Cash in With a Cash Back Credit Card
Consumers have different criteria when shopping for credit cards. Most credit card reviews focus on two main characteristics of the card: the annual interest rate and fees. This is because nationwide statistics show that the majority of people who have credit cards do not pay off their full balance each month.
For people who do usually pay their balance in full, the interest rate isn’t as important. For many, they look at the type of rewards that come with the card. That’s where cash back reward credit cards look more attractive.
Don’t be fooled. Cash back reward credit cards don’t necessarily mean that you will qualify to receive a check in the mail. Some credit cards really are that simple but many package the rewards in various ways. At the end of the calendar year, you receive a check in the mail reflecting how much you charged to your card. Sometimes you will receive a rebate based on a simple percentage. Meanwhile some card companies have a confusing formula for computing rewards. So attempting to keep track during the year may be difficult.
You may remember when the Discover card came on to the market. At the time, MasterCard, Visa, and American Express were the big three credit card companies but when Discover was launched, they advertised a cash rebate. Because of this rebate, the card became popular among consumers.
Since the days of Discover, cashback cards have taken off in terms of popularity. They have evolved into not just cash but many other choices. Those cash rewards may be converted into frequent flyer miles, gas station rewards, charitable donations, or investment products such as 529 college funds.
Cards like these often require you to have good or excellent credit. There are a small amount of cards that cater to those with damaged credit but remember that those people must first rebuild their credit so the quality of the rewards should be further down their list of criteria. Low fees and interest rate should be towards the top.
Watch the fine print! With cash back credit cards and all other rewards cards, you must pay your bill on time. Breaking the rules is not allowed or you may end up paying a larger price than those without rewards cards. Why? Sometimes there is a clause in the fine print that states that when you pay late, a portion of your earned rewards are taken away. Sometimes that amount can be very substantial in addition to the late fee, sometimes as high as $40.
Don’t forget that if you are a consumer who normally carries a balance on your card, you should be more concerned with the interest rate. Carrying a balance almost always means that you are paying more interest than you are gaining with rewards so only consider cash back credit cards if the interest rate is comparable to other cards.
Finally, don’t let the allure of getting something for nothing affect your good financial sense. No amount of rewards points will be worth going into debt much like a coupon to buy a name brand is often still more expensive as the equally tasty generic. Practice good financial discipline no matter what the credit card company offers you.
Start earning cash back on your credit card purchases with cash back credit cards. Frequent travellers may prefer an airline miles credit card.
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