Glossary Terms

Annual Fee
A credit card issuer may charge you a fee each year for your account. <a href='/glossary/what-is-annual-fee' title='See the full definition of Annual Fee'>read more</a>
Annual Percentage Rate
The cost of credit, including the interest and fees, expressed as an interest rate. APR was created to make it easier for consumers to compare loans... <a href='/glossary/what-is-annual-percentage-rate' title='See the full definition of Annual Percentage Rate'>read more</a>
Credit Card
Any card used from time to time to borrow money or buy goods or services on credit. <a href='/glossary/what-is-credit-card' title='See the full definition of Credit Card'>read more</a>
Line of Credit
A line of credit is a revolving (re-usable) credit account that allows account-holders to borrow money and repay it any time during the term of the... <a href='/glossary/what-is-line-of-credit' title='See the full definition of Line of Credit'>read more</a>

Cash Back Cards Explained

Cash back credit cards are very popular these days, and there are a lot of cards to choose from. Although these cards allow you receive cash back on purchases you make, not all rewards are the same. In general, there are two types of cash back rewards cards – rotating cash rewards and flat rate cards. For example, one credit card may offer you five percent cash on grocery purchase for three months, then gas the following three months. This is a rotating rewards card. Another card may offer you a flat one percent cash back. This is, of course, a flat rate card.

How Do Cash Back Rewards Work?

Each company has its own policies, terms and conditions for cash back credit cards. In general, you will receive points for each dollar you spend, and you may then convert these points into cash. Usually, the cash back amount is between one and two percent, but some cards may offer more on purchase in specific categories.

Are there Restrictions or Limits to How Many Rewards I Can Earn?

Credit card companies may restrict how you use your rewards points. In addition, some may limit the number of cash points you may earn in a given time period. So, as you reach a certain limit, you will not qualify to gain more rewards points. Be sure to check if the card you're interested in has limits or restrictions to your rewards.

The Psychology Behind the Card

The goal of the credit card company is to encourage you to spend more on your cash back rewards credit card. Just make sure you don't overspend or are otherwise unable to pay off the full balance of your credit card each month. Otherwise, you'll end up paying a lot in interest.

Are Cash Back Cards Worth It?

Whether or not these cards are worth it really depends on you. One thing is certain, if you are sure you can pay off your credit card balance each month, then cash back is certainly going to be a reward for the money you're already spending.

If you are interested in applying for a cash back card or are looking to make a major purchase without paying interest, look for a cash back rewards card with a 0 percent APR introductory offer. This may allow you some time to pay off your credit card balance without paying a lot in interest.