When it comes to credit card perks Americans love their cash back. In fact, a whopping 57.4% of those who hold rewards credit cards have them for the cash back benefits. However, as you might expect not all cash back credit cards are created equal and it does help if you take the time to understand how cash back reward credit cards work and what the offers you might be considering really give you.
Cash Back Credit Card Basics
Put in the most basic of terms a cash back credit card is one that offers those who hold one the opportunity to earn a cash back bonus of a percentage of the money they spend on their credit card. These benefits are not to be confused with other credit card perks like air miles or travel points, although there are some credit cards that offer a combination/choice of all these benefits
Who Will Benefit from a Cash Back Credit Card?
Usually financial experts recommend that if you are going to use a cash back credit card you pay off your balance every month. Most cash back credit cards have a higher APR than more conventional credit cards so if you make a habit of carrying a balance those extra interest charges will effectively cancel out the cash back benefits completely. So really cash back credit cards are only beneficial to the most disciplined of credit card holders.
As previously mentioned some cash back credit cards are better than others. Here are some tips to help you decide which is the best cash back credit card for you and how to get the most out of it once you have it:
Choose AutoPilot Rewards
Some cash back credit cards require that a card holder call them and request that their rewards be distributed to them every time they want to tap into their cash back balance. There are plenty of cards however that issue rewards on “autopilot” at regular intervals which is, let’s face it, a lot easier, especially when you have so many other things to deal with.
Choose a Card that Matches Your Spending Habits
Different credit cards award cash back benefits in a variety of ways. Some simply offer a single dollar amount, or point amount per dollar wherever you make your purchases while others will offer greater rewards when you use the card at certain types of retail locations like restaurants or gas stations. To get the most out of a cash back credit card you should look for one that matches your personal spending habits.
For example if you make a habit of taking advantage of the convenience of using your credit card to pay at the pump a cash back credit card that offers higher rewards for gas purchases would make a lot of sense. You should also look for a cash back credit card that does not put a limit on the amount of the cash back rewards you can earn in a year.
Use Your Cash Back Rewards Cards Frequently
These days there are very few places that do not accept credit cards as an acceptable form of payment. Therefore if you get into the habit of making every day purchases with your credit card that you would usually pay cash for you can rack up those cash back rewards that bit faster. For this tactic to work though you do, as previously mentioned, make sure that you pay your full balance off every single month.
Think of Your Cash Back Rewards as a Savings Tool
For most people saving money is not always the easiest thing to do. One way you can get the most out of your cash back rewards is to think of them like they were the funds in a savings account. Many cash back credit cards let the card holder choose when they would like their cash back rewards dispersed when they first sign up for the card. So if you were to set your dispersal date for say, sometime in October, the money can be used to pay for all those holiday presents you have to find the money for at that time of year.
Avoid Most Points Cards
Credit cards that only offer points redeemable for various rewards tend to be less generous with the benefits they offer than straight cash back rewards credit cards. According to financial experts that is because cash back programs are cheaper to administer than points programs, so the banks that issue them can afford to attract customers with rewards that are a little more generous. If you do still want to have the option of earning a special reward choose a credit card that offers both.
Some Examples of Great Cash Back Credit Cards
There are a few cash back credit cards that really stand out from the crowd. One of the best available is the Capital One Rewards credit card. This card offers 2% cash back on grocery and gas purchases and1% cash back on all other purchases so most people will benefit as gas and groceries are simply things that almost everyone has to buy anyway! There is also a 0% APR for 12 months introductory offer which does mean if you do have the occasional month where you cannot quite pay off your entire balance you won’t be financially impacted, at least for the first year of card membership.
Blue Cash from American Express is another particularly good cash back rewards credit card. Initially card holders receive 0.5%-1% on all purchases made on the card. Once you have spent a total of $6,500 though (and paid it all off) you will begin earning up to 5% cash back o purchases made at drug stores and on gas and groceries and 1.5% on all other purchases. If you get into the habit of using the card in place of cash on a daily basis you can certainly earn some great cash back rewards at the end the year, which is when the cash back rewards are automatically sent out to Blue Cash customers.