Cash back credit cards offer what appears to be free money to account holders. The premise of a cash back card is simple: spend money on a credit card, and you will receive a percentage of your expenditures in the form of cash back. This can range anywhere from 1% to 5%. The precise amount of cash back that you receive depends entirely on your spending patterns, and practices.
It is always advisable to maximize your savings by way of promotional offers available through your credit card company’s shopping portal. Not every cash back credit card is created equal. According to studies from Colloquy and Swift Exchange, the average US household generates $622 (on average) in rewards per annum, and $205 of that figure is unredeemed. That means just $417 is enjoyed by households.
Create Synergy Between Your Expenditures and Rewards
There are several ways to squander credit card rewards, and they should be avoided at all costs. It is important to pay attention to detail so that you can enjoy maximum rewards from your cash back credit card program. For example, if you select the wrong credit card, you’re automatically minimizing your rewards. A personal or business credit card program must dovetail with the needs of the person or the business.
For example, if you are the type of person who travels extensively, it is in your best interest to have a travel rewards credit card. Anything less than that will not maximize your spending and rewards program. Likewise, it is pointless to have a travel card and associated benefits if you never travel. You’re better off having a higher cash back credit card for grocery shopping, refilling your vehicle, and other everyday expenses. The goal is to create synergy between your spending patterns and the rewards associated with them.
Be Frugal: Pay off More Now to Spend Less Later
Being frugal doesn’t mean you don’t spend money; it means you spend money judiciously. People who maintain rolling balances on their credit cards invariably end up depleting the benefits of the cash back program. For example, if you spend $1,000 on your cash back credit card with 1% cash back and a 16% APR, but you only pay off $500 of the balance, it’s not as appealing as it seems. The 16% APR is $160 for the year, or $13.33 per month. The $10 cash back is less than the $13.33 in annual interest. If you don’t repay the amount in full, you carry the interest-related payments with you and keep rolling them over.
Many cash back credit cards require account holders to register for rotating categories. There is typically a fixed cash back percentage on general purchases, and much higher cash back offers on limited-time deals. These could relate to automobile repairs, home improvements, vacations etc. To benefit from these types of offers, credit cardholders are required to opt in. For example, it is possible to enjoy 5% cash back on purchases made at a gas station. By neglecting to sign up for these rewards, the efficacy of a cashback credit card is diluted.
Which Credit Cards Offer Valuable Cash Back?
The most beneficial cash back credit cards are those which have a higher fixed percentage cash back across all categories. Typically, credit card programs will offer limited cash back on general purchases, and higher cash back on specific categories. Capital One cards are known to raise the general cashback across the board with the Capital One Quicksilver card offering 1.5% cashback on all purchases.
The typical cash back percentage rate is 1% from leading credit card companies, however Capital One is known to offer much higher rewards across the board. Additionally, the APR rate is 0% for the first 9 months, and it rises anywhere between 13.49% and 23.49% thereafter. These are important considerations to bear in mind when selecting a credit card rewards program.