Cashback FAQ

Will cashback be available for ever?

Who knows? As long as the credit card companies can attract new customers with cashback and find that it is affordable, then one would hope so. However, there was a decline in the cashback percentages being offered during 2004. In early 2003 many cards offered 1% cashback and a few 'mean' ones offered 0.5%. By the end of 2003 only a couple were offering 1% and most offered 0.5%. In 2004 1% offers were pretty hard to find and many of the 0.5% deals had dropped down to 0.25% or disappeared altogether. After a quiet spell for cashback cards, they came back with increased competition in 2007, offering up to 5% cashback for the first few months.

Should I cancel my direct debits and pay by credit card instead?

This is a matter of personal choice. Before cancelling any direct debits, here are a couple of additional considerations. Some organisations give a discount if you pay by direct debit, so check before cancelling them - it may outweigh any potential cashback. Paying by direct debit (or standing order) is easy because it just happens - it doesn't need your manual intervention. If you cancel a load of direct debits, you may find the task of remembering to pay everything by credit card on the phone too time-consuming.
It is possible to set up regular payments using a credit card (a 'continuous authority') but you are not protected in the same way as you are with a direct debit. In fact, you cannot stop a continuous authority unless you can get the payee to stop collecting the money from your account!

Should I use my cashback credit card if the retailer charges me to use a credit card?

Probably not, but it depends on what you want to achieve. It is almost certain that the charge for using the credit card will be greater than your cashback so it would cost you money rather than earn you money. However, if you need to make the purchase using a credit card anyway - to give you a couple of week's cash flow - then using a cashback credit card would be better than using a non-cashback card. Remember! you still need to pay it off at the end of the month to avoid interest charges.

When is my cashback paid?

Normally you will be paid on, or shortly after, the anniversary of your card i.e. 12 months after being accepted for the card. Read the card's T's & C's to be certain.

Do I get paid cashback for Balance Transfers?

No. I have never seen a card that does, but maybe someone will be the first! Check your own card's T's & C's.

How is my cashback paid?

Normally the cashback is credited to your credit card account, although I know of one who sends a cheque to the cardholder. Others transfer the money to your current account.

Do I have to pay tax on my cashback?

Cashback received for normal everyday (i.e. non-business) purchases is tax free. You have already paid tax on the goods you purchased: this is technically a discount on the purchase price. However, if you are self employed and use the credit card to purchase goods for your business, then the cashback should be brought into your accounts. In addition, if you are an employee incurring expenditure on your employer's behalf, the cashback is a taxable payment and should be declared.

What happens if I close my card before the anniversary date?

In most instances you will lose any accumulated cashback, so wait until after the anniversary before closing the card. The author has experienced one exception to this rule. As with any of these detailed questions, read the T's & C's of your card. If you were considering closing the card because you were worried about your credit rating, but you did not want to lose any cashback, then reduce your credit limit while leaving the card open until the anniversary.

Is there anything else that would stop me getting my cashback?

Most card issuers insist that you operate your account very well e.g. they may not pay you any cashback at all if you make a few late payments or miss a payment. Once again, read the T's & C's very closely.

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