Cash back offers can be lucrative and potentially save you a good amount of money on your daily purchases. You must utilize the cash back credit card smartly for the rewards to be worth it, but if you do, the savings can add up quickly.
If you carry a balance on the card every month, any savings you earned on the cash back rewards will quickly be negated by the interest you will be charged on your monthly balance.
Cash back is simply a small percentage of every purchase that you get back in the form of a statement credit or a deposit to a bank account of your choice. The cash back reward comes from the credit card company themselves and not the store you are making the purchase. Some cash back offers let you earn a higher percent on certain purchases, such as fuel or travel, while still maintaining a smaller percent for every purchase. Others simply offer a set rate for all purchases, regardless of the type of purchase.
Before accepting any new cash back offer, it is important you understand the complete terms of the offer and what purchases are eligible for cash back rewards, if the card only offers cash back on certain items that you do not purchase, the card may not be worth it for you.
The cash back bonus is usually only a few percentage points, and sometimes not even that much, so it is highly likely your interest rate will be higher than your cash back rate. So, it is vitally important that you pay off your balance every month, while also making sure you are not just purchasing items to accumulate cash back rewards. If you do not plan to pay off the balance in full every month, you should be searching for a low-interest rate offer and not a rewards card.
It can be very smart to make your usual purchases on a cash back card because you can save a few percent on every purchase, but you must be sure you are not making purchases you do not really need, just to earn cash back. Similarly, as you would with any other credit card, intelligent spending is one of the most important aspects of responsible use of your credit card.
Also, as with any other credit card offer, you should aware what effect a new credit card will have on your credit, and ultimately your financial standing. There are several different types of offers that may appeal to you, but you should understand what benefit the card can provide.
Some credit card offers offer cash back on every purchase, some offer different cash back rates for different types of purchases, or some may have an introductory rate that will change after a set amount of time. You must be sure you completely understand the terms of the card, now and in the future.