What Are the Benefits of Cash Back Credit Cards?
Cash back credit cards, as their name imply, can be a good way for customers to earn money back from the purchases that they make using their cards.
The way it works is that if customers use their card to make a purchase, then over an amount of time the customer is able to accumulate rebates which translate into money for them.
So how does this really work and are there any restrictions? Usually, cash back credit cards have very low percentages when it comes to rebates.
They tend to hover around 1%, which is pretty much the industry standard.
Still, that 1% can add up over time.
So how are credit card companies able to give you back any money at all with cash back credit cards? Usually, the merchants that you shop with are charged a fee if you use your card to make a purchase with them.
Basically, when you earn 1% back from your purchase, the credit card company is handing that fee over to you.
Of course, this can still add up for credit card companies.
They find other ways of compensating for this by adding high annual fees to their cash back cards, as well as high APRs in some cases.
Some annual fees are as little as $25 per year, while some can be as much as $100 per year.
Although some cash back cards will give you a higher percentage on your rebates if you use your card at specific merchants, you can still generally only get rebates on purchases and not on balance transfers or cash advances.
Typically, cash back credit cards are better for those people that are able to pay their balance off every month.
Why? Because the APRs on these types of cards are usually pretty high and you don't want to continue paying interest on purchases that you have already made.
If you do this, then earning a rebate back is a moot point since the percentage that you're paying for the purchase is probably more than any amount of rebate that you would earn in return.
For example, the popular Capital One No Hassle Cash Reward Card has an APR of 14.
9%.
Of course, it doesn't have an annual fee, which might help offset this high APR, but you should still be careful of carrying a balance with it.
If your limit is $1,000 then you will be paying nearly $150 in interest over the course of the year if you don't pay off your balance.
However, if you pay your balance off every month then these cards can definitely be worth your while.
Over time, you could possibly earn back a significant amount of money.
The Discover More card, for instance, will let you earn 5% back on travel and groceries and that can definitely add up in rebates if you use your card a lot and make sure that you pay off your balance on time.
The way it works is that if customers use their card to make a purchase, then over an amount of time the customer is able to accumulate rebates which translate into money for them.
So how does this really work and are there any restrictions? Usually, cash back credit cards have very low percentages when it comes to rebates.
They tend to hover around 1%, which is pretty much the industry standard.
Still, that 1% can add up over time.
So how are credit card companies able to give you back any money at all with cash back credit cards? Usually, the merchants that you shop with are charged a fee if you use your card to make a purchase with them.
Basically, when you earn 1% back from your purchase, the credit card company is handing that fee over to you.
Of course, this can still add up for credit card companies.
They find other ways of compensating for this by adding high annual fees to their cash back cards, as well as high APRs in some cases.
Some annual fees are as little as $25 per year, while some can be as much as $100 per year.
Although some cash back cards will give you a higher percentage on your rebates if you use your card at specific merchants, you can still generally only get rebates on purchases and not on balance transfers or cash advances.
Typically, cash back credit cards are better for those people that are able to pay their balance off every month.
Why? Because the APRs on these types of cards are usually pretty high and you don't want to continue paying interest on purchases that you have already made.
If you do this, then earning a rebate back is a moot point since the percentage that you're paying for the purchase is probably more than any amount of rebate that you would earn in return.
For example, the popular Capital One No Hassle Cash Reward Card has an APR of 14.
9%.
Of course, it doesn't have an annual fee, which might help offset this high APR, but you should still be careful of carrying a balance with it.
If your limit is $1,000 then you will be paying nearly $150 in interest over the course of the year if you don't pay off your balance.
However, if you pay your balance off every month then these cards can definitely be worth your while.
Over time, you could possibly earn back a significant amount of money.
The Discover More card, for instance, will let you earn 5% back on travel and groceries and that can definitely add up in rebates if you use your card a lot and make sure that you pay off your balance on time.