Earn Money by Using a Cash-back Credit Card
Choosing the Right Card Requires Careful Consideration
Jul 30, 2009
Consumer credit cards come in a variety of flavors. And based on the number of banks and other credit providers, which are offering plastic money these days, there seems to be something for everyone. By and large though, credit cards can usually be grouped into distinct categories.
Cash-back Credit Cards
This particular category of credit card has been around for a while and is quite popular. After all, who doesn't like to be rewarded for using a credit card by having some of that hard-earned cash returned. Cash-back incentives and/or rebate offers are hallmarks of this type of card. And, of course, there are good points and negative points associated with the use of any type of credit card.
Advantages
- Cash-back rewards usually amount to 1% or 2% for qualifying purchases.Some cards allow users to qualify for higher percentage bonuses for online shopping (for selected cards). The Discover More (SM) Card is one example.
- Accruing large blocks of bonus points is sometimes an option. The Citi PremierPass Card - Elite Level is one such credit card. It offers 20,000 bonus points after one makes at least $600.00 in purchases within three months of opening an account.
- Some credit providers offer extra incentives to use their plastic for auto-related expenses, including gas purchases and other auto maintenance expenses. Besides cash-back rewards for other purchases, the Discover Open Road(SM) Card offers such advantages - to the tune of 5%.
- Rewarding one for participating in certain hobbies is an increasingly common way for credit card issuers to entice consumers. The GOLF MAGAZINE Rewards Visa Credit Card fits into this subcategory. Using this particular credit card, users can opt for regular 1% cash-back purchases, or earn points, redeemable for golf-related purchases, including access to premier golf courses. Moreover, the starting APR can be as low as 10.24%.
- In addition, many of the cards in this category don't require annual fees. That being said, it's important for consumers to realize the downside of going with this kind of credit card.
Disadvantages
- Generally higher annual percentage rates are common among cards in this category. Rates reaching 19% are not uncommon, even for credit cards offered by some of the better-known providers.
- Overuse of this type of card can easily negate any benefits derived from using it wisely. For example if one uses a cash-back card only for purchases he or she would normally make anyway, and then pay off the balance in full each month, the high finance charge is avoided. Thus, the consumer can truly take advantage of the card's reward attributes. Unfortunately, too many consumers start using their cards immediately to make purchases they might not otherwise make, in an attempt to maximize their cards' cash reward power. So, when a portion of the previous month's balance is carried forward, month after month, the high APR takes on a life of its own, like some uncontrollable monster.
- Some cards set annual caps on the number of points one can earn. Discover Card and American Express, however, usually don't limit earnings.
- Many cards have time limits tied to their rewards points. Thus, consumers should be on the lookout for a card which gives ample time to redeem them.
It Pays to Do Your Homework Before Deciding on a Card
As with any decision involving something as important as one's credit, it's important to research and compare several credit cards from different providers before making the decision of which one to apply for. Try to honestly determine if using a higher interest cash-back card will be more financially beneficial, in the long run, than sticking to one with a much lower APR offering no rewards. Also realize that, for purposes of maintaining a nice high credit score with the three major credit bureaus, its important not to have open too many credit accounts of any kind at the same time. This situation can easily have the effect of lowering a credit score.
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