How to Choose a Cash-back Credit Card
Choosing your cash-back credit card takes a little more study and investigation than you might think, because the features vary from one to another. In fact, some of them that offer big rewards might not pay off at all – ever.
The first thing to watch for is an annual fee. If you have to pay to carry the card you might have to spend quite a bit just to break even. So unless that annual fee offers some other benefit, such as an extremely low interest rate, you probably want to keep looking.
Next is the kind of cash-back. Is it actual cash, or is it points? If it’s points, how many do you have to accumulate before you can turn them into cash?
Some cards offer cash-back but with a combination of expiration dates and payment thresholds that mean you have to spend a lot in order to ever see the cash back. If the threshold is say, $100 and you’re earning 2%, you’d have to spend $5,000 before you get your rebate. And if your rewards expire at the end of each twelve month period, you could have spent $4,900 without seeing a dime returned to you.
You want rewards that roll over from one year to the next, or that automatically pay out at the end of the period, no matter if you’ve only “earned” $20.
Check to see how you go about getting your cash back – will they automatically send a check or credit your account? Will you have a choice of how to receive it? Or will you need to fill out rebate forms in order to get your money?
If you use your card for business and thus charge and pay off large amounts each month, it makes sense to use a card that rewards you. But be careful, some credit card issuers put a cap on how much you can earn. Some cap your earnings at $300 per year.
Look for restrictions. If the card rewards grocery, gasoline, or restaurant purchases, don’t assume that just because you bought groceries, gas, or a meal that the purchase will qualify. Many of the credit card issuers have significant and surprising limitations with regard to which stores, gasoline outlets, or restaurants qualify.
The bottom line is that if you want to get a card that fits your lifestyle, and will truly give the promised cash back, you have to read all the fine print. It isn’t easy – those agreements are filled with legaleze and the print is minute, but reading it all is the only way to know if you really are going to get what you expect.
