Cash Back Credit Cards: A Few Things To Consider

Posted by Nick Niesen on October 29th, 2010

Cash back credit cards have become extremely popular over the past several years as consumers are able to receive a percentage back of each purchase in the form of a cash rebate or incentive. Cardholders can get cash back on every purchase they make from everyday purchases at the grocery store to recurring monthly bills such as their cellular phone bills. If you are considering getting a cash back reward credit card, then here are a few things to consider before you apply. Knowing what to look for and having some knowledge about what type of offers are out there will help ensure that you get the credit card that is right for you.

The first thing to consider is where you make the majority of or a significant portion of your charges at. Does that store or vendor only take credit cards from Visa and MasterCard or do they accept other issuers like American Express and Discover? Most grocery stores and gas stations accept all or most issuers, but if you do a lot of shopping at wholesale clubs like Costco, Sam?s Club or BJ?s; you should consider which of the exclusive credit card issuers they do accept. We do most of our wholesale club shopping at our local Costco, so we opted for an American Express credit card. Determining which stores or vendors you frequently charge at can help maximize the cash back you receive on the purchases you make.

Many cash back credit cards have either a limit or cap on the amount of cash back you receive on purchases you make. Credit cards that have a rebate of 3% or more typically have a limit on the amount you can earn. If you do not put charges on your credit card very often, this may be the best way for you to maximize your rewards. If you are anything like me and charge everything you possibly can every month (don?t worry we pay it off), then you will want to get a card that has no limit or cap on the cash back you can receive. When searching for an offer, also determine if the amount of cash back you can receive is tiered. Some credit cards require that you charge a minimum amount every year to get your 1% or more cash rebate. When comparing credit card offers, check the terms and conditions for each individual credit card to determine if your card has a limit or cap and a tiered cash back program.

Our last point of consideration is the specifics of each credit card. By specifics I mean the introductory interest rate, the normal interest rate (APR) and the annual fee. If you will be transferring a balance to your new card, the introductory rate and length of that rate is a primary concern. Most issuers will let you transfer a balance at 0% for three to twelve months, but without that balance applying towards your cash rebate or incentive. Also, if you do make charges after transferring a balance, your monthly payments will be applied to the balance you transferred, not towards the purchases you have made. You will be charged interest on these new charges until you payoff the transferred balance. The interest rate on our American Express credit card is almost 20%, but since we pay if off every month, we would not care if the APR was 30%! If you do carry a balance each month, then find a credit card offer that has the best interest rate possible for your credit rating. Credit card issuers make money every time you make a charge with your credit card, so why should they charge you an annual fee? Luckily, most issuers of cash back credit cards do not charge cardholders an annual fee, but if you find one that does ? find a different card.