With the end of the year on its way, now is the perfect time to analyze your credit card rewards and cash back strategy. In case you didn't know, a number of popular rewards cards offer cash back on each purchase you make, usually in the form of a percentage of each sale. With some careful planning and the right rewards card, you could earn extra money for the holidays, start building up rewards to use on Spring break, or build a stash of cash that can help out when money is tight.
Sounds great, doesn't it? While these offers are both lucrative and exciting, earning cash back doesn't come without risk. In other words, it's important to realize the downside of pursuing cash back from credit cards, too. Let's get started.
How to Earn Cash Back With a Rewards Credit Card
The vast majority of the time, earning cash back is as simple as using your cash back card to make a purchase. Depending on the card, you can plan on earning anywhere from 1-5% cash back on everyday purchases and alternating "bonus categories." The amount of cash back you can earn will vary drastically depending on the offer you choose, so it's important to read all the fine print and terms of your rewards program.
Some cash back cards also offer shopping portals where you can earn more cash back just by clicking through to a participating retailer before making a purchase. Coupled with the ongoing cash back you earn, these special shopping portals can be especially lucrative if you can remember to use them.
Cash Back Offers to Consider
Deciding to pursue cash back is easy, but figuring out which cash back card to get can pose a challenge. However,it almost always makes sense to choose a cash back credit card with no annual fee. That way, you won't be on the hook for additional charges just for keeping the card in your wallet year after year.
Popular cards that fall into this category include the Chase Freedom® card, the Citi® Double CashCard, and the BankAmericard Cash Rewards™ Credit Card. Meanwhile, the Discover it® and Discover it® for Student credit cards also fit the bill. With any of these options, you can earn 1-5% cash back on your everyday spending without worrying about paying an annual fee for the privilege.
What to Watch Out For
Earning cash back with credit cards is easy, but it isn't always so easy to avoid paying into the pot. Remember, if you don't pay your credit card balance in full after each statement closes, you'll have to pay credit card interest on any part of your balance that carries over. And if the interest you pay ends up being more than the cash back you earned that statement (as it almost always will), you're not earning any rewards at all. In fact, pursuing rewards may be costing you money. No matter what, that's never a good deal.
Further, it's important to read all of your card's fine print and terms and conditions. Even though most straight cash back cards don't charge an annual fee, you should know your card's details (including all fees and potential charges) inside and out before you sign up. With some cards, paying your bill late or spending more than your credit limit will trigger late fees or over-the-limit fees.
If your main goal is cash back, you'll also want to understand the intricacies of your rewards program. For example, some cards come with minimum redemption levels for cash back (i.e. $25.00 minimum), and only let you redeem your points for statement credits. Others, however, let you redeem points in smaller increments and redeem them for a check in the mail, gift cards or other perks. Either way, it's important to know the ins and outs ahead of time.
Rewards credit cards offer an easy way to earn cash back on purchases you planned to make anyway. However, it's crucial to avoid a situation where you're paying in more than you get back in return. If you want to make the most out of cash back cards, commit to using them sparingly and only for amounts you can pay back right away. Then, and only then, will you be in a position to benefit.
Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author's alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.