Cashback Earn Rate
One of the first things to consider when comparing cashback credit cards is each card’s cashback earn rate. In basic terms, this is the amount of cashback you will earn on your card spending. You will usually find this earn rate expressed as a percentage, say 0.5% or 1%, but it may also be expressed as a dollar value, for example, $1 cash reward for every $100 you spend.
Cashback Limits
Like traditional rewards cards, cashback cards may limit the amount you can earn on your spending. With a traditional rewards card, this could see you limited to earning points on the first $10,000 spent on your card each month. Similarly, you may only benefit from cashback on the first $10,000 you spend on your cashback card.
Tiered Earn Rates
Again, just like traditional rewards cards, cashback cards can shape your earn rate according to how much you spend. As an example, a rewards card may offer 1 point per $1 up to $10,000 spent each month, and 0.5 points per $1 on all spending thereafter.
In terms of cashback tiered earn rates, let’s look at the ANZ Cashback Visa Platinum Credit Card as an example. On an annual spend below $5,000, you would earn no cashback, but if you were to spend between $5,000 and $9,999, you’d earn cashback at a rate of 0.5%. Ramp up your spending to anything over $10,000 each year, and you’ll earn 1% cashback, with no limits in place.
Annual Fees
Knowing how much you will spend in annual fees or account fees should help you work out how much value each cashback card could offer. Start by working out how much you would spend on the card each month, then calculate what that would equate to in cashback.
If you would earn less cashback than you pay out in annual fees, it may be better to look elsewhere. On the other hand, if you earn more than the annual fee, that card could indeed be a worthy option.
Let’s say your annual spend is $8,000.
- With the ANZ Cashback Visa Credit Card, your cashback earn rate on that amount would be 0.5%, meaning your cashback total for the year would come to $40. Bearing in mind your annual fee would be $60, this would leave you out of pocket $20.
- With the ANZ Cashback Visa Platinum Credit Card, your cashback would also come to $40, but with an annual fee of $125, you would be lose out on $85.
- With the BNZ Advantage Platinum Credit Card, you benefit from a $1 cash reward for every $90 you spend. That means your cashback total would be $88 – and with its $90 annual fee, you would be $2 out of pocket.
As with traditional rewards, cashback rewards offer more value to bigger spenders. With the caveat being, you need to pay off your spending each month to avoid interest, while also being mindful of any caps in place that could limit the amount of cashback you earn.
Comparing Cashback to Traditional Rewards
So then, which option is better? Cashback or traditional rewards? As with any type of card, it depends entirely on the cardholder.
- Cashback could work well for cardholders looking for a simpler option, who don’t want to have to worry about what to use their rewards points on. Cashback is cashback, and you can spend it as you like.
- On the other hand, traditional rewards programmes may offer more value, especially when points are redeemed for travel.
It will all come down to how much you spend, what that equates to in rewards value, and whether it is more or less than the annual fee. Need some help deciding? If you want to look at any of these cashback credit cards in detail, click onto their pages for all the need-to-know info, including our review of what’s on offer.
