Current accounts with cashback UK 2021

Learn how current accounts with cashback work, whether they're right for you and how to find the best current account.

Fancy earning a bit of extra cash every time you spend money? A current account with cashback is the answer. Here’s more about the pros and cons of these accounts and how to compare them to choose the one that’s best for you.

What is a current account with cashback?

Some banks offer current accounts, which will credit a cash reward back into your account when you make debit card purchases. These rewards tend to be based on a percentage of your spending.

A lot of these accounts will only pay cashback with certain retailers or on a certain category of spending (groceries, travel, etc). Most will cap the maximum amount of cashback you can earn per month.

In some cases, you have to “activate” a cashback deal using your bank’s online banking rewards portal before making a purchase. However, some banks’ rewards systems are sophisticated enough to automatically credit cashback whenever you make an eligible purchase.

A lot of current accounts offer cashback instead of paying interest on in-credit balances, although some do both.

How to open a current account with cashback

Opening a current account with cashback is no different to opening any other type of current account. As with most bank accounts, you can apply to open a current account online, by phone or in-branch.

The majority of banks are signed up to the Current Account Switch Guarantee, which guarantees a seamless switch from your existing current account to your new account within seven working days.

How to choose the best current accounts with cashback

1. Check if you’re eligible. It’s important to bear in mind that pretty much every cashback or reward scheme offered to current account customers come with conditions you have to meet, sometimes on a monthly basis.

These typically include a requirement to deposit a minimum amount into the account each month. This shouldn’t be a problem if you have a regular monthly income or salary which you can get paid into that account.

2. Do you spend enough? This may sound like an odd question, but many cashback accounts also require you to spend a certain amount of money each month. For example, you’ll only get the £5 monthly cashback reward with Halifax’s Reward Current Account if you spend at least £500 per month on your debit card.

It’s also pretty common for some cashback accounts to require you to set up a certain amount of direct debits. For example Santander’s 123 Lite Current account gives you 3% cashback on some household bills each month, but only if you have at least 2 active direct debits.

3. Look out for fees. Annoyingly, a large number of reward or cashback current accounts actually charge a monthly account maintenance fee which can eat into your cashback. So if you’re attracted by a bank’s promise to give you, say, £5 a month in cashback for switching to it, make sure you factor in any monthly fees. If the monthly fee is £3, then all you really stand to gain is an extra £2 a month.

But some cashback accounts that charge a monthly fee will waive it if you pay in a certain amount each month. For example, Halifax’s Reward Current Account usually charges a monthly £3 account fee – but you’ll only be charged that fee if less than £1,500 is paid into the account that month.

Above all, make sure that fees don’t result in you actually losing money from a cashback account!

4. Look for convenience. If you already pay some of your regular bills from your bank account with a direct debit, then getting a cashback account that needs you to do that in order to get a regular reward could be an attractive prospect.

How to compare current accounts with cashback

The best way to compare these current accounts is to try and calculate exactly how much you’re likely to earn. This isn’t always easy, because what you’ll earn will be credited as a percentage of your overall spending.

Let’s say one account offers 0.5% cashback on all spending up to £100 per month, while another pays 2% cashback on all grocery shopping up to £250 per month. In this case, the amount of cashback you’ll earn is based on what spending you’re going to do in the future.

Cashback is unlikely to be the only factor you’ll want to consider either. Make sure you also look at features such as interest paid on in-credit balances, overdraft options, customer service and branch access as well.

Perhaps, after all this, you’ll decide that the other factors are more important than the potential cashback that you could earn anyway. For this reason, make sure you compare all features of a current account to figure out which is best for your needs.

What’s the difference between a cashback and reward account?

Many people use these terms interchangeably. Some accounts are purely cashback-based, meaning you get money in return for meeting the account’s requirements. A reward account usually gets you some extras like cinema tickets or discounted movie streaming services.

What kinds of items can you get cashback on?

Some cashback accounts don’t offer a fixed cash amount, but rather give you cashback as a percentage of your spending on some household bills or with selected retailers.
Depending on the account, you can get a percentage cashback on your household bills, a few pence per debit card transaction, and even a percentage of your spending with selected retailers.

Some banks will even top up your cash if you have your mortgage with them or if you keep a lump sum in your account. For example, Santander 123 Lite current account customers who also hold a Santander mortgage can get up to £3 cashback on their monthly mortgage payments, subject to certain conditions.

Other types of current accounts

While the best cashback current account can put a bit of extra money in your pocket, you might find that other types of bank account can offer you better value.

If you have a less steady income stream, a cashback account that requires you to get a certain fixed amount deposited each month might not be that beneficial.

But, a high-interest current account might work better for you. While most easy access savings rates at the moment are pretty dire, some banks offer current accounts that pay in-credit interest of up to 2% gross AER on balances of up to £1,000.

Elsewhere, packaged current accounts can offer you benefits ranging from mobile phone and travel insurance, streaming subscriptions and discounted retail offers, in exchange for a monthly fee.

Pros and cons

Pros

  • Earn cashback on your purchases
  • Unlike interest, cashback is tax-free
  • Some banks allow you to earn cashback automatically

Cons

  • Some accounts offer cashback instead of interest on in-credit deals
  • Some accounts require you to “activate” cashback deals before you can earn money

Bottom line

In order to unlock the best value from a cashback current account you need to be confident that you can regularly meet its requirements. That means keeping a close eye on your day-to-day personal finances, including how much your regular bills are costing you, the methods you use to pay them, and where you usually spend your money.

Used properly, these types of accounts can offer you a handy bonus of around £60 or more each year to help you meet your financial goals. But always weigh up the costs and eligibility criteria of cashback current accounts to work out if they are truly worth it for you.

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

More guides on Finder

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site