Want to earn rewards on your credit card spending, but can’t be bothered with complex rewards programs? A cashback credit card could be just what you’re looking for. While cashback credit cards are few and far between here in Australia, American Express launched a zinger just last week, introducing the American Express Cashback Credit Card to the Australian market.
So, with that in mind, we thought we’d take a good look at what cashback credit cards have to offer. Taking a deep dive into the subject, we’ll look closely at the three main cashback credit cards currently available, to then compare cashback rewards with traditional rewards, so you can more easily decide which option is right for you.
While the American Express Cashback Credit Card is indeed a straight-shooting cashback credit card, there are other types of cards offering cashback that are worth investigating. Let’s get into the various ways you can earn cashback as you use your card.
Over in the US, cashback rewards are everywhere, giving would-be cardholders much more choice than we get here in Australia. For whatever reason – perhaps because providing traditional rewards is cheaper for Australian card providers – we really only have three cashback credit cards from which to choose. Let’s get into them.
In terms of everyday cashback earning, you will earn 1% cashback on all eligible card spending. On all government transactions, such as spending at Australia Post and the ATO, the cashback earn rate is 0.5%. There is no limit to the amount of cashback you can earn on this everyday earn rate, at either 1% or 0.5%.
Offered to new cardholders only, American Express is currently offering bonus cashback at a rate of 5% for the first three months from card approval. As long as you don’t currently have an American Express issued card, or have held one in the last 18 months, this allows you to earn 5% cashback on top of the 1% you earn on all eligible purchases. Bonus cashback is capped at $200.
Encouraging cardholders to Shop Small, American Express is also offering 1.5% bonus cashback as part of its Shop Small offer. All you need to do is nominate your card for the offer, and then spend at participating businesses. Bonus cashback is again capped at $200, with the offer lasting until 22 March 2022.
Like many American Express cards, the American Express Cashback Credit Card is fairly packed with perks. Here’s what you can expect.
So, how much will you pay to keep the American Express Cashback Credit Card in your wallet? Unlike most credit cards here in Australia, this card charges a monthly fee rather than an annual fee, which comes in at $10. Essentially, that means you pay out $120 each year, but you can choose to add up to four additional cardholders at no extra cost, helping you to earn even more cashback on their spend.
As for interest, the card comes with a purchase rate of 20.74% p.a. This is pretty much standard for a rewards card, but highlights the fact that you should only choose this type of card if you clear your balance each month to avoid interest accruing. The card offers up to 55 days interest free on purchases to help you in this goal.
If you want to apply for the American Express Cashback Credit Card, you will need to meet the eligibility requirements as set out by American Express.
As a platinum offering, the ING Orange One Rewards Platinum Card works in much the same way as the AmEx, but with limits in place and slightly fewer extras.
With the ING Orange One Rewards Platinum Card, you can earn 1% cashback on all eligible spending. Unlike the AmEx, this card places a cap on the amount of everyday cashback you can earn, limiting your earn to $30 cashback per month. As a result, the maximum cashback you can earn in a year on this card is $360.
What counts as eligible spending? Eligible purchases include those made in store and online, including transactions made via Apple Pay and Google Pay. Transactions excluded from cashback earn include cash transactions, such as cash withdrawals and gambling transactions, and BPay transactions. It doesn’t seem government spending is excluded, but the card’s cap would limit the amount of cashback you could earn on say, paying your taxes with your card.
While the ING Orange One Rewards Platinum Card may be a platinum card, the extras are not quite as extravagant as some platinum options. Here’s how they stack up.
Looking at the cost of keeping the ING Orange One Rewards Platinum Card in your wallet, you will pay an annual fee of $149. Adding an additional cardholder to the account comes at $10 per cardholder, per year.
Interest on this card is relatively low for a rewards card. Both its purchase rate and cash advance rate currently sit at 16.99% p.a. The card offers up to 45 days interest free on purchases, allowing cardholders to avoid paying interest altogether.
To apply for the ING Orange One Rewards Platinum Card, you must meet the following eligibility requirements.
As a basic rewards card, the bcu Rewards Card keeps things simple, focusing on low costs, basic extras, and of course, cashback.
With the bcu Rewards Card, you will earn cashback at a rate of 0.66% on all eligible spending made in Australia and overseas. The maximum cashback you can earn each year is capped at $500.
The bcu Rewards Card is designed to appeal to cardholders who want to earn rewards, while keeping costs down. As such, its extras focus on payments and security. That means you can expect all the major security features found on all credit cards, such as Visa’s Zero Liability policy and 24 hour fraud monitoring, as well as contactless payments using Visa payWave.
This is where the bcu Rewards Card shines. Keeping ongoing costs down, the card has an annual fee of $89. In terms of interest, its purchase rate is a low 12.8% p.a., and its cash advance rate is 14.8% p.a. It’s worth bearing in mind that while choosing a low rate card is a good idea if you tend to carry a balance, paying any interest on this card will lower the cashback value you receive.
Like most cards, the bcu Rewards Card allows you to avoid interest when you clear your balance at the end of the month, with up to 55 days interest free on purchases.
Note: All fees and interest rates correct at time of writing.
So, now you know what cashback credit cards can offer, let’s look at how you should compare your options.
When it comes comparing cashback credit cards, one of the first things to look at is cashback earn rate. This tells you how much cashback you will earn on your card spending, expressed as a percentage. As an example, the American Express Cashback Credit Card and ING Orange One Rewards Platinum Card earn 1%, cashback, while the bcu Rewards Card earns 0.66% cashback.
Let’s say you spend $1,000 on a card with a 1% cashback rate, you would earn $10 cashback. On the other hand, if you spend $1,000 on a card with a 0.66% cashback rate, you would earn $6.60 cashback.
While earn rate is important, any limits placed on the amount of cashback you can earn is perhaps even more significant. With the American Express Cashback Credit Card, there are no limits on the amount of cashback you can earn on everyday spending (limits are placed on bonus cashback).
With the ING Orange One Rewards Platinum Card, there is a limit of $30 cashback each month. With the bcu Rewards Card, cashback is limited at $500 per year.
If you are a bigger spender, limits will affect you more.
Like traditional rewards cards, cashback credit cards can come with introductory offers designed to entice new cardholders. Unlike rewards cards, which offer a chunk of bonus points, however, cashback credit cards tend to offer a higher cashback earn rate over an introductory period.
Within the range currently available, only the American Express Cashback Credit Card has an intro offer. Over the first three months from card approval, you can earn a bonus rate of 5% on top of the standard 1% cashback rate. This is capped at $200.
As with any rewards card, it’s important to choose a cashback card that rewards your spending habits. While limits will play a part in this, it’s also worth looking at the small print to see what counts as eligible spending. This may involve looking at the rate on government spending, or perhaps spending made in foreign currencies.
Lastly, look at how you can use the cashback you earn. With some cashback credit cards, you may be able to transfer the cash out of your card account, so you can spend it as you please. Other cards may limit you to using your cashback to paying down purchases made on the card, or paying down fees.
|TIP: Even if you use your cashback to pay down your purchases, you will still need to make the minimum repayment on your card each month. If you fail to do so, you may be penalised with a late payment fee. You may also lose your interest free days, as interest starts to stack up on your balance.|
Having compared features specific to cashback credit cards, it’s now time to check out other crucial aspects to compare that apply to all credit cards.
The annual fee you pay on your cashback credit card will significantly affect the value you receive in cashback. Let’s look at some examples, based on the spending patterns above.
Based on a $2,000 monthly spend:
Based on a $5,000 monthly spend:
Based on a $10,000 monthly spend:
As you can see, the value you receive depends on your card spend, and the amount you pay out in annual fees. Finding the right card is all about balance – and finding that sweet spot.
While cashback value is easy to calculate, it’s also worth taking into account how much value you receive from the extras on offer. If you make good use of those extras, they can further balance out the amount you pay in annual fees.
Like many AmEx cards, the American Express Cashback Credit Card goes big on extras, offering a BINGE subscription valued at $120 per year, a CENTR subscription valued at just under $120 per year, and smartphone screen insurance, which could save you up to $500 on each screen repair.
Rewards cards typically come with a high interest rate. With a purchase rate of 20.74% p.a., the American Express Cashback Credit Card lives up to this stereotype, while the ING Orange One Rewards Platinum Card and bcu Rewards Card offer lower rates at 16.99% p.a. and 12.8% p.a. respectively.
As we mentioned before, you’re best to avoid paying interest whenever possible on rewards cards such as these – even if they do offer lower than usual rates – as it will reduce the amount of value you get from your cashback. With the AmEx and bcu cards, you can benefit from up to 55 days interest free on purchases, and up to 45 days on the ING card.
Now you know what to look for, let’s check one last thing off the list. Will a cashback credit card suit you?
✓ You want to earn something back on your card spending. Check! With a cashback credit card, you earn cashback rather than points, making it easy to work out how much you are getting, without worrying about how to get the most value from your points.
✓ You don’t want to mess around with complex rewards programs. Check! A cashback credit card could make this happen.
✓ You have a significant monthly spend. Check! Looking at the above comparison, you can see just how much you’d need to spend on each card to enjoy value from the cashback you receive.
✓ You pay off your balance each month. Check! As long as you make the effort to pay off your closing balance by the due date each month, you can maximise the value you receive from your card.
Okay, time to compare cashback credit cards with traditional rewards cards. How do they compare side-by-side?
There’s no denying cashback credit cards offer a more simple way to access rewards than traditional rewards cards. With your cashback earn rate, you know exactly how much you will get back on your spend, which can easily be converted into a dollar value. You can then use that dollar amount to pay down your purchases, or as your card allows.
With traditional rewards, you earn a certain number of points per $1 spent on the card. This earn rate may be tiered according to the type of spending. You then have to build up your points balance, and choose the reward that you think will provide the most value.
In terms of choice, traditional rewards cards are the clear winner. If you want a cashback credit card, there are currently only three to choose from on the Australian market. Within the world of traditional rewards, there are dozens of cards to choose from. Not only does this allow you to choose the card you want, but the extras you need, and the rewards program that best suits you.
Value is a tricky one to compare. As you can see from our above calculations, value depends on the amount you spend, versus the amount charged in annual fees. Extras also need to be taken into account. So, the value on offer within each category will really depend on how you plan to use the card.
With that being said, it is easier to calculate value in dollar terms with a cashback credit card.
Even within the three cashback credit cards we’ve checked out in this post, you can see there is a variety in cost with regards to both annual fees and interest. The same applies to traditional rewards cards. Annual fees can range from $0 to hundreds, or even thousands of dollars. Interest rates also vary widely, starting at around 11 or 12% p.a., and reaching 22% or 23% p.a.
It’s as difficult to compare cost within the two categories as it is to compare value. It comes down to what you are willing to spend, what the card offers, and how you plan to use it.
Still trying to make a decision? Answering these questions should help you to decide which type of card is right for you as you compare the options.
Founder of Creditcard.com.au. Roland has extensive knowledge about credit cards in Australia. Known as a credit card expert, he has been featured on tv and in various publications. Some popular offers on our site right now include the ANZ Low Rate. This special offer has no annual fee first year, a low purchase rate and long 0% balance transfer. Have a look also at the huge 0% for 30 months balance transfer from Citi with no balance transfer fees.
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