People love the idea of earning money as they spend, and this has made the cash back credit card very popular. While these cards are a way to get something in return on every purchase, they are not all created equal. The following will help those who want to save as much money as possible find just the right cash back card.
Whenever someone makes a credit card purchase, the retailer has to pay a certain percentage of price (interchange fees and other costs) to the bank and credit card company. With cash back credit cards, a percentage of this money, usually 1% or more is returned to the buyer. Although this is a small percentage, it still adds up to what can be thought of as a discount on every purchase. If the money was going to be spent anyway, it is certainly better than nothing.
However, being such a small part of the purchase price, shopping with a cash back card should never be used as an excuse to buy things that might not otherwise be purchased. The shopper is still paying for the overwhelming part of the purchase.
In addition, cash back programs come at a price, usually manifested in higher APRs. Therefore, it is more, and not less, important to use cash back credit cards responsibly than it is with regular credit cards. Paying off balances in full every month will save more than any rewards program even can. As always, nobody should ever make purchases they would not have made if they had never acquired the credit card.
Cash back vs. frequent flier credit cards
Which type of program is best depends on the card and the individual. The major factors are how good of a mileage or cash back program one can get. Of course, the frequency of travel and the expected costs of the tickets are also important. However, as a general rule, cash back cards are a better deal for most people. While cash back credit cards usually do not have an annual fee, mileage cards can be expensive. Besides, monetary bonuses are easier to use than miles, and expiration dates are much less of a problem.
Cash back rewards
While the standard reward rate usually starts at around 1%, many deals can be found that offer more. Although they will be limited as to the kinds of purchases, they may offer up to 5%. However, people need to be wary and look at the fine print. Apart from limits as to what merchants these kinds of rewards can be earned, other limits such as windows in which the points must be used or spending thresholds that need to be reached every month are common.
Another common tactic is for companies to make introductory offers during which consumers can earn higher cash back percentages or other perks. Keep in mind that these periods are relatively brief and cards should be chosen on their long-term benefits. In addition, offers to transfer balances should only be taken up if the card the balance will be transferred to has better rates.
Cash advances on credit cards are just as expensive with cash back credit cards as they are with other types of credit cards. Because nothing is being paid by the merchant in these advances, they are not going to offer any kind of cash back bonus. Those who take these will have to pay all fees that come with them and any interest that may be incurred. Since the rates on cash back cards are often higher than other cards, they are some of the worst ways to get cash.
Getting the most out of rewards
People often miss out on a lot of extra bonuses by not thoroughly examining the benefits their cash back card offers. A common way people tend to miss out on great savings is by not taking advantage of programs their credit card has with select merchants. Go to the website of the credit card company and carefully look over all the merchants they have agreements with. By shopping through their website, very substantial cash back bonuses and other rewards can often be had.
The fine print
Everyone has to be very careful with the fine print. There are often many situations where rewards can be lost or do not count. For example, some cards have limits as to how much cash back can be earned in a given time frame. In other cases, reward money may be lost after repeated late payments.
By starting with a little research and making a good choice, cash back credit cards can offer a nice way to get something back on everything purchased with them. When used properly, they are one of the best ways to save money without any significant additional effort.