Thinking of getting a cash back credit card? Wondering what the advantages are and what the pitfalls might be? You’re not alone. Research shows that nearly 60% of all rewards cardholders have opted for cash back cards. Such telling numbers shouldn’t surprise us. As consumers, we simply want to get the most out of our spending – from discounts to savings to cash back.
Rewards for Shopping
Just how much can I earn from my new card though? It depends. Ponder this: many cash back cards offer 5% cash back on purchases made at supermarkets, drug stores/pharmacies, and gas stations, plus 1% on all other purchases. If you pay off your balance each month, that 5% rate is basically a 5% discount on all groceries, prescriptions, and gasoline: every day, any day. If you spend $100, that’s $5. If you spend $500, that’s $25. And so on. Bonus cash for simply shopping as you always did.
Sounds simple enough. But, be aware. You shouldn’t be dazzled by numbers alone. When considering a new cash-back credit card, it’s important to do one’s homework. Proper research on a card’s terms and conditions could very well save you in the end. The last thing you’d want to do is spend, spend, spend, only to find out that an offer has expired, changed, or was always – too good to be true (such as tiered return rates).
Caps and Restrictions
Indeed, in addition to the percentage of redeemable cash, you also should also look into some other numbers; namely cash back spending caps, rates, and restrictions. Once all this data is gathered, what’s the verdict then? Just how much can a person earn from a cash back card?
Depending on the card, it can be a little or it can be a lot. Before applying though, be clear on what the card’s rebate potential is, as well as how much needs to be spent in order to receive the reward. Also, what exactly are the conditions? Are there any hidden fees? It’s age-old advice, but nonetheless applies: always read the fine print.
Most cash-back cards are attractive because they can be used for “everyday” purchases, such as groceries or gasoline. Yet, be aware that some cards have rewards caps that could factor into the card’s overall worth and make one card a better deal than the next. Note that caps can be monthly, yearly, or both and typically range from $300 to $600.
Don’t Overspend
Something else to consider is, if you tend to use your debit card now for purchases, you might consider shifting to a cash back card full-time – while still limiting yourself to a budget. Remember that in order to maximize the amount earned, you must pay off your balance at the end of each month. To maintain a balance beyond this will quickly negate any potential cash-back returns, given the higher interest rate and any related finance charges.
However, if you spend within a budget, like you did with a debit card, you should have no problem in paying off the balance. The change (bonus) though will be the cash-back points/reward you’ll accumulate with each purchase made.
The Bottom Line
Lastly, realize that the right cash-back card is the one that best suits you and your individual spending habits. (Or that of your family or business.) Each card will offer a set of conditions that can either benefit or hinder you. Ultimately, how much you earn from a card really depends upon you, what you spend, and how well you adhere to a card’s conditions.
Thus, before making a decision like this, it’s never a bad idea to do a bit of comparison-shopping and numbers-crunching. In the end, you should be able to make an informed decision, one you’ll be happy with long-term. With earnings to make you smile.
