Cash back credit card is one of the popular types of credit card. Hearing the name itself many people find this type of credit card attractive. This article provides you with valuable information in relation to the following:
- What is the principle behind cash back credit card?
- What are the major features of cash back credit cards?
- What are the pros and cons of cash back credit cards?
Cash back credit cards sound pretty attractive to almost all credit card users. After all, what credit card customer doesn’t like the idea of getting money back from their credit card company? Before you rush out to get a cash back card, though, you will want to step back and consider all the features, disadvantages, and advantages of these types of credit cards. It is only by doing so that you will know whether these cards are right for you.
What Is Cash Back Credit Card
Cash back credit cards look and work just like any other credit card. They allow you to shop at stores, over the telephone, and in person. They allow you to charge purchases from participating merchants and they charge you interest for any balance not paid off at the end of the month. However, credit cards offer cash back or money back perks to encourage customers. Credit card companies and other institutions realize that these cards attract customers because customers love cash prizes and rewards.
There are basically two types of credit cards with cash back advantages: credit system cards and cards that offer cash back coupons in the mail. The first type of card adds credit or points to your card each time you make a purchase with your card. When you have enough credits or points, you can apply for cash rewards or for other bonus rewards. The second type of card regularly sends card users coupons or gift certificates that can be used as cash at specific retailers. This type of card is especially popular with large stores. Many store credit cards offer a cash-back feature that is only valid in-store, which encourages shoppers to make more purchases in the store.
Some Cash Back Credit Card Features To Look For
If you decide that credit cards with cash back advantages are for you, do consider the features you will want to look for in your card:
- Credit limit
Many stores and companies will encourage you to get the largest spending limit possible, arguing that the more money you spend, the more rewards you will enjoy. While it is true that you will get more rewards with more spending, you should never get a card limit that you cannot repay comfortably each month. There is no point in going into debt just for the promise of a few dollars. - Flexible rewards system
Look for cards that give you some flexibility when it is time to redeem your rewards. If you can choose from a range of products or can choose cash, you will have a more rewarding system than one that only sends you coupons. - Interest rates
As with all cards, cash back reward credit cards allow you to carry a balance and charge you interest on your balance. Choose a card with the lowest rate possible, so that you will not end up paying too much if you do have to carry a balance. - Type of rewards system
Read the fine print of any credit card offer and try to determine exactly how the reward system works. Will you get coupons, credit on your credit card bills, or actual checks? Make sure that the rewards system being offered meets your expectations, or you will end up disappointed. - Credit amount
If you decide to try a card that credits you for every purchase made, determine how much credit you need to gather before you get your reward. If you need many points and you only use your credit card occasionally, you may never get to enjoy any rewards. - Expiry dates
Some credit cards offer you only a limited time to redeem your rewards or points. If you spend little via credit cards, these types of cards may not give you time to get your cash rewards. - Special card features
There are cash back business credit cards and student cards with cash rewards. If you qualify for a specific type of credit card, chances are good that you can get that card with cash back reward options - Fees
To pay for the rewards, some cards charge hefty annual fees or fees when you try to redeem your rewards. Always try to find no-fee cards or cards with very low fees. - Limited time offers
Some cards make it easy to rack points up – for a limited time. After that, getting credit or rewards may be a very slow process indeed. Always read the fine print to find out what sort of credit system the card uses after the introductory offer is over.
Disadvantages Of Cash Back Credit Cards
While bonuses and cash rewards are a very nice feature, cash back reward features on credit cards are not always a great thing. According to credit card customers and some financial experts, these cards do have some marked drawbacks:
- Spending habits
Cash back credit cards encourage you to spend, spend, spend in order to rack up credit or points for rewards. This can be a less than great thing, especially if you end up buying items you do not need. - Slow credit accumulation
Some cash back reward cards allow you to build up cash back rewards very slowly, meaning that you have to spend a lot of money on the card in order to get your reward. If you have a card that charges extra fees as well, you may find that the few rewards are not really worth your money. - Less than valuable rewards
If you have a card that only offers you coupons to a specific store, you may not be getting a great deal, especially if the coupons are for items you do not want. Some cards have very short periods in which you can redeem your credit. After that, your credit is no longer valid and you need to start accumulating points again. - Complicated reward systems
If getting points or redeeming your cash rewards is too complicated, you may not end up seeing any of your bonuses. - Ineligible purchases
Some cards specifically declare some charged goods to be ineligible for the reward program. These exemptions can apply to everything from online purchases to tobacco and alcohol products. If your card excludes lots of products and purchases from the reward program, you may have to wait a long time to see any cash back.
Some Advantages Of Cash Back Credit Cards
One of the reasons that many businesses and many individual credit card customers opt for cash-back reward programs is that these cards offer some benefits. Among the benefits of cash back credit cards are:
- Rewards
Getting a reward from your credit card company is simply satisfying. It is even more convenient when that reward is money. - Good money value
If you choose wisely, you can get a card that offers good cash back rewards and so helps you save money on each purchase. - No extra effort to save money
Many people love cash back cards because they are so simple to use. You can literally accumulate money without having to do anything besides use your credit card. - All the convenience and benefit of a credit card
You can get any type of credit card you wish with a budget-friendly cash back feature. Now that you have a better understanding of what cash back cards can and cannot do for you, you likely are able to better judge whether this type of credit card is for you.
