (I'll do some quick maths for you) that if I spend £280 a month then I will get the full cashback over the year. There is no point in spending more than that per month as you will not earn any more cash by using the card.

The Cashback Solution

The simple solution is to get yourself another decent cashback credit card. You will spend up to whatever amount is necessary each month to gain you your full cashback on your highest cashback percentage card. Then any other spending you will do on your other card. I myself have another card that gives me cashback at 1% up to £100. This means that each month I first spend £280 on my 3% cashback credit card on my needs (not wants!) and then any other spending that month is done on my 1% cashback card. Simples!!!

Obviously the only problem is working out how much to spend each month on each card. Here's how I did it: I earn 3% on my spending up to £100 a year. This mean that to get £100 I must have had to have spent £3333.3 in the year. Divide this over 12 months gives me my monthly spending: £277.7 or £280. The rest of the spending for that month can be done on the other cashback card.

Readers, what cash saving tips do you have?

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