Save Money with Cash Back Credit Cards

Posted by Nick Niesen on October 29th, 2010

Many credit card companies offer a popular incentive called cash back. Cash back is the money given to the cardholders by credit card companies for every dollar spent by them. Cash back is often given in a single payment once in a year. The cash back incentive has proven to be successful for those users who charge everything, including clothes, gas, groceries, and dinners, etc to their credit card.

Therefore, if you are comfortable with charging everything to your card, a cash back credit card is all you need. Cash back credit cards are advisable for those credit card users who pay off their outstanding charges every month. However, if you are not able to pay off the balance every month, then you will have to pay interest charges that are higher than the amount paid back to you. This is because interest charges by these cards are colossal.

The Best Cash Back Credit Cards Need a Good Rating
If you have a good credit rating then credit card companies award you with cash back credit cards. Every purchase charged on the card gains you points. After attaining a certain number of points, you can get some more points for redeeming your cash. Thus, you can even reduce your balance by getting it credited to your outstanding credit card bill or by getting the company to send cash to you.

It is a win-win for all - Merchant charges fetch good earnings to the credit card companies, while merchants earn more by attracting more customers and the consumers get their cash back for using these cards. Thus, a cash back credit card is advantageous to every body.

Calculate The Cash Back

The cash paid back to you is calculated as a percentage of your total spending and it ranges from 0.5% to 2%. Different companies offer individual rates of percentages. For example, The Discover® Platinum Card generally offers 1% cash back, but if purchases are made from the merchants who avail the Get More Program, then the rate offered is about 5% of the spending.
If there is no outstanding balance on the credit card then the cash back option is an attractive package. However, if you are paying an interest, then that amount will possibly outweigh the gain of cash back. Select a card with very low annual percentage rate (APR) or a card offering an interest free, introductory period.

Tips for Selecting a Cash Back Credit Card

* Make sure whether the headline rate is paid on all purchases or only on a portion of the annual spending. Some cards offer 0.25% on the first $1500 spent, a 0.50% on the next $1500 spent, thus allowing a full 1% on the purchases that exceed $3000.
* Be aware of any cap on the total amount of cash back in a year.
* Enquire whether cash back is paid by check or is deducted from the credit card bill.
* Check whether the card offers an initial bonus, whereby the consumer earns more cash back in the initial months. Check the duration for which the offer is valid and what the rate is after the initial period is over.
* Always be on the hunt for a cash back credit card that offers schemes allowing cash back for huge discounts with the selected merchants.
* Beware of any hidden costs in getting the annual cash back payments.
Compare the schemes offered by various cash back credit cards and always be on the lookout for those offering better cash back amounts. Modern consumers are excited about making money while spending.
* Make sure which purchases are eligible for cash back programs. Ask pertinent questions like - are all the purchases rewarded or not?
* Look for the cards that offer highest amount of percentage of cash back and carefully study how much are you really getting back into your pocket.
* Try to increase your cash back because some companies push their customers to visit certain retailers for getting a larger cash back amount.
* Enquire how frequently can you redeem the cash back? Some companies allow redemption of cash back as payments in return of their balance or for giving it for charity as soon as a certain amount is accumulated
* Try to find if your card charges a fee for cash back.

All in all, a cash back credit card is an advantage, if you have no outstanding balance to your credit. A disciplined cardholder is always preferred by companies. The best cash back credit cards are those that offer better cash backs with low and long-term annual percentage rates.