What Is A Cash Back Credit Card?
A credit card which rewards you in cash when you use it to make purchases is called a cash back credit card. It is called cash back credit cards as it pays you rebate in cash rather than in miles or some benefit other than cash. In other words any credit card which will give you monetary benefit when you pay for your purchases with it is called a cash back credit card. In that way it works like shopping at a cash back site.
How Cash Back Credit Cards Work
Cash back credit cards work on the principle of rewarding cardholders to use them for paying for their purchases. In that way they are like cash back sites which give you incentive to make purchases through them. However the difference is that with credit cards is that you don’t have to pay cash when you buy something through them.
So cash back credit cards have the benefit of getting rewarded for getting what you want on credit without the need of immediate cash though you have to clear the outstanding balance at the end of the billing period.
How Much Cash Back You Can Earn With A cash Back Credit Card
The percentage of reward may vary from one cash back credit card to another but 1% to 2% is the typical cash back that you can expect from most cards. The rate may vary between types of purchased items. For example there may be a different rate between garments and groceries.
The percentage can go up to 5% even with some cards but such high rate of rebate is usually for first 6 months of your getting the card and that too on some specific cards such as gas. The high percentage is usually offered by credit card companies as an incentive for new users to apply for their credit card facility.
How You Get Cash Back With Credit Cards
Depending upon the card you are using you may get the cash back amount added to your statement every month or at the end of the year. This may be added to your credit or you may have to ask for the check to be sent to you.
Another variation that you may encounter is that you may have to use the earned cash back on specific products or shopping outlets though some cards may not have that limitation on what you do with the earned rebate.
Annual Cost of Cash Back Credit Cards
Another factor to be considered is the annual cost that you have to pay to use a cc which can be very high in some cases though there are some cards which have 0% annual fees. So it is always advantageous to shop around for credit cards and consider what charges and fees you will have to pay before applying for a credit card. So compare various credit cards before making a decision. Here don’t miss to read the fine print on the terms and conditions that apply to various cards.
Finally, cash back credit cards can be beneficial to you only if you pay your dues every billing period. If you carry forward your due balance to the next billing period you are liable to suffer very high and expensive interest rate which can offset more than what you saved by your purchases with a cash back credit card.