Compare Cashback Credit Cards - Australia

Cashback credit cards can be pretty attractive, but they’re not always easy to understand — for most of us that fine print can be pretty hard to interpret! So in this guide, we’re stripping away some of the jargon and sharing some facts to help you compare a range of cashback credit card options.

When you’re done reading, you’ll have some background which may help you make an informed decision about whether a cashback credit card is suitable for your situation and needs.

All credit card providers compete to produce a credit card package that attracts more borrowers. Banks and lenders that offer cashback credit cards aim to attract borrowers by giving them money in exchange for making eligible purchases on their card.

As an example of one type of cashback offer, let’s say you’ve got a card that provides you with 2 per cent cashback on every purchase. If you spend $1000 on eligible products and services using your credit card, you’ll be awarded $20. What makes a purchase an eligible one varies across credit card providers. Many cards specialise in a certain type of product or service. As an example, one cashback credit card might reward travel-related purchases, while another might reward shoppers when they eat out. And yet another might give you 1 per cent cashback on most purchases but 3 per cent cashback when you buy something from a specific shop or set of shops.

You might find another type of cashback credit card that allows you to earn rewards points on your spending, which could be redeemed for cashback rewards in the form of a gift card once you’ve earned enough points.

Alternatively, some cashback credit cards might offer cash as an introductory offer, where you would only earn cashback on purchases made during the introductory period associated with your card.

Always remember, though, that cashback credit cards are still credit cards. So, cashback rewards don’t actually increase the amount of money you have because you’ll still have to repay the credit you spent — it’s not like being paid a salary. What they typically do is more like giving you a rebate on your purchases.

In Australia, a cashback rewards card more commonly delivers a sign-up bonus or a cash voucher once you reach a particular spending threshold. Cards that return a percentage of total purchases aren’t as common, but do exist.

The way a classic cashback credit card works is simple: there’s a cashback offer of a certain percent of qualifying purchases annually. The cash reward could be delivered via direct deposit into your bank account, as a contribution to your credit card account, as a gift card or even by cheque in the mail, though the latter isn’t common in Australia.

So, let’s say your card returns 1 per cent of every dollar spent on eligible purchases. If you spend $500 on that card over a year, you’ll receive $50 cashback.

But as we’ve said, there are other kinds of cashback offers, and the one above isn’t the most common in Australia. Here are some others:

• You might get cash back, but only after reaching a certain minimum spend
• There might be a maximum amount a lender will return
• The lender might offer a cash bonus or waive certain fees and charges as a sign up bonus
• You might receive an annual voucher to spend with a specific company (e.g. an airline credit card that offers an annual voucher you can spend on airfares or other services the airline offers)
• The lender might refund or waive your annual credit card fee if you meet a certain minimum spend (though some cashback cards in Australia may not charge annual fees)
• You might earn points per dollar spent and have the option of trading those points for cashback

This may not be a complete list of all the different types of cashback programs out there, and it is important to check the terms of any card you’re interested in. It does, though, hint at the fact that many credit cards are hybrid cards in that they don’t just offer cashbacks. For example, a lender might reward you by refunding your annual fee while also offering a low interest rate. Such a card could be classed as a low interest rate card and a cashback card. We explore other kinds of credit cards in our main credit card comparison guide.

Note, in all other respects, a cashback credit card works in the same way as do all credit cards. For example, there’s still a purchase rate, an interest rate for cash advances (on those cards that allow them), minimum repayments, late fees, other fees and charges, special rules for cash advances and more. And you’ll need to meet eligibility criteria if your application is to be approved. So, if you’re considering applying for a cashback credit card, as always, be sure to carefully read the terms and conditions.

As there is no such thing as “the best” credit card or cash back card, it can make it a tricky job choosing between specific cashback offerings for which you meet the eligibility criteria. In our main page on comparing credit cards, we’ve listed a set of robust questions to ask when comparing cards that will help you to make an informed choice. That list is absolutely applicable to cashback cards, but we thought you might appreciate additional questions for comparing cashback rewards cards:

• First, ask yourself what you’re looking for. What do you want to earn when you shop with your credit card? As an example, let’s say you want a rebate to apply to grocery purchases. An airline credit card is probably not the one for you.
• If the cashback offer is a voucher or store credit, is it for something you need or somewhere you shop regularly? Some vouchers sound wonderful but end up going to waste because the recipient didn’t actually need or really want the product or service.
• Is there a spending target before rewards kick in? Will you reach that target without changing your spending habits? It could be counterproductive if you’re hoping to save money as a result of the cashback offer only to end up spending more money than you would otherwise have spent just to get the reward.
• Is there an annual fee? What is it? Will your credit card habits justify this fee? If your reward will be less than the annual fee, you’re coming out behind.
• What’s the sum of all the fees, charges and potential interest paid?
• What’s the monthly minimum payment? Is it a set amount or a fixed percentage? It can be a bad idea to get into the habit of paying only the minimum every month. However, if you do find yourself having to do that, you need to make sure you can afford it.
• Are there any introductory offers or other one time bonuses to sweeten the deal? If so, are these actually valuable to you, or are they just pretty baubles?
• What about balance transfers? Are you looking to transfer a balance from another account to the new one? If so, ask if you’ll get rewards on the transferred balance. Also, see if the new interest rate will be higher once the balance transfer period ends. If it will be, is it worth transferring that balance? Will your rewards cover the difference?
• Can you use the credit card for ATM withdrawals (cash advances)? If so, what will the fees be?
• What restrictions, penalties, and eligibility criteria are there? Are you eligible for approval?
• Will you be able to pay off your balance every month so you can avoid interest fees? If you can’t pay the full balance each month, how much interest do you estimate you’ll have to pay each year? Consider the impact if your reward is less than the interest you pay.

In essence, it all comes down to this: is it worth it? We all have different spending habits and needs. When considering a cashback credit card, it’s important to consider the value based on your own unique situation and needs.

There is no ‘best’ credit card, and what one person might find attractive won’t necessarily be the best option for you. After all, a seemingly great offer isn’t so great if you’re not going to use it.

Who benefits from lots of airline vouchers when they rarely fly? Who uses hotel gift cards if they don’t travel much? Who benefits from restaurant freebies if they prefer cooking up a storm at home?

Every person is different, and your spending habits and preferences are unique to you. So, there’s no way we can tell you how to choose your ultimate credit card. But the information in this guide can help you more confidently compare a range of cashback offers available to you, so you can choose a credit card that’s suitable for your needs.