Cash Back Credit Cards

Posted by: Henry B. | Feb 20,2008

When seeking out a credit card rewards program, many people go for the cash back rewards program.  It can be difficult otherwise to sift through all of the other rewards programs available.  Unless you’re an avid and frequent traveler, maybe an airline rewards card isn’t necessary.  Do you really need a Starbucks rewards card?  I mean, how much coffee do you drink?

To avoid the hassle of selecting a specific rewards program, many just go for the cash.  It makes it easier too to select a credit card with advantageous interest rates and fees.  There are a lot more cash back cards than there are airline cards, for example.  One thing to point out: nearly every credit card has some kind of cash back rewards program, even if the card is not advertised as a rewards card.  Go, check your current card, you might have points built up you never knew you had. 

How to Use a Cash Back Card

With all this in mind, there are good ways and bad ways to use cash back credit cards.  First, the bad way.  If you carry a balance (like most everyone) then the money you get back via cash back is basically going to be cancelled out.  Cash back points work best to your advantage if you pay off your balance in full every month, as the cash back dollars will put you into the black.

However, I take some issue with this.  Suppose you have a credit card with decent interest rates, low fees, and a good cash back percentage.  While the cash back points may just go back into the card, this could cancel out what you pay in interest on the card.  Another way of saying that: it’s almost like you’re not paying interest at all.  Of course, this depends on the amount of your balance and the rate of cash back points, but putting that money back into your card is not the worst idea.  It may not put cash directly in pocket, but it’s still a good way to make a credit card’s terms more favorable.   

Sponsored Resources Ads by Google