Cash-back credit cards were created to allow consumers to earn cash in return for using their credit cards. In this article, we will discuss the ins and outs of how they work, as well as why you might want one. The first thing that needs to be understood is what a rewards program is and how it differs from a cash-back credit card. Next, we’ll go over some of the pros and cons of these types of cards so you can decide if it’s right for you!
What is a cash-back credit card, and why should I get one?
A cash-back credit card is much like a regular credit card, except that you earn bonus cash each time you use it. You can typically make between one percent and five percent of your purchase price in the form of money when using this type of rewards program.
There are also cards available where you can get up to six percent or more for certain purchases! This means if you spend $500 on grocery stores, gas, clothes, and other purchases, then you will receive anywhere from $50-$60 at the end of the month depending on which card(s) you have – not wrong at all!! There are hundreds of different types out there to choose from right now, so sign up for the card with the highest cash-back amount that you think you will use regularly.
But before doing anything, I need to tell you some of the cons associated with these cards, so there are no surprises later. This type of credit card is not suitable for everyone because it doesn’t have significant benefits compared to other rewards programs – but if you have no excellent credit score, then they might be exactly what you’re looking for.
On top of all their fees, none offer 0 percent intro rates either, which means unless your interest rate is already at zero percent (which most aren’t), then this type won’t help lower your rate.
Now that you know what a cash-back credit card is and why it might be right for you, we’ll go over some of the fees associated with them so there are no surprises later on down the road. This type of credit card has high fees when compared to other rewards programs – but if your credit isn’t excellent or if you can only qualify for a low limit initially, then they might be exactly what you’re looking for.
How does it work?
Cash-back credit cards can be very beneficial for a credit card issuer, and this is why they are also becoming more popular in the market. As a result, there has been a significant increase in their usage over the past few years. For example, according to data from CardHub, the percentage of consumers using them increased by nearly 700% between 2005 and 2015. During that time, there was a 400% growth rate in terms of spending on these types of loans overall too!
While it remains true that revolving debt is at its highest level ever right now (adding up to roughly $11 trillion), most economists believe that this will not stop people from taking out cash-back credit cards. This is because they are very advantageous too!
A cash-back credit card allows the borrower to get a percentage of their total spending (usually ranging between 0.25% and six percent) in return, which can be redeemed as rebate rewards on your bank account balance.
It’s important to remember that you don’t need to spend more money either. For example, you only spent $200, then receiving an extra $0.50 or so won’t make much difference at all, nor will it affect your cost/benefit analysis calculations either way when deciding whether these types of loans are suitable for you or not! But do keep in mind though, that there might be fees associated with using this kind of credit card.
So why would you want one of these?
Because they can offer great value to the borrowers and give them more ways to save money on their loans. For example, suppose you could redeem your cash-back rewards as a rebate for online purchases or even use it towards paying off future ones (which is also known as “rolling” the balance). In that case, this could be very beneficial indeed!
Banks offer cash-back credit cards, credit card issuers, finance companies, and retailers alike. However, there has been some controversy surrounding their usage recently because many institutions have tried to promote them through ineffective marketing practices like: misleading consumers into believing that saving with these types of loans is superior to other styles such as no-fee cash back credit cards or store-brand products.
What are the types of cash-back credit cards?
Store cash-back credit cards
They are offered in conjunction with a specific retailer such as Amazon or Walmart; all you need to do is spend money at their stores and earn rebates when purchasing items from them.
It’s important to point out that the value of your rebate rewards will be based on how much you purchase (and not necessarily what category it falls under). So if you wanted to redeem your rewards towards getting something expensive like an electronic device, this could work well! But keep in mind, though, that these types of loans also have higher interest rates compared to other types of revolving debt too, so they should only really be used if you can pay your balance in full.
Bank Branded Cards
The second type of cash-back credit card is the bank brand ones; these are offered by central banks such as Wells Fargo and Chase, and they usually offer better rates than store varieties (although this also depends on your credit score).
Tiered system
The final type of cash-back card is called a tiered system, and it requires you to spend at least $500 within three months to qualify. Once this threshold has been reached, your rewards will begin accumulating after every purchase until they reach a specific limit (which depends on how much money you spent during that period).
For example, if you earned 500 points out of 1000, there’s only another 500 left to get halfway through the cycle. However, once these have also been redeemed, there won’t be any more opportunities for you to earn bonus rewards either unless the program changes or an annual fee takes place because some companies directly deplete the value of your points when this happens.
These are called “tiered” because they have different benefits that you can enjoy depending on how much money you spent during that particular period. Usually, it will be based on specific categories you spend too (e.g., travel rewards might give more points than groceries, for example).
Some people prefer this type of cash-back credit card because they can choose how their rewards will be used. For instance, if you like to travel, then it might make sense for you to use them towards that instead!
Statement Credit Cards
Statement credit cards are great because they offer cash-back. Cash is an excellent incentive for borrowers to make purchases with the cards. In addition, if you have a debit card from your bank already, then adding a credit card to this account could be advantageous.
Examples of what you can spend your rewards on
While most cash-back credit cards offer rewards in the forms of points or percentages, some also allow you to redeem them for other types of benefits. For example, let’s say that after an online shopping purchase with your revolving debt if there was a promotion available at the time, then chances are you might have been prompted to use it, which means that you can get a reward there as well!
Make sure to read all the fine print first because sometimes you might only be able to redeem them online with specific retailers, or it could require certain spending thresholds before they can be redeemed at all.
Another popular option with cash-back credit cards is that some of them let you donate your rewards instead; by doing this, you will help out society and earn yourself an income tax break too if, for example, $100 were donated and given to charity. Anyone who contributed towards those funds would save themselves around $40 in taxes. However, given that there are concerns about abuses, some credit card companies have made it harder to redeem this way, so you need to check with your issuer first before committing.
– One final thing worth mentioning is that sometimes cash back cards don’t always give their rewards automatically; for example, American Express will require you to purchase something within a specific timeframe. Otherwise, they can be lost entirely! This might seem like an inconvenience, but if no action was taken six months or more passed by, then this means that the cardholder is probably not very active with revolving debt. After all, who wants to use a credit card if they’re never going to earn any rewards by doing so?
Sometimes these loans don’t give you any cash rewards at all either, so make sure to read the terms carefully before applying for one!
Pros and cons for using a cash-back credit card vs. other types of cards like travel or airline miles
The main advantage of using cash-back cards is that it’s an easy way for lazy or forgetful about revolving debt (or don’t want to spend money by any means) to still earn generous rewards without having to do much of anything at all! Just make sure you’re not spending more than you usually would, and you should be fine.
The main disadvantage is that sometimes revolving debt can take a while to get approved for; even if the process only takes place over the phone, this might mean waiting around on hold, which also eats up your valuable time! However, it’s important to remember that some people would prefer not having rewards at all than paying an annual fee when they never actually used their credit card anyway.
Another advantage of using cash-back credit cards is that there are no strings attached to them because, unlike travel or airline mile cards, where to redeem these benefits then you have to follow specific rules; otherwise, they’ll expire eventually. However, all you need do is complete one purchase within three months after up for revolving debt (which is usually automatic), and you’ll be able to redeem cash or your rewards!
In conclusion
Cash-back credit cards can be a great way to earn rewards and cash-back on everyday purchases. However, the best way to decide which one is right for you is by comparing them online. It’s easy and free, so take the time now to get started!
