A cashback credit card offers a rebate on all your credit card purchases, including everyday purchases such as groceries, dining, petrol, transport and utility bills. Depending on the card, users can typically earn back up to 1% of their spend. Credit cards that earn cashback allow users to save a little bit of money on every eligible purchase transaction they make.
Only eligible purchases earn cashback
You won't earn cashback, however, on any type of transaction that counts as cash or a cash equivalent. No cashback is earned, for example, on cash advances, balance transfers, interest charges and other card fees, and purchases of traveller's cheques or foreign currency banknotes.
Cashback credit card features
Not every cashback credit card is the same. Features you'll need to compare include:
- Minimum qualifying spend. Many cashback cards require you to spend a minimum amount per year in order to qualify for the cashback program. For example, if you spend less than $5,000 in a year you might not receive any cashback at all.
- Flat rate cashback. Some cards will earn cashback at a flat percentage rate, e.g. 0.5% cashback on all spending once the minimum spend criteria has been met.
- Tiered cashback percentage. Other cards have a cashback percentage which varies according to the amount you spend in each 12 month period, starting on the anniversary of your card account approval. E.g. 0.5% cashback if you spend up to $9, 999, 1% cashback on all your purchases if you spend $10,000 or more.
- Cashback cap. Some cards have a cap on how much cashback you can earn each year (e.g. cashback earned only on the first $30,000 of spending) while others don't. Check a credit card's cashback cap, if any, before you fall for a high-rate cashback. For instance, you might be able to earn 1% cashback, but be limited to a maximum cashback of $300 per year.
- Converting rewards points to cashback. While they are not principally cashback credit cards, many rewards points cards have a a redemption option which allows you to convert points into a cashback into your card account. You might want to consider this type of card as an option if you're not sure whether you want to receive cashback or some other type of reward for your spending.
- Annual fee. You may have to pay an annual fee of $60-$80. possibly more. The highest fees usually confer benefits like a higher cashback percentage and/or unlimited cashback.
- A sign-up bonus. Some cards may offer a temporary cashback to new customers who achieve a specified spending target within the first few months of holding the card.
- Other features. Take note of whether the cashback credit card you have your eye on comes with any complimentary extras. Small features that you can actually make good use of can make all the difference in your decision.
Applying for a cashback credit card
The process of applying for a credit card with cashback is similar to that of applying to standard credit cards. You'll need to meet the following eligibility requirements:
- Age, and citizenship or residency. Applicants must be at least 18 years old and New Zealand citizens or permanent residents in most cases. But some types of work and student visa will make their holders eligible to apply.
- Proof of identity. For proof of identity you may be asked to provide a passport or local driver's licence.
- Income. Minimum income requirements will start at around $15,000 p.a. for lower cashback rewards, rising to $50,000 or more for a card with a higher level of benefits. To prove your income you will need to supply recent payslips and/or details of your employer.
- Credit score. Applicants will have a greater chance of approval if they can prove they're creditworthy. While some cashback providers will offer cards to those with no credit history or low scores, most will prioritise applicants with a credit score of 670 or more.
How the cashback is paid
Cashback is paid as a credit to your card account, usually every 12 months. This means, in fact, that cardholders are given an absolutely free choice about how to spend their cashback.
Alternatives to cashback credit cards
If you think that a cashback credit card is not the right choice for you, there are plenty of other options to consider:
- Rewards points credit card. Earn points on all eligible spending and redeem them for gift cards, merchandise, travel, and – in some cases – cashback.
- Airpoints credit card. Eligible spending earns Airpoints Dollars, which can be redeemed for free flights and upgrades, hotels and travel, rental cars and Koru Programme membership.
- Balance transfer credit card. If you have existing credit card debt, your best choice might be a card with an introductory 0% or low interest rate on balances transferred from your current card. You'll save far more in interest charges than you could earn in cashback.
- Basic credit card. Some people prefer a simple credit card that is convenient to use for shopping (including online) and bill payments, without the hassle of keeping track of points, Airpoints Dollars or cashback. It's even possible to have this kind of card with no annual fee.
Double dip at the Airpoints Mall
Want to be rewarded twice, with both cashback and Airpoints Dollars? Simply use your cashback credit card to shop online at the Airpoints Mall. You could earn up to four Airpoints Dollars per $100 of spending, sometimes more, and every dollar you spend will also contribute to your cashback earnings.