What is a cashback bank account?
A cashback current account is a bank account that gives you back money as you spend. This will usually be as a percentage of your total purchase. For example, if you have a current account offering 1% cashback, for every £100 you spend you’ll earn £1.
The best cashback bank accounts can be a good way to make your money work harder for you.
They are usually set up as current accounts – in other words, as part of an everyday bank account that you use for household spending.
If you have a cashback current account and you use it to pay a lot of regular bills or direct debits, you will earn money on each transaction as a cashback reward. If you have a current account that is not paying any interest or cashback, and you switch to a cashback bank account you could earn up to £5 a month or more as a reward.
A cashback bank account can also be useful if you do not manage to save enough money each month to take advantage of interest rates. Instead, you are being rewarded simply for running your account.
Is cashback the best benefit to look for?
When deciding whether a cashback account is worth your while, you need to think about what benefits you would use if you were to switch.
It all depends on how you use your account. Often you will only be paid cashback on certain purchases, and sometimes even only from certain stores.
This means you will need to make sure you spend in the right way to earn cashback. If you don’t think you’re going to earn the cashback rewards you may want to look for other benefits you can get from a current account.
How do rewards work?
Bank accounts offer a range of different rewards. You can choose the benefit that suits you best. For example, some bank accounts offer travel insurance or car breakdown insurance as part of a package. Others offer insurance cover for laptops, mobile phones and iPads.
Many cashback bank accounts charge a small monthly fee, so you will need to work out whether the cashback reward or other perk you receive will work out to be greater than the fee.
If you have a cashback current account you may not receive interest on the money that you have in your bank account, (known as your credit balance). Instead, the cashback element of the account acts as the reward.
You will need to look carefully at the terms and conditions to see if these are the right deals for you. For example, bank accounts with cashback could work for you if you know that your spending is in the types of shops that will count towards the cashback total. However, the range of shops is usually quite limited, and they may not be places where you would normally spend money.
Do you get more money back on some bills than others?
Yes, some accounts have a reward system which gives you different reward rates. For example:
- Water bills, council tax, household bills and mortgage payments might earn a 1% reward
- Gas and electricity bills might give a 2% reward
- Mobile, home phone, broadband and paid for TV packages might earn a 3% reward.
So how you spend matters as well as how much you spend each month.
What are the different types of cashback and reward accounts?
When you are looking to choose the best cashback bank account, you need to look at the way that you earn your rewards.
Different banks give you cashback incentives in different ways. Think about how you run your own bank account to work out which reward would give you the most money:
- Could you earn cashback incentives for all or some of your direct debits and standing orders?
- If you pay most of your bills automatically, you could receive up to 3% of the bill back as cash.
- Does the cashback current account reward you for spending at certain stores or with specific retailers?
- Are these shops your favourites, or do you rarely spend money there?
How to maximise cashback and rewards
When you are considering how to make the most of a cashback bank account, check what the rules are for earning the cash reward incentive and think about how you would earn the money.
- Some accounts make you pay in a minimum sum each month (from around £500)
- Others ask that you have at least two direct debits linked to your cashback account
- You may need to arrange for your salary to be paid into your new cashback current account
- Some cashback current accounts will reward you for spending, others for paying bills, and some reward both.
- Look at the list of shops where you can earn rewards. Would you normally shop there? For example, Santander’s 123 Current account rewards spending at Morrison’s and Vue as well as JD and Costa.
- Is there a monthly limit on the amount of cashback you can earn? Some accounts limit the amount of cash you can earn back to £5 per month. Others give you unlimited cashback for a limited introductory period.
What are the Pros of a reward bank account?
The big advantage of a cashback current account is that you are rewarded for running your normal bank account. In other words, you get cashback on your normal spending, and on all the bills you have to pay each month.
You can get money paid into your account by the cashback incentive without having to do anything extra to earn it.
What are the Cons of a reward bank account?
Many of these cashback bank accounts charge a monthly fee. If you don’t earn much cashback, it may not be worth the monthly cost.
You probably won’t earn interest on your credit balances, although interest rates are very low at present, so that is not a big loss.
Overdraft costs may be higher than a current account that doesn’t pay cashback. You may be charged a daily fee for an arranged overdraft, although many banks are revising their overdraft rules and will be making changes from April 2020.
Alternative bank accounts
If you do not meet the criteria for a cashback current account, or you do not want to pay a monthly fee, there are other options.
You could consider a high interest bank account or a packaged current account instead.
High interest bank accounts
A high interest current account is much like a standard current account, offering many of the same features for everyday usage. However, you will earn higher than normal interest on the money you have deposited with the account. For this reason, a high interest bank account may suit people who frequently have a large balance in their current account.
Find out more with our guide to high interest current accounts.
Packaged current accounts
A packaged account gives you a range of benefits, which often include travel and home insurance, all within a current account.
You can find out more with our guide to packaged current accounts.
How much cashback can I get from a current account?
This obviously depends on how much you spend, if you are a big spender (and are spending in the right way) you could earn hundreds of pounds a year. However, you would have to spend many thousands to earn this kind of a return.
Many current accounts offering cashback have a maximum they will pay out. Make sure you find out this limit if you’re planning on high spending, as you may not get as much cashback as you plan.
What does 'most popular' mean?
Bank accounts on this table are ranked by popularity, which we have judged according to how many clicks they got over the past 48 hours. Those with the most clicks are at the top of the table, and those with the least at the bottom.
However, the most popular account might not be the account for you. You should still take time to filter and search all the accounts listed to see if there’s one that better fits your needs.
Which banks does Uswitch's comparison include?
We compare current accounts from a wide range of high street banks and newer challenger banks. Compare our current account providers to check which ones we include.