Learn about how to do cash credit cards work in this article as you keep on reading.
A cash-back credit card is a type of rewards card that you can make use of to earn cash in purchases. Moreover, the cash-back card can be a little easier to use than travel rewards cards because the value of your rewards is clear.
However, cash-back cards can still differ in important ways depending on the rewards program and specific card.
Here’s what you need to know about how cash-back cards work.
READ MORE: How does cash back work?
What Is a Cash Back Credit Card?
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Most reward cards fall into one of two categories: travel reward cards and cash-back rewards cards. With the cashback card, it is easy to understand how much you will earn on each purchase.
For instance, if your cash card gives 2% cash back on purchases, you will get $2 in rewards for every $100 you spend.
In contrast, the value of travel program points and miles can vary greatly depending on the loyalty program and the current cost of travel.
How To Earn Cash Back Rewards With Your Credit Card
Cash-back rewards cards can be further distinguished by the card’s rewards system.
Flat-Rate Cards
With the flat rate cash back card you will earn the same amount of cash back on every purchase, always 1.5% or 2%.
Generally, the card with a high reward rate will give you the most value.
However, you need to be assured whether the card has an annual fee or other fees that will offset the rewards you earn.
Flat raw cards can be a good fit for people who don’t want to spend a lot of time managing a credit card rewards program. Also, it is easy to compare flat-rate cards to each other and you will know exactly how much you are meaning by every purchase.
Bonus Categories or Tiered Rewards Cards
Some can’t back cards give diverse tiers of rewards which depend on where the card is. These cards are sometimes distinguished by their bonus categories.
For instance, there are dining cards that give bonus cash back on takeout and at restaurants and gas cards with bonus cash back at gas stations.
Also, diverse cash-back cars have different tiers like 2% cash back on dining and 3% on gas. There can also be a limit to the amount of bonus cash back you can earn quarter of a year.
Generally, you can earn an unlimited 1% cash back on all non-bonus category purchases.
A tiered rewards card can be best when you tend to spend most of your money at particular types of retailers.
They are also helpful if you have several rewards cards and can remember to pick the card that gives the most rewards on each purchase.
Rotating Rewards Cards
The rotating cash back rewards card is the type of tiered rewards card that has changing bonus categories.
Generally, the categories change every three months.
These cards can be appealing because the limited-time bonus categories can offer 5% cash back at a high rate.
However, you are always limited to earning bonus rewards that are up to a certain amount, usually $1,500 or $2,000 in purchases each quarter.
How To Redeem Your Cash Back Rewards
You can be able to redeem your cash back rewards in some ways including:
- A check
- A statement credit
- Direct deposit into your bank account
- Gift cards.
Also, some cards give other options as well, like letting you use your cash-back rewards to book travel, donate to charity or make purchases online.
Some cash-back cards give you points in the issuer rewards program which can open up additional options as well.
Cash-back cards can have minimum balance requirements for redeeming your cash rewards.
READ MORE: How To Build Credit Without A Credit Card
What Credit Score Do You Need For A Cash Back Credit Card?
Many cash-back cards require at least fair to good credit and some of the best options require a very good or excellent score.
These cards can give large intro bonuses, high cash back reward rates and additional cardholder perks.
There are options for people with poor credit which include secured cards that give cash back rewards. But it can have higher fees, lower reward rates and fewer cardholder benefits.
How To Maximize Cash Back Rewards
You can take some steps to maximize the cash back rewards you will earn.
- Select the right card. Review your average spending and consider how much time you want to spend to manage your card then get a cash-back card to match. Always reevaluate your choice if your creditworthiness improves and you can qualify for more cards.
- Remember your card’s bonus categories. Maybe you have a tiered or rotating rewards card, to keep track of which card you want to use for each purchase.
- Sign up for extra earning opportunities. You can be eligible for limited-time offers to earn bonus cash back.
- To review the terms. Make sure you read over the credit card agreement to find out what doesn’t count as an eligible purchase. For example, you might not earn cash back if you use your credit card to buy gift cards or lottery tickets.
READ MORE: How Do Cash-Back Credit Cards Work?
Conclusion
Cash-back credit cards give a straightforward and rewarding way to earn money on your purchases. When you understand how these cards work, you can identify the right cash-back credit card for your needs and take advantage of the benefits it gives. Remember to always use credit responsibly and pay attention to the terms and conditions set by the card issuer.
