Carried Balances Make Cash Back Credit Cards Useless
Credit cards offering cash back tend to have a higher interest rate, which usually wipes out any reward you might receive if you carry a balance. According to CNNMoney.com statistics, interest rates on reward credit cards are, on average, approximately 1% higher than standard no-frill platinum credit cards. So if you plan to carry a balance your best deal is to look for the credit card with the lowest interest rate. Keep your financial health in mind and don't be lured by cards offering rewards that end up costing you more money.
Shop around for the best cash back credit card
Not all cards are created equal either, so you will need to do some shopping to determine the best card for your spending habits and lifestyle. Consider it an investment of your time with the payout being a little monetary freedom. Keep these things in mind when you go shopping for your cash back or rewards credit card:
- Is there an annual fee? This is a huge red flag. With all the different cash back reward cards that do not charge an annual fee, you should not have to settle for one that does. If a card with an annual fee seems too good to resist, then it is time to do some calcuations in order to compare the rebate to other cards without an annual fee.
- Does the card require you to carry a balance or offer enhanced rebates if you carry a balance? This is another red flag because any interest you pay will most likely be more than the amount of cash you get back. Determine how much you will charge for the year, how much it will cost you in interest, how much you will pay in fees, and how much you will receive in cash. If you do end up still receiving more cash than you pay in interest and fees, then you need to compare it to other cards to see which will give you the greatest rebate. But remember, reward cards tend to have higher interest rates and carrying a balance on any credit card is generally not advisable.
Cash Back and Rewards Credit Cards Details
If you've made it this far, chances are you're dedicated to learning about cash back and rewards credit cards. So, here's little more detail about getting your own cash back credit card.
How do cash back credit cards work?
Rewards are usually offered by merchants, and you choose the credit card that gives you rewards for shopping at your favorite merchant. Merchants are charged a fee for every credit card purchase, so why not let them pay for you to get a well deserved reward?
“Everyday Purchases”—What is it, exactly?
Some cash back cards offer a higher rebate for common consumer purchases, such as supermarket, gas station, and drug store purchases. The definition for these types of purchases is usually clearly defined in the terms and conditions. Typically it is up to the merchant to make sure the purchase is coded correctly to qualify for an enhanced rebate. The bottom line is to read the fine print to know exactly what merchants qualify and who is responsible for making sure transactions are coded correctly.
With rebates, loyalty is key
Sometimes cash back credit cards will have a list of specific merchants where you will earn a higher rebate and/or have no cap on the amount you can earn. If you shop often with the merchants on this list you will earn more cash.
Remember to keep yourself in mind when shopping for a cash back card
If you charge less than $10,000 each year, the best deal in cash back cards is usually one in which you earn a flat rebate percentage with your first purchase and with every purchase thereafter. A flat 1% rebate on all purchases is the industry standard. Other cards are tiered—meaning the more you spend the more you earn—so be sure you read the fine print and clearly understand the amount you must charge to earn a certain percentage. Tiered cards normally favor cardholders that charge over $10,000 a year. Your first clue to a tiered card is the “up to” clause.
Watch out for fleeting rewards
You may come across a card that is offering an amazing rebate, but when you read the fine print it only applies to purchases within a set time frame (the first 30, 60, 90 days, etc.). Pay close attention to the terms of the cards after the set time is over. Does the rebate drastically decrease? Does an annual fee apply? Will the interest rate increase (hopefully you will pay your balance in full each month, but if not, this is an important consideration). If the secondary set of terms is as agreeable as the primary set of terms, you may consider making any previously planned, large purchases during the introductory time frame. Again, keep in mind your ability to payoff such purchases. If you end up carrying a balance you will have to calculate the cost of paying interest against the rebate you earn—usually this scenario works in favor of the card issuer.
Watch out for reward caps
There is usually an annual limit, but it depends on the card. Some cards earn cash at a higher rate, but have a relatively low cap on the amount of rebate. Other cards earn at a lower rate or have rate tiers (the more you spend the more you earn), but there is no limit to how much you earn. You'll need to figure out how much you plan to charge and how quickly you can get to the higher tiers to determine which card will benefit you most.
How will you get the “cash” back?
Occasionally the credit card issuer will issue a check, but more often than not, a credit will appear on your next statement. Also keep in mind that some cash back credit cards require you to request a check, while others will send the reward out automatically. In some cases you will have to earn a set amount (usually around $50) before you can receive a check. Know the details before signing with any card; after all, if your goal is to pay your mortgage down, a credit on your card may not be very helpful.
Keep an eye on the T&Cs
The terms and conditions can change at any time. Credit card issuers reserve the right to change the agreement at any time for little or no reason. This includes the merchant list where you can earn a higher rebate, the rebate itself, interest rates and grace periods, along with any other details of the card.
www.find-a-creditcard.com| Other articles on Credit-box.com: |
|
Use the credit card responsibly |
