Cash Back Credit Cards
A cash back credit card is a specific type of rewards card. With this type of card, customers receive points for purchases made at certain types of stores. These points add up to a cash value that can be applied to the balance of the card or paid back to the customer. As a rule, the reward is given yearly, although some companies may offer rewards on another schedule.
There are other types of rewards cards, such as those that offer frequent flier miles, but cash back rewards are some of the most flexible and useful rewards. They enable a shopper to save money on on purchases, something that very few credit cards do. Some people who make all purchases in cash may still want to use a credit card in order to gain certain rewards.
A cash back reward credit card can be a great way for customers to shop. By using the credit card to fund purchases a person would make anyway, he or she can accrue money to use down the line on other purchases. If a person pays back his balance promptly, the cash rewards will be essentially free money.
How do Cash Back Credit Cards work?
Some businesses have an arrangement with credit card companies that allows the card company to receive a commission on any transaction made on that company’s card. This means that every time you spend money with your cash back rewards card, the gas station or grocery store where you shop pays a commission to the credit card company.
The credit card company then gives a portion of the commission back to the customer in the form of rewards points. The rewards may be as high as 5 percent for the first six months but will usually drop down to 1 percent or less after the initial promotional period. In many cases, the rewards will only apply to people who are using the card at certain types of stores, such as gas stations or grocery stores.
A cash back credit card allows the credit card company to make extra money while rewarding shoppers at the same time. This type of card also encourages people to shop at certain places, which increases the overall revenue of certain businesses. In this way, a cash back card is a very good marketing strategy.
In most cases, the cash back rewards will be granted automatically to the consumer at the end of the period. In some cases, however, the cardholder may need to request a payoff. In these cases, it’s more likely that the points may translate to more than one type of reward and that the cardholder will need to choose how he’d like to receive the reward. For example, he can choose to get the reward as a cash payment, gift card or merchandise. After he makes the selection online or over the phone, he will receive his award.
How to Choose a Cash Rewards Card
There are multiple different cash reward cards available, and most people can qualify for one. Like all credit cards, cash rewards cards come with different interest rates and annual fees, so it’s important to see how much the card will truly cost to own before purchasing one. In many cases, the rewards are no worth the cost of owning the card.
Many cash rewards cards only pay the points after the purchase has been paid off, not when it is made. This means that if you get a point every time you spend $100, the points may not be rewarded until the money has been paid back with interest. In other cases, the card company may offer the points as soon as the purchase is made. It’s important to determine how the specific card company handles this as it will have far-reaching implications for the way the card carrier spends his money.
Different reward cards will also offer more rewards at different types of businesses, so it’s a good idea to pick a card that matches your shopping habits. For example, a person who needs to drive a lot for business may want a rewards card that pays extra points for gas purchases. An individual who drives a hybrid or primarily bikes to work will not benefit from this card as much.
Some rewards cards are tied to specific companies, and certain rewards cards may even be offered by the business itself. Many department store credit cards pay cash rewards that are only useable in the store itself. For example, a Best Buy credit card may have a reward system, but the rewards are offered in store credit or gift certificates. Before taking out this type of card, be sure that you know how the rewards will be given, and decide if you will shop enough at a given place to make this worthwhile.
All credit cards are most advantageous for the consumer when they’re paid off in full each month. The best way to use a cash back reward card is to make the purchase on the card in order to earn points, then pay off the balance immediately. This allows the rewards to accrue without substantial interest gathering on the card balance.
Some cards will punish people for using this method, however, so be sure to check before agreeing to the card. Some card companies will charge a fee for inactivity if the card never carries a balance. There may be additional limitations that the card carrier can be subject to as well.
Overall, the best cash reward card will be one that has a low interest rate, no annual fee and offers a high percentage on rewards. This type of card may not be available to all consumers, but you can comparison shop for the best match that you might qualify for. This will allow you to reap the benefits of a rewards card with a minimal amount of financial trouble.