Monday, January 18th
What Are the Best Cash Back Credit Cards?
Cash Back Credit Cards let you make money when you spend money - no tricks or gimmicks involved. Whether you use the card for big purchases like appliances or everyday spending for lattes and lunch, you'll get a percentage of your money back. If you've got good to excellent credit already and want to start getting free cash, a Cash Back Credit Card is a great way to do it!
Who doesn't like free money? Cash Back Credit Cards give consumers with good-to-excellent credit a percentage of their spending back on every purchase - almost like an extra rebate or discount every time they use the card. It's easy to see why cash back cards are the most popular type of credit card available today!
Which Cash Back Credit Card Should You Choose?
Not every Cash Back Credit Card is the same. While most, if not all, of them require you to have a decent credit history already, the way each card's rewards are structured can vary. Which one is best for you? That depends on how you use your credit card, and how much effort you want to put into keeping track of which card(s) to use and when.
- Flat-rate rewards give you a fixed percentage of your spending back, usually between 1-2% of your purchase price. There's nothing to keep track of, no categories to monitor, and so on. These are great to use as your go-to card for everyday spending.
- Category rewards can take more effort on your part, but you'll probably think it's worth it - because you'll get more cash back for making certain purchases. For example, your cash back card may give you 1% back on most purchases, but that percentage increases to 5% at grocery stores or gas stations. Some cash back credit cards with category bonuses keep those categories fixed: you'll always get that higher percentage back at the supermarket, restaurants, or on travel. Other cards have rotating categories: you might get 5% back at warehouse stores for the first three months of the year, and then that 5% category shifts to pharmacies and gas stations for the next quarter.
Those category rewards can have limits, so keep that in mind too. For instance, you may only get that higher reward percentage on the first $6000 you spend in that category during the calendar year; after you reach that limit, you'll only get the card's regular cash back rewards (such as 1-2%).
Maximizing Your Cash Back Rewards
Are you starting to see how easy it is to make money just for doing what you already do? There's a whole online community built around sharing tips for maximizing the rewards from a variety of credit cards, often referred to as "credit card stacking" . You may not be ready to take your spending game to that level, so in the meanwhile, here are a few things to keep in mind:
- Annual Fees. Most Cash Back Credit Cards don't have an annual fee, but read the fine print to be sure. If the card you select has an annual fee, make sure that the rewards you're getting more than cover the fees for owning it.
- Sign-On Bonus. Many cards offer promotional rewards to get you to choose them over the competition. A common reward is $150 in extra cash back if you spend at least $500 in the first three months that you have the credit card. Again, it's important to make sure that you can actually meet that minimum spend, if you're using the sign-on bonus as the deciding factor for choosing a particular cash back credit card.
- Interest Rates. The best way to maximize your rewards is to pay your balance in full every month. But, if you might need to carry a balance - you had unexpected medical bills or car repairs, for example - be aware of what you'll pay in interest for the balance you carry.
- Cards for Categories. If you travel frequently, maybe you'll want to choose a Cash Back Credit Card with high rewards for airfare, restaurants, and hotels - and use that card exclusively for those purchases. You can then choose a different card that offers high rewards for groceries, gas, or entertainment, and only use that card when making purchases in those categories.
TopConsumerReviews.com has partnered with Lending Tree to help you find the best cash back credit cards in the industry. We hope this information will help you pick the right card for you - and earn plenty of cash back rewards for your everyday spending!
How Cash Back Credit Cards Work
Every time you swipe your card, the store merchant must pay the credit card company a small fee or a percentage of the sale. A portion of this fee is given back to the consumer in the form of a cash back reward. Cash back cards encourage consumers to use their credit cards for everyday purchases and the credit card company benefits from the store fees and passes some of the money back to the consumer.
Every card has a different system for how you redeem and receive your rewards. Some are automatically applied to your statement or are sent in the mail. With other cards, you must manually redeem your rewards (usually on the credit card website). Some offer money back on a monthly basis while others may send the cash back at the end of the year. Some other credit cards require a minimum balance to be released before you earn your rewards. Typically customers will receive the money back as a credit on their account or as a check or cash card in the mail.
Most of credit cards keep track of your cash back rewards with a point system (or something similar). For example, some cards may give you two points for every dollar spent on groceries. 1000 points may equal $10 in cash back. So if you spent $500 dollars on groceries, you would be eligible for $5 back. Often credit card companies have partnerships with other larger companies. Making a purchase from a store that has a partnership with your credit card company would mean a higher percentage of cash back rewards from that purchase. This might mean that different stores offer more or less points for purchases made there.
Another way cash back credit cards are able to offer rewards are from annual fees and interest accrued. While some credit cards have no annual fee, often cash back cards with bigger reward packages have some type of annual fee. Make sure your rewards are going to offset the annual fee you may be required to pay. You want to use the card to your advantage. Cash back rewards cards have higher interest rates than most other cards to help offset the reward costs. It is important to remember to pay off your purchases on a monthly basis to avoid high interest charges. This will allow you to enjoy the benefits and while paying little to no interest on purchases. Those that carry a balance from month to month will end up owing far more in interest charges than what they will receive as rewards
Always pay attention to the fine print. Many customers rush to sign up for a card that offers 5% back on all purchase, but miss the part about it being an introductory offer. While this is a good incentive and one to consider, make sure you think about how the card and its benefits will look for you long term.
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