Although you should not give to receive, this Christmas, there is nothing to stop you doing both. Currently there are more than 80 incentive-based credit cards on the market, many of which offer cash back on all purchases.

This means that, at the end of each year, every pound you spend on the card is totted up and a proportion of that total – typically between 0.5 and one per cent – is returned to you by way of a cheque or credit to your credit card statement. So if you spent £5,000 in a year and the cash back offered was one per cent, you would receive payment of £50.

The popularity of this kind of reward and loyalty scheme is on the up, according to a recent survey from the Morgan Stanley Credit Card. Perks such as cashback were found to be the prime consideration of 29 per cent of cardholders who had switched or were considering switching their plastic. A year ago only seven per cent of cardholders said this was important.

Change of heart 

This change of heart is partly due to the fact that more people are paying their credit cards off in full every month. This means they can look beyond simply the rate of interest charged by the credit card provider. The latest figures from APACS (The Association of Payment Clearing Services) found that in 2005, 59 per cent of cardholders repaid their balance in full every month – up from 56 per cent on the previous year.

If you are one of the remaining 41 per cent who carry a balance on your credit card, you should not even be considering a cash back deal, according to Andrew Hagger at financial analysts, Moneyfacts. “For these customers, finding the cheapest rate or taking an initial 0 per cent deal should still be the first consideration. You have to spend a fair amount to receive any significant cash back on a credit card and the monthly interest you will pay with a balance will wipe it out anyway.”

But if you are a ‘non-borrowing’ card holder and plan to put your Christmas shopping on plastic, there are some real benefits to be had. Morgan Stanley’s Cashback MasterCard for example is offering triple cash back from the day you open the account up to and including 1 February 2007.

This means that over the festive season and all through the January sales, cardholders will receive three per cent back on the first £2,000 of purchases and 1.5 per cent thereafter up to your personal credit limit. So if you put £2,500 of Christmas purchases on the card, you would receive £67.50 in cash back. And, if you pay off your balance each month, the relatively high interest rate of 15.9 per cent becomes irrelevant.

Less festive but equally true is the old adage that you don’t get something for nothing. There are several snags with cash back credit cards. Firstly, the initial rate of cash back offered usually only applies to a certain spending cap. “Credit card providers offer ‘teaser’ rates to get customers interested for the first purchases and then reduce the rate,” says Robert Kenley, head of credit cards at price comparison website Moneysupermarket.com.

"For example, the Yorkshire Building Society Classic credit card offers one per cent cash back on the first £2,000 but if you spend more than this during the year, the level of cash back is reduced to 0.5 per cent."