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Cashback Credit Cards.

Why not the make most of your everyday spendings?
Cashback Credit Cards are a great way
to make your everyday purchases more rewarding

Cashback Credit Cards: The Good, The Bad, and The Great

Looking Back in History

It all started in way back in the 90s when pump prices for gasoline went skyrocketing like crazy. During this time when prices were going up when the major card companies saw an opportunity that will benefit them and all their customers mutually.

And then came the rise of cashback credit cards. Cash back offers have been around for quite a while but they weren’t a “hot deal” back then as they are now.

Top 4 Cashback Credit Cards

Visa Credit Card

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Visa Credit Card

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Visa Credit Card

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Visa Credit Card

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What is a Cash Back?

A cash back, simply put, is a rebate. In essence, your credit card becomes a discount card. You pay for your groceries, gas, medicine, and other everyday items via your credit card.

At the end of the year, or some other specified time in the terms and conditions of these credit cards, you will get a check paying you back a certain percentage of the total money you spent on the items related to the discount program.

Why Get a Cash Back Credit Card?

Let’s not complicate things – cash is cash. You either earn it or get it as a gift. Every bit of cash you save is a bit of cash you earn. Even though you save a little, if you add things up at the end of the year, getting a thousand dollars will go a long way, right?

Point rewards can’t compare to cash backs. Some rewards like a night at a hotel or a free dinner at some fancy restaurant may sound good, they may not exactly be what one wants. Why not give cash as the award so the consumer can decide what they want for themselves? Thus the cash back is definitely better for everyone.

Cash Back Percentages

In a way, you end up saving some money for the tough times. Every bit of cash you are able to save is definitely something to be grateful for. The big change in the 90s however was the fact that the credit card companies raised the cash back amount up to 5% from the usual 1%. That became a big help to a lot of families who had these cashback credit cards.

Now, don’t get it all wrong. Note that not all cash back credit cards will offer you a 5% rebate or cash back. A good number of these credit card companies only offer cash backs of 0.5% to generally somewhere around 2%. The 5 per cent rebates are usually given for specific purchases – remember to read the fine print so you’ll know which of your purchases qualify for the bigger cash back rates.

Pros and Cons of Cash Back Credit Cards

 

Using a cash back card is like getting paid for all the shopping you have done with your credit card. It’s the stuff of dreams for some folks. You basically get a percentage of the credit card purchases you make each month, however do take note of the pre-set minimums.

That means you can get a cash back rebate if you make the minimum amount of purchases. Some minimum purchase requirements go as low as $20 – that means your purchases should be at least that much. However, some pre-set minimum amounts can range up to $100 – again, read the fine print so you don’t get disappointed if you don’t get a cash back rate for your other purchases.

As you can see, there are pros and cons of these cash back credit cards offers. Here are some more pros and cons that you should know about. Let’s start with the advantages.

The pros:

  • You get to make a small amount in savings every time you use your credit card (terms and conditions apply – again, note the minimum amounts you should spend on and the purchase categories that qualify).
  • If you have a pretty good credit score you can qualify for the biggest rewards
  • Some credit card companies offer cash bonuses for customers who are able to spend a certain amount of money for a limited amount of time (e.g. $50 in a week or $200 for 14 days or $500 for three months).
  • Some credit card issuers will give you a dollar for every dollar cash back matching your rewards at the end of your first year with them (just like a match bonus in a casino).
  • Some cash back on credit cards lets you redeem your cash back rewards any time. That means you can request to get your cash any time you need it. Note that some credit card companies do not offer this feature – you have to wait at the end of the year to get your check.
  • Some card issuers waive the rotating categories (that will be discussed below in a later section).
  • Some cash backs are automatic, which means all your purchases no matter what the amount gets a cash back – again, check the fine print since not all credit card companies offer this feature
  • 0% APR – this varies from one credit card to the other. This rate is often given for the first year only.

The cons:

  • Different cash back credit cards have different features – it’s not a one size fits all world.
  • Most point and mile values are usually higher compared to cash back amounts. That means if you travel around a lot then the miles are better for you than just getting a cash back award for your purchases.
  • Annual fees and other charges or costs definitely reduce the value you get from credit cards of this type.
  • Some cash back type credit cards have higher interest rates compared to credit cards that do not have any cash back offers.
  • If you have any remaining balances at the end of a month, that basically cancels out the rewards that you have earned for that month – which is why everyone is encouraged to pay their credit card premiums in full at the end of their billing cycle.

 

Compare the Different Types of Cashback Credit Cards

Note that there are different types of cash back cards offered by banks and other financial institutions. You can actually categorize them into a few broad categories or card types. The categories of course will be based on the points that you can earn from them.

Every kind of cash back card you can find will offer rewards for your purchases depending on the amount you have spent. Well, it’s actually based on the net percentage of all your expenditures.

Some cards have fixed rates for all purchases while others give you a higher rate for specific purchases. Given all these factors, here are the categories of cash back cards that you will find today:

• Flat Rate Cash Back Cards

These credit cards offer a flat rate for all your purchases. That means you get a cash back reward every time you use your credit card. You don’t have to worry about which purchases you’re going to make – you’re sure to get some cash every time you spend. The big downside here is that the rate of the cash back isn’t that high. It can only go up as high as 1.5%.

• Variable Rate Cash Back Cards

Credit cards of this type usually use a point based system to determine how much of a cash back reward you’re supposed to get. They also have different rates depending on the type of purchases you make – purchases are also categorized and each category has a different rate. That means some purchases like groceries or medicine purchases get a a higher cash back rate like 2 percent or 3 percent. The usual rate for a lot of the other purchases is only at 1 percent.

• Rotating Rate Cash Back Cards

These credit cards usually offer a higher cash back rate each month. For instance, these cards can offer a 5% cash back for your gasoline purchases this month but not in the following month. Next month’s higher rate may be set for other purchases such as grocery purchases or entertainment purchases. If you are able to track your expenses and the cash back offers each month then this is the type of cashback credit card for you.

How to Use Cashback Credit Cards

Here’s how you can get a cash back on credit cards. The first step is to choose the right credit card that offers cash back rewards. You should check out the different available offers out there. We have a short list of these credit cards below.

Take note which cards use a point system and which card just offers a percentage of your expenditure. You should also note which cards would require you to qualify your spending and which ones would just reward you with pretty much anything you spend on.

Check out the rates of the cash back awards. Note that some give you a higher rate of rewards however, you must have a higher credit score. Some will give you a reasonable rate even if your credit scores aren’t that stellar.

Categorize each type of cash back card you find into: flat rate credit cards, variable rate credit cards, and rotating rate credit cards. Find out which type of credit card will work best for your spending habits.

The most popular credit cards that offer cashback programs are from Discover, American Express, Citi, and Capital One. We have a list of these cards and their features below.

Another important thing to look out for are the sign up bonuses offered by each type of cash back credit card.

How to Make the Most of Your Cash Back On Credit Cards

Here are some ideas on how to make the most of your cashback rewards on credit. These tips, if followed, will help you get more cash back rewards at the end of the year:

Tip#1 Use them for normal expenses

The best way to take advantage of credit cards of this type is to use them for normal expenses. Any of the usual things that you purchase on a regular basis should be purchased with this card.

That way you can be sure that you are getting discounts on everyday items. This is also the fastest way to rack up rewards. If you wait for special purchases that don’t occur each month then you will only see trickling amounts of cash backs each month. Regular expenses are equal to recurring rewards.

Tip#2 Check out the expenses

Check out the expenses that you usually pay using your personal checks and/or your debit cards. See if you can use your credit cards on those expenses. Add them to the list of items you should be paying with your cash back card.

Tip#3 Check if your cashback card is accepted by your local vendors

Find out if your cashback credit card is accepted by the vendors you usually shop with. Mastercard and Visa are the most widely accepted credit cards nowadays. In case a lot of vendors you regularly shop with will honor your card then use it. The purchases you make there can help you rack up some points in the long run.

Tip#4 Don′t use your cashback credit card to withdraw cash

Avoid withdrawing cash using your cash back credit card. As much as possible, use a different credit card in case you have to withdraw cash or use a cash advance. Note that most of these credit card companies will charge you a sizable fee for every cash advance or cash withdrawal (whatever they call it).

Remember that the fees that they will charge you will basically cancel out whatever cash back reward you may get. Let’s say you spent a hundred dollars and got 5 dollars as cash back. And then you withdrew cash; how much is the charge? It’s usually around 5 dollars or so too per withdrawal.

Tip#5 Don’t cancel your cash back reward card

Don’t cancel your cash back reward card. Well, that is until you get the cash back reward, that is. If you’re supposed to get your rebates or rewards at the end of the year, then wait until the end of the year before you cancel your credit card. If you cancel too early then you forfeit whatever reward you may get –– goodbye one thousand bucks.

Tip#6 Take advantage of cash back credit cards offers

Make sure to take advantage of cash back credit cards offers as frequently as needed – as needed, remember. Always read the fine print. Credit card companies will usually require a certain number of purchases before you can get rebates.

That means if you don’t use your cash back reward credit card frequently enough you may end up losing your rebates anyway. However, as stated earlier, you should only use your card as frequently as needed.

You don’t need to go on a monthly shopping spree just to get the desired rewards or rebates. You may even end up losing your savings at the end of the year.

Tip#7. Check your monthly recurring expenses

Check if your monthly recurring expenses like your water bill, power, gas, and fuel will count in your selected cash back rewards program. If they do, then include them in your list of card expenses that you should make.

Tip#7. Setup a direct monthly debit

If tip #7 above works for you then here’s another important thing you should do – setup a direct monthly debit. Most banks that offer cash back rebates on their credit cards also offer to have the bill paid automatically each month on your savings account. That way you can be sure that your payments are up to date and are on time. You are already stacking up your rewards; it makes no sense losing them all via a missed payment.

Cashback Credit Cards Top Picks

Some cash back credit cards are better than others. On the other hand, there are some of these credit cards that are just scams. Sure they give you cash back rebates but they charge you a ridiculous interest.

We have compiled below some of the best cash back rebate programs provided by each credit card. Check out their features and decide which one is for you.

Chase Freedom Unlimited

Chase Freedom Unlimited gives you a 1.5% cash back on all your purchases. This means you can redeem virtually anything – virtually. Again, read the fine print. There are a few purchases that you won’t give you a rebate or reward.

Now on top of the flat rate of 1.5% (which is already a bit generous compared to some credit cards out there), you also get a sign up bonus. The worth of the bonus is around $150 up to $175.

Blue Cash Preferred

This credit card offers you with 6% cash back rewards. That’s huge. It also gives you 3% cash back on purchases made in department stores and gas stations. All other categories of expenses will get 1% rebates.

On top of that you will also get $350 as a sign up bonus. The drawback is that the application process is pretty stiff (check your credit scores if it is high enough). Another downside is the $95 annual fee. One last thing – this is an American Express card so not every vendor will honor this credit card.

Fidelity Rewards Visa Signature

This cash back card gives you 2% cash back on all purchases. Minimum redemption rate is at $50. The APR is at 14.24%.

Chase Freedom

This is different from Chase Freedom Unlimited. This one offers a rotating cash back rate of 5% on the monthly selected purchase category and 1% on every other expense you make.

Discover It

Just like Chase Freedom, this also features a rotating cash back rewards program. 5% cash back on selected categories of purchases and 1% on everything else. On top of that, you get 0% APR on the first year and it doesn’t have an annual fee.

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