Is a cash back credit card for you?
January 20, 2008
It can be difficult to determine these days what sort of credit card is likely to best suit your needs, as there are so many different card types available. Some people will benefit most from interest free credit cards whereas others may benefit more from a balance transfer card. One type of credit card that has proven popular amongst those that want to enjoy the convenience and ease of credit card use, whilst making a little money from the credit card provider, is the cash back credit card.
Cash back credit cards are a type of rewards based credit card, and these cards actually enable the cardholder to make money from the card provider rather than the other way around, which is the norm. However, in order to benefit from this type of card it has to be used correctly, otherwise you will find that you are not actually benefiting at all. Many people that use cash back credit cards enjoy earning money from their card provider.
With a cash back credit card you earn a certain level of cash back for every pound that you spend on the card. Firstly, don’t get too excited, as the cash back levels tend to be fairly low, but can vary from one provider to another, which is why it is important to compare different cash back cards from a range of providers in order to get the best deal.
Some card providers may offer 1% cash back on every pounds spent on the card, whereas others may offer 1.5%. Some card providers offer a more generous amount, such as 4 or 5% if purchases are made at certain retailers or simply as an introductory offer for a limited period of time.
One thing you need to remember about these cards is that you will not earn any cash back on cash withdrawals or transactions made on the card - in fact, you will incur hefty interest and other fees for these types of transactions. The cash back is only given for actual purchases that are made on the card.
Although the cash back levels are small, those that use their cards on a regular basis or to make expensive purchases find that the cash back soon mounts up. It is therefore advisable to use the card for your day to day spending or to make a larger, more expensive purchase in order to get as much cash back as possible.
However, there is a catch. In order to benefit from the cash back credit card you must ensure that you repay the balance in full within the interest free period. This is not something that is stipulated by the card providers, who would actually prefer you not to repay the balance in full so that they can then charge you hefty interest fees.
The reason you need to repay your balance in full within the interest free period is that any interest that you are charged on your balance will by far exceed the cash back that you might have earned for making purchases on the card. These cards will therefore not benefit those that like to spread their credit card repayments over a longer period.
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