Cash Back Rewards

February 22, 2010

These days not many people are applying for credit cards. But if you are fortunate enough to be able to qualify, the type of credit card you choose is important. We don’t mean MasterCard or Visa, but the type of rewards program that the credit card company offers.

When applying for a credit card, many people ask, “What can you do for me?” Creditors want your business so they will entice you to come to them, with offers and lower interest rates to appeal to your financial side. One perk that is attracting customers is the cash back rewards program.

Here is some advice. Most all of the credit cards operate in a similar fashion. Whenever you use the credit card, it pays you a percentage of your total purchase price. There are guidelines for qualifying purchases, but usually it includes gas, groceries, drug store items and retail purchases. That just about covers anything you might want to buy.

Depending on the type of purchase, the percentage you receive back goes up or down. Let’s look at the American Express Blue Cash card for an example. Cardholders can earn up to 5 percent back on purchases at gas stations, grocery stores and drug stores. At all other venues, the compensation is 1.5 percent. In addition, there is no annual percentage rate for the first twelve months.

Other cards like the Capital One No Hassle Cash Rewards card (“What’s in your wallet?”) offers 2 percent back on gas and groceries and 1 percent on all other purchases. Plus, they have no annual percentage rate for the first year either.

Each card has its own appeal. American Express has another card that is good for cash back rewards at restaurants and on travel. Someone who likes to take trips can accumulate a big cash back bonus that they can use for other things. Depending on what you are looking for, there is usually a card for you.

But, read the fine print before you sign on the dotted line. Some cards are designed for those who spend large amounts of money because the cash back rewards kick in only after a certain dollar amount is reached. For others, the cash back percentage may drop after an introductory period. Some offer cash only when purchases are made at the stores of their choice. If you can live with the terms and conditions, then you can stand to earn a tidy sum.

Cash back rewards cards encourage you to use your credit card for all purchases. You are paying with a card of some kind anyway and you can still keep up with your finances by viewing your credit card statement. As a bonus, you will also see how much money you are making back on each purchase.

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