If you want to receive money back every time you spend it, credit cards cash back is by far the most convenient alternative. With this form of rewards card, there are no complicated points or redemptions. You use your credit card to pay, and you receive cashback on your purchase.
It’s normal to have a few questions before you open a cashback card, like how it will work and the types of cashback cards that are available. In this guide, you’ll learn all about cash-back rewards and how to pick from the best cash-back credit cards.
Credit cards Cash Back are one of those things whose name accurately describes how it works. When you use a cashback card, you get a percentage of the transaction value as cashback. The actual proportion depends on the card and, in the case of credit cards Cash Back, the spending category of the purchase. For example, a card may receive a higher percentage back when used at an office supply store or a restaurant.
Assume you spend $100 with a cashback credit card that offers 1% cashback. You would receive $1 in cashback. If the card offered 2% cashback, you’d earn $2. You will continue to accumulate cashback until you decide to redeem it.
The majority of transactions, but not all, will be eligible for cashback. Card companies normally do not allow you to earn it on cash advances or debt transfers. You may also not get cashback on purchases of cash-equivalent items like gift cards and person-to-person payment services like Venmo. Any of these exceptions will be specified in the terms and conditions of your card.
Cashback can be redeemed through your online credit card account or by calling your card issuer. Some credit card companies require a minimum redemption amount, such as $20 or $25. Fortunately, many credit card companies now allow you to redeem any amount of cashback using your credit card.
Methods of redemption vary, but typically include one or more of the following:
Statement credit: Apply your cashback to your current credit card amount. Unless you don’t use your card frequently and have more cashback than your current balance, this is usually the simplest option.
Bank account deposit: Deposit your Cash Back into a bank account that has been linked to your credit card.
Check: Receive a check in the mail for your cashback.
Gift card: You can use your cashback to purchase a gift card. Even if cash is more helpful than a gift card, retailers will occasionally offer promotions in which you can get gift cards for less than their face value.
There are three kinds of cashback cards, with the distinction being in how their cashback rates are structured.
Flat-rate credit cards Cash Back
A popular option if you just want to carry one credit card, a flat-rate cash-back card earns the same percentage on all of your purchases. While 1% was once the most popular cashback rate, 1.5 % has now become the new benchmark for flat-rate cards.
The disadvantage of these cards is that there is no possibility of earning a higher bonus rate. If you typically spend a lot of money in a single expenditure category, you may be wasting money. The good news is that you’ll get a nice rate on your card every time you use it.
Bonus category cash back credit cards
The amount you earn with bonus category cash back credit cards is determined by the purchase. These cards can earn 2%, 3%, or more on qualifying purchases in specific, defined spending categories. For example, if you have a credit card that offers 3% back on gas purchases, you would get $3 on a $100 gas purchase.
Some credit cards limit the amount of bonus cashback you can earn. You may be able to find credit cards Cash Back that give bonus rates on purchases of up to $1,500 every quarter or $6,000 per year. Others offer an unlimited number of bonus categories. In any case, all non-bonus expenditure will earn a flat rate, which is typically 1%.
If you locate a card with bonus categories that match your shopping habits, you could earn a lot more money with it.
These cards operate in the same manner as the cards mentioned above, with the exception that the bonus categories change at predetermined periods, most commonly quarterly. So, for three months, your card may get 5% back at restaurants, and then 5% back at grocery stores for the next three months.
Your credit card company may disclose all of the bonus categories for the year in advance, or they may just release them at the beginning of each new quarter. To obtain the bonus rate for that quarter, you will normally need to activate certain categories with the card issuer.
The major advantage of these cards is that they frequently feature the highest bonus rates. However, there is no assurance that the bonus categories will be ones in which you spend a lot of money. As a result, consumers frequently receive a flat-rate cashback card in addition to a rotating bonus category card.
With so many credit cards Cash Back available, it might be difficult to choose one. You can simplify the decision by narrowing it down to a few key features.
Cashback rate: Everyone wants the card with the highest cashback rate. Always reviewing your monthly expenses, determining where you spend your money, and selecting a card with cashback rates that correspond to your spending.
Annual fee: If you don’t want to pay an annual fee for a credit card, you’ll be relieved to know that most cash-back cards have no annual fee. There are a couple that have an annual fee, but they also have greater cashback rates.
Sign-up bonus: There are several cashback cards that provide sign-up incentives. A sign-up bonus is also known as a welcome bonus or a welcome offer. These are a great method to make even more money right away after receiving your card. Meeting a spending requirement is the most prevalent sort of sign-up bonus. Certain credit cards, for example, give a $200 bonus cash if you spend $500 within the first three months of starting the account
A 0% initial APR offer is a frequent bonus benefit of credit cards Cash Back. This can be used on either purchases or balance transfers, or both. If a card provides an introductory deal like this, you won’t have to pay any interest on that type of transaction until the introductory period expires.
These offers make it possible to use credit cards Cash Back in new ways, such as:
- Transferring credit card balances over to consolidate your debt and repay it at a 0% intro APR.
- Financing a big purchase and paying it off at 0% intro APR.
While these introductory offers can be beneficial, make sure you understand the terms and use them responsibly. Most credit cards have a balance transfer fee, so consolidating your debt will almost certainly cost you money upfront. When your trial time expires, you’ll be required to pay interest on any leftover balance.
You don’t want to be foolish and spend extra money just because you have a 0% intro APR. Use one of these deals only if you absolutely need it.
- You want to generate a return on your usual expenditure without complicating your life.
- You want a card with no annual fees.
- You’re looking for a credit card with a 0% introductory APR.
Anyone with good financial habits can profit from credit cards Cash Back. If you travel frequently, there’s a strong possibility you’ll earn greater value from travel rewards cards. However, if you don’t travel frequently or prefer to keep things simple, a cashback card is an excellent choice.