If you are trying to save as much money as you can by making the most out of every dollar, then cash back cards are an excellent option for you. Here’s the complete guide with all the relevant information you need to know.
Getting rewards while you spend money is amazing. Most credit cards offer a reward program to entice you into signing up. While some cards will offer points in exchange for every dollar you spend, cashback credit cards will offer the possibility of getting some money back.
However, there are two sides to every story: the upside and the downside. If you were wondering a cashback credit card is a good option for you, you need to know the pros and cons.
Some of the main pros discussed in that article are:
1- They are easy to understand. You can keep up with how much you’ve earned because you don’t have to convert points and miles into equivalent cash. This is already cash.
2- Your cashback is easy to redeem. There’s no trick, really. You just need to connect your bank account for a direct transfer, although gift cards and statement credits are also available options.
3- Variety of bonus categories. Depending on the cashback credit card, you could earn high-rate rewards on categories that rotate throughout the year. Some other cards offer an unlimited flat-rate cash back on any purchase.
And the cons you need to keep in mind are:
1- Not everyone qualifies. In order to be able to apply for a good cash back credit card, you need to have a good FICO score of at least 700 points.
2- Signup bonuses. Cashback cards usually offer a sign-up bonus, but in order to redeem it you need to meet a minimum spending requirement. This could tempt you into spending more money than you can afford, resulting in a balance you can’t pay in full and incurring in interests.
3- Tracking bonus categories. As the categories rotate throughout the year, you need to be disciplined if you want to make the most out of your cash back credit card. Keep track of the bonus programs so you use your cards accordingly.
‘I want a cashback card, what’s next?’
If after reading the pros and cons you consider this is the right option for you, the next step is to choose a cashback credit card issuer.
First of all, keep in mind that there are three different types of card:
-flat-rate cashback cards, which offer unlimited rewards on all purchases (usually 1-2%) with the flexibility to use them wherever and whenever you want.
-tiered cashback cards, which offer rewards in specific categories, usually with an earning limit, and a lower rate (around 1%) on other purchases
-bonus category cards, which offer a high rate reward (around 5-6%) on spending categories that change periodically and a lower rate (around 1%) on other purchases.
And, of course, there are a lot of options. Before you shop around to see who is offering what, here’s a list of the ones we consider best.
1- Capital One® Quicksilver® Cash Rewards Credit Card
This one offers a simple reward program with no annual fee and it allows you to cash in on everyday expenses. You can earn to 1.5% cashback on every single one of your purchases, no cap to the amount. Cashback amount is automatically applied to your statement every time it reaches a certain amount ($25, $50, $100 or $200). Keep in mind that in order to qualify for this card, you need to have an excellent credit score.
2- Discover it® Cash Back
This card allows you to earn up to 5% cashback each quarter at a variety of places such as grocery stores, restaurants, gas stations, etc. On top of that, you can earn a 1% cashback on all of your other purchases. If you want to apply and become a cardmember, you need to consider that Discover is not as widely accepted as a MasterCard or Visa. But a great feature is that during the first year, you get a dollar-for-dollar match.
3- Blue Cash Preferred® Card from American Express
This is a great option if you mainly use the card in the supermarket or at gas stations in the U.S. You can get up to 6% cash back at supermarkets or up to $6,000 per year in purchases, 3% cashback at gas stations and 1% cashback in all of your other purchases.
What about debit cards?
However, credit cards are not the only ones that can offer such a reward program. You can make the most out of this perk with debit cards, too!
But, how can you get the most out of your cashback?
“First, you need to search for a rewards program that matches your needs and spending. With debit cards like the one offered by Discover, you can earn 1% cash back on purchases up to $3,000.
To maximize the cashback you should make a plan and, in order to save the money without feeling tempted to use it, set an automatic deposit of your cashback to your savings account.
Once you get your debit card, you should base your purchases on your cashback plan. One of the best things you can do to get high cashback is to offer your friends or family to make group purchases, like dinners or vacation rentals. This way, you can make large purchases, getting the most out of your debit card cash back.
Lastly, one thing you need to keep in mind is that you should always make sure you have enough money in your account to cover your purchases. Otherwise, you will be spending more than you have and end up paying overdraft fees.”
Now you have all the information you need to become a cash-back expert and save money while you spend!