Cash back credit cards operate as their name implies; you receive cash based on the amount you spend. That’s right – you earn money just for swiping the card! But before you apply, there are some factors you should know about cash back offers. Read on to learn how these offers work and find one that best fits your lifestyle.
How Cash Back Credit Cards Work
While the concept is the same in all cash back offers, the method for calculating your reward varies greatly. Some companies offer up to 5% on frequently purchased items, such as gas or groceries. So if you spend $1,000 at the grocery store each month, you can expect a return of $50. Other offers calculate a straight percentage on all purchases. Still others include a point system. You might earn one point for each dollar you spend. The points can then be redeemed for cash.
Another way that these offers differ from one another is in the rebate system. Many companies will send you a rebate check at a certain time or year or when you earn a certain amount of money, such as $25. Some credit the money to your account. Others require you to request the reward money.
Why the Fine Print is Important
With some cards, you must spend a certain amount before you receive a higher percentage of cash back. This tiered option is usually spelled out in the fine print. So if you see the wording “up to 1%” on the application, check the fine print. This could mean that the first $1,500 you spent will only earn 0.25%. The next $1,500 will earn 0.50%. Once you spend $3,000, you will earn 1%. This method varies from card to card, so be sure to read the details.
Select the Best Option
Keep in mind that some cash back offers are only available to those who have good to excellent credit. Also, many times these cards come with higher interest rates. If you carry a balance from month to month, you may end up spending more on interest payments than you earn through the system.
Another factor to consider is the way to earn the most for your spending. If you spend a lot of time on the road every week, a card with rebates on gas may be a good option. If you have high grocery bills, look into a card that offers a good return at supermarkets. If you do not want to be limited to where you can earn money, check out a company that offers a set percentage return on all purchases. By looking through your options, you can find what works best for you.
Cash back credit cards offer great incentives to the consumer. If you use your card regularly and pay off the balance each month, the cash back credit card may be perfect for you. And its rewards add up fast. Enjoy the ease of swiping your card; then use the extra dollars you earn for a plane ticket, a fancy dinner, or a vacation splurge.