One of the most popular credit card reward programs available today is the cash back credit card. These will give you a cash rebate every time you make a purchase. The best cash back credit cards appeal to many and would even include no annual fees and a 0% interest APR for up to 15 months. Imagine taking an instant discount every time you make a purchase on your cash back credit cards. Depending on where you shop, those savings could add up to a considerable sum.
Cash Back
The most basic benefit from a cash back credit card is your rebate from every purchase. Most companies give a 1% rebate on all purchases. However, some programs will give up to a 5% rebate on such purchases as groceries, drug store purchases, and especially gasoline. You have to spend these amounts of money anyway, so why not get a rebate for it? However, there are savings beyond what we have mentioned here.
Savings
Here is an example. Let’s say that, over a month, you spend $500 at the grocery store, $100 at the pharmacy, and $150 filling up your car with gas. Your total spending during this month would be $750. If you get 5% back for these sorts of purchases from your best cash back credit card, you can save $37.50. If you had to spend this much every month, you would have saved $450. In other words, you’ve saved half of one month’s expenses over the course of an entire year, and just because you chose to benefit from a cash back credit card.
$450 is pretty cool….but should I really switch?
You would not be able to notice the slight difference of 1% or even a 5% on your cash back credit card; but over a period, your cash back credit cards could actually make you money… increasing your nest egg incrementally. In a way, every time you buy groceries, you are putting money into your savings.
If you can pay your balance off every month, and do not need a zero or low interest rate card, cash back credit cards can work for you. Your cash back would even cover your interest payments – let the poor money managers pay you. If you do not pay your balance off, your rebate can go toward paying down your existing balance, so that less of that has to come out of your own pocket. Make sure that you read the fine printings, because fees for late payment and going over the limit could be steep.
The first cash back credit card was issued about 15 years ago. The program was very simple – 1% of your purchases were rebated back to the customer at the end of each year of membership by check, or by a credit to the account.
Now there are quite a few different types of cash back credit card programs. Some offer a simple percentage on all purchases, some give a higher premium for different categories of purchases. Some programs deposit your rebates directly into your bank account, while others retracts it from your credit, or send you a check once your rebate amount reaches a certain dollar level. Pay attention to the more complex ones, as it can be confusing to track your rebates by expenditure.
A cash back credit cards could not make you wealthy – after all, you are only getting back an infinitesimal amount of the money you spend, so this can never be a source of revenue. However, since everyone has to spend money for everything from the necessities of life to the luxuries, it makes sense to maximize the return on that spending as much as possible. Cash back credit cards give you a chance to earn back some of the money you spend, and to put that money to use elsewhere in your financial picture.
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