Cash-back credit cards do exactly what their name says: they give you cash back based on how much you spend. Yes, you do get paid just for swiping the card! But there are a few things you should know about cash back credit cards before you apply. Read on to find out how cash-back credit cards work and how to choose the one that works best for you.
How credit cards with cash back work
Even though all cash-back credit cards work the same way, there are many different ways to figure out how much you'll get back. Some companies will give you up to 5% cash back on things you buy often, like gas or groceries. So if you spend $1,000 a month on groceries, you can expect to get $50 back. Other deals work out cash back as a straight percentage of all purchases. Still others have a system of points. For every dollar you spend, you might get one point. After that, the points can be turned in for cash.
The way the rebates work is another way that cash-back credit cards are different from each other. Many companies will send you a rebate check at a certain time or year, or when you earn a certain amount of money, like $25. Some put the money in your bank account. For some, you have to ask for the money.
Why it's important to read the fine print
Some cash-back credit cards require you to spend a certain amount before you get a higher cash-back percentage. Usually, this tiered option is explained in the small print. So, if you see "up to 1 percent" on the application, make sure you read the fine print. This could mean that you only earn 0.25 percent on the first $1,500 you spend. For the next $1,500, you'll get 0.5% cash back. After you've spent $3,000, you'll get 1% cash back. This method is different for each card, so make sure you read the fine print.
Choose the Best Choice
Remember that some cash-back credit cards are only for people with good or excellent credit. Also, the interest rates on these cards are often higher. If you keep a balance from month to month, you may end up paying more in interest than you earn through the cash back system.
Another thing to think about is how to get the most out of what you spend. If you drive a lot during the week, a credit card that gives you cash back on gas could be a good choice. If you spend a lot on groceries, you might want to look into a card that gives you a good return at grocery stores. If you don't want to be limited in where you can make money, check out a company that gives a set percentage return on all purchases. By looking at your options, you can find what works best for you.
Cash-back credit cards are a great way to get a good deal. If you use your card often and pay off the balance every month, a cash-back credit card might be just what you need. And it pays off quickly. Swiping your card is easy, and the extra money you earn can be used for a plane ticket, a fancy dinner, or a vacation treat.
