The Rewards of Credit Cards: A Guide to Finding Cards that Pay You to Use Them
In the world of credit cards, there are numerous options available, each with its own set of benefits and features. While some cards focus on providing cashback rewards, others offer travel points, sign-up bonuses, or exclusive perks. However, with the rise of cashback credit cards, there are now options available that actually pay you to use them. In this article, we’ll delve into the world of cashback credit cards, exploring their benefits, features, and what to look for when choosing the right card for your needs.
What are Cashback Credit Cards?
Cashback credit cards are a type of rewards credit card that offers customers a percentage of their purchases back in the form of cash or credits. These cards are designed to reward customers for their spending, providing them with a financial incentive to use their card. Cashback credit cards can be divided into two main categories: fixed cashback cards and rotating cashback cards.
Fixed Cashback Cards
Fixed cashback cards offer a set percentage of cashback on all purchases, regardless of the category. These cards are ideal for customers who want a straightforward rewards program that doesn’t change with the seasons. Some examples of fixed cashback cards include:
- Citi Double Cash Card: This card offers 2% cashback on all purchases, with 1% cashback when you buy and 1% cashback when you pay your bill.
- Chase Freedom Unlimited: This card offers 3% cashback on all purchases in your first year up to $20,000 spent, and unlimited 1.5% cashback on all other purchases.
- Discover it Cash Back: This card offers 5% cashback on various categories such as gas stations, grocery stores, and restaurants, and 1% cashback on all other purchases.
Rotating Cashback Cards
Rotating cashback cards offer a percentage of cashback on specific categories, but the categories change throughout the year. These cards are ideal for customers who want to earn cashback on a variety of purchases, but don’t want to commit to a single category. Some examples of rotating cashback cards include:
- Discover it Cash Back: This card offers 5% cashback on various categories such as gas stations, grocery stores, and restaurants, and 1% cashback on all other purchases.
- Chase Freedom: This card offers 5% cashback on up to $1,500 in combined purchases in bonus categories each quarter, such as gas stations, grocery stores, and restaurants.
- Citi Dividend Card: This card offers 5% cashback on up to $500 in combined purchases in bonus categories each quarter, such as grocery stores, gas stations, and movie theaters.
Sign-up Bonuses
In addition to earning cashback on purchases, many cashback credit cards offer sign-up bonuses that reward customers for opening a new account. These bonuses can range from hundreds to thousands of dollars, and are usually awarded after meeting specific spending requirements within a certain timeframe. Some examples of cashback credit cards with sign-up bonuses include:
- Chase Sapphire Preferred: This card offers a $60 statement credit and 80,000 bonus points after spending $4,000 in the first 3 months.
- Capital One Quicksilver Cash Rewards: This card offers a one-time $150 statement credit after spending $500 in the first 3 months.
- Bank of America Cash Rewards: This card offers a $200 statement credit after spending $1,000 in the first 90 days.
Features to Look for in a Cashback Credit Card
When choosing a cashback credit card, there are several features to consider. Some of the most important things to look for include:
- Interest rate: Look for a card with a low or 0% introductory APR to minimize interest charges.
- Annual fee: Consider a card with no annual fee or a low annual fee to avoid unnecessary expenses.
- Foreign transaction fee: If you travel abroad, look for a card with no foreign transaction fee to save on international transactions.
- Introductory period: Consider a card with an introductory period or promotional APR to save on interest charges.
- Rewards program: Look for a card with a generous rewards program that aligns with your spending habits.
- Customer service: Consider a card with excellent customer service to help with any issues or concerns.
Benefits of Using a Cashback Credit Card
Using a cashback credit card can provide numerous benefits, including:
- Earning cashback on purchases: Cashback credit cards offer a percentage of your purchases back in the form of cash or credits.
- Building credit: Using a cashback credit card responsibly can help you build credit and improve your credit score.
- Rewards program: Cashback credit cards often have rewards programs that offer additional benefits and perks.
- Exclusive offers: Some cashback credit cards offer exclusive offers and discounts on purchases.
- Travel benefits: Some cashback credit cards offer travel benefits, such as airport lounge access and travel insurance.
Drawbacks of Using a Cashback Credit Card
While cashback credit cards can offer numerous benefits, there are also some drawbacks to consider, including:
- Interest charges: Cashback credit cards can accumulate interest charges if you don’t pay your balance in full each month.
- Interest rate: Cashback credit cards often have high interest rates, which can make it difficult to pay off your balance.
- Fees: Cashback credit cards may come with fees, including annual fees, foreign transaction fees, and late payment fees.
- Rotating categories: Some cashback credit cards have rotating categories, which can make it difficult to keep track of your rewards and spend accordingly.
- Spending limits: Some cashback credit cards have spending limits and restrictions, which can affect your ability to earn rewards.
How to Use a Cashback Credit Card Responsibly
Using a cashback credit card responsibly requires discipline and financial management. Here are some tips to help you use a cashback credit card wisely:
- Pay your balance in full each month: Avoid accumulating interest charges by paying your balance in full each month.
- Set a budget: Determine how much you can afford to spend on your cashback credit card each month.
- Monitor your spending: Keep track of your spending to ensure you’re earning rewards on the categories that align with your spending habits.
- Take advantage of promotions: Take advantage of promotional offers and sign-up bonuses to maximize your rewards.
- Read the fine print: Understand the terms and conditions of your cashback credit card, including the interest rate, fees, and rewards program.
Tips for Maximizing Your Cashback Rewards
To maximize your cashback rewards, consider the following tips:
- Choose a card with a high rewards rate: Select a card with a high rewards rate that aligns with your spending habits.
- Use your card for all purchases: Use your cashback credit card for all purchases, including Groceries, gas, and other daily expenses.
- Take advantage of rotating categories: Take advantage of rotating categories to earn rewards on a variety of purchases.
- Use a card with a long intro period: Consider a card with a long intro period to save on interest charges.
- Monitor your rewards: Keep track of your rewards to ensure you’re earning them on the categories that align with your spending habits.
Alternatives to Cashback Credit Cards
If you’re not interested in a cashback credit card or prefer to use alternative financing options, consider the following alternatives:
- Cashback apps: Cashback apps like Ibotta and Fetch Rewards offer cashback on gas, groceries, and other purchases.
- Rewards credit cards: Rewards credit cards like Chase Sapphire Preferred and Capital One Quicksilver offer travel points, sign-up bonuses, and exclusive perks.
- Debit cards: Debit cards offer a no-fee option for making purchases, with no risk of accumulating interest charges.
- Budgeting tools: Budgeting tools like Mint and Personal Capital can help you manage your spending and create a budget.
Conclusion
Cashback credit cards offer a range of benefits, including earning cashback on purchases, building credit, and accessing exclusive rewards programs. However, before signing up for a cashback credit card, it’s essential to consider the features, drawbacks, and fees associated with the card. By understanding the terms and conditions, setting a budget, and monitoring your spending, you can maximize your cashback rewards and use your cashback credit card responsibly.
