Cash Back Credit Cards
Many credit card companies are now offering what are called cash back credit cards. They reward you with a cash amount that equals a percentage of the amount that you pay for purchases using your credit card. The exact percentage amount varies from company to company but it is usually between .05% and 5%. While there are many advantages to using a cash back credit card, there are also some big disadvantages.
The obvious advantage of a cash back credit card is that you do receive money in return for using it for purchases. Even so, there may be certain requirements that you need to meet before you receive that money. You may be required to spend a minimum amount before you start receiving the cash back reward and depending on the company, if you don't reach that minimum amount within a specified period of time, you will not be eligible for it at all. It is also important to note that some credit card companies place a cap on the amount of cash back that you can earn.
With that being said, you have probably realized that cash back credit cards are not necessarily for everyone. If you are the type of person that only uses their credit card when absolutely necessary, then this card is probably not right for you. It is more geared towards those that charge most or all of their purchases, including groceries, gas, clothing, prescriptions, etc. By doing this they are able to reach the minimum amount needed to get the cash back on a regular basis. It is important to note that if you are going to use a cash back credit card on an every day basis, you need to make sure that the card you choose is one that will reward you for purchases made at the stores you frequent the most.
In order to make cash back credit cards work for you, it is vital that you pay off the balance every month and do not make any late payments. These cards are known for having higher than normal interest rates. Therefore, not paying off the balance or making a late payment could negate the whole reason for having this type of card in the first place. You would be using the money that you earn on your purchases to pay the interest that would accrue on your account. In the end, it would probably cost you more than what you would get back.
You should also be aware that in most cases, you will not earn cash back from your credit card if you take a cash advance from it. You could very well end up paying extra interest and fees for taking a cash advance. It is also not advisable to transfer balances from other cards to your cash back card. The interest rate on the balance that you are looking to transfer is probably much less than it would be if you transferred it. If you were to transfer the balance you would be paying more because of the higher interest rates and you probably would lose out on the cash back reward.
Before applying for a cash back credit card, make sure you know what you are getting yourself into. Read the small print on the credit agreement. Paying off the entire balance on time every month is very important when you have this type of card. Examine your finances and spending patterns closely before deciding whether or not a cash back credit card is right for you.