You might think you already did everything possible to create the perfect budget, but if you have not started using a cash back credit card, you have not yet. You can earn back cash or miles for travel using one of these credit cards. If you just started college, you can potentially get one of these amazing cards to help pay for your monthly expenses.
These cash back credit cards let you earn back a small percentage of what you purchase with them each month. Depending on your expenses each month, that can create a significant payback for you.
What Are Cash Back Credit Cards?
Cash back credit cards offer a rebate or refund of a percentage of your monthly charges. Typically, the rates offered by this type of credit card range between one and two percent.
These cash back credit cards fall into the category of rewards cards. If you do the research, you will see that more than half the companies offering rewards credit cards offer a cash back card.
Cash Back Cards to Try
Discover it Cash Back
The Discover it Cash Back card offers 5 percent cash back on up to $1,500 each quarter. You need to activate the bonus categories to get that rate. It offers a no annual fee. Some retailers do not accept Discover, but you can earn back money from those that do.
Double Cash Card
We’re not sure how Citibank affords the Double Cash Card, but you earn two percent cash back on all purchases – one percent when you buy, one percent when you pay. There are no categories, caps and no annual fee. You have to pay the minimum payment due on time to keep earning. It also allows balance transfers although you do not earn cash back on those. You do get zero percent APR on the transfers for the first 18 months you have the card. Thereafter, it switches to a variable 15.49 percent to 25.49 percent. You must make the balance transfer within the first four months you have the card. You will pay a fee of $5 or 3 percent of the amount transferee, whichever is greater.
American Express Blue Cash Preferred Card
The American Express Blue Cash Preferred Card costs a whopping $95 per year annual fee, but you will make it back pretty easily. You earn six percent cash back when you buy groceries in any US supermarkets, up to a $6,000 per year cap. Then you switch to a one percent cash back. You get the cash back as reward dollars redeemable as a statement credit.
Amazon Rewards Visa Signature Card
If you have excellent credit, apply for the Amazon Rewards Visa Signature Card, a branded cashback credit card from Chase Bank. It offers no annual fee. You earn cash back of one to three percent and earn a signup bonus of $50. The variable APR ranges from 16.24 to 24.24 percent. Enjoy no foreign transaction fees and cash back on gas of up to two percent for every $1 spent. Amazon Prime members earn five percent back when shopping at Amazon.com and Whole Foods and three percent back for non-Prime members. But you need at least a credit score of 690 for this luxury card that gets you the best rates at 900 luxury hotels worldwide and concierge, plus Travel Accident Insurance, Baggage Delay Insurance, and Lost Luggage Reimbursement.
Discover It Secured Credit Card
If you have not so awesome credit, apply for the Discover It Secured Credit Card. You will need to put down a refundable security deposit and that amount varies depending on how much you want your credit limit to be. It allows balance transfers with an applicable APR of 25.24 percent. You can obtain a balance transfer 10.99 percent for up to six months. You can qualify for this card with a credit score between 300 and 700. There is no annual fee and a cash back rate of up to two percent. If you carry a balance, avoid this card. Improve your credit or build it.
How Much You Earn Back
Most cards offer a one percent rate of return. If you charge $1,000 in a single month, you earn back $10. While that may not sound like much, if you charge a lot each month or use your credit card for business expenses, you could amass significant charges. Spending $10,000 per month would earn you back $100.
Cash back credit cards come in four reward rate types:
A flat rate credit card pays the same percentage of cash back regardless of your spending or the items on which you spend it. A variable rate offers different rates for various spending categories while an accelerated credit card offers a higher percentage reward for purchases in one or more categories. Typically, the higher rate reaches 5 or 6 percent while the main rate remains one percent. You might be capped on how much you can earn in the higher-rate categories annually.
A rotating rate provides the higher reward for each various category, but not all categories at one time. Rather, some cards, rotate to a new spending category every quarter. This lets customers benefit from making major categories to earn the higher, five percent cash back rate. This is a feature you must activate, such as that of the Chase Freedom credit card.
Specialized Cards with Multiple Rewards
You will need to choose a cash back credit card based on your spending habits and the credit card’s rewards structure. Many of these cards only pay you back when you purchase travel or when you shop at specific stores. The ideal credit card offers a rewards structure that fits your existing buying habits.
Some cash back credit cards offer a sign-up bonus. It may require you to spend a specified amount within a time frame to qualify. For example, you must charge $500 in the first three months you have the Wells Fargo Cash Wise Visa to earn its $150 cash back bonus. A good rule of thumb is to choose a cash back credit card with a higher cash back reward percentage and small sign-up bonus.
With some cash back credit cards, you earn points that convert to a cash back amount. These often have point caps that limit how many points you can earn during a specified period, such as a per month, quarter or annually. Other cash back cards offer cash value refunds issued as gift cards. In this case, you need to ensure that the gift cards are for stores you use. The point is moot if they issue Visa gift cards since you can spend those anywhere.
Keep in Mind Your Existing Habits
Do you want a credit card with a standardized reward or one with accelerated earnings for a specific type of purchases? Typical accelerated earning categories include gas, groceries, dining out, drugstores and travel. Some incentivize parking or paying for your utilities.
Some cash back credit cards limit their rewards earnings to specific stores, gas stations or restaurant chains. Choose a credit card that lets you earn at places you are already a regular. Your cash back credit card should let you spend as you usually do and still earn rewards. The idea is to reward your existing expenses, not to change where you shop.
You might have to register online to earn the cash back. If you forget to register, you can invalidate your purpose for getting the card. This also applies to special promotions from the credit card.
Typical Cash Back Credit Card Requirements
Okay, let me be totally honest with you here. You need a terrific credit score to get a cash back card. Rewards cards are tough to come by. You can count on the required credit score being in the very good to excellent range.
While there are good credit cards for bad credit, they are not typically cash back cards. A few, like the Credit One Bank Unsecured Visa with Cash Back Rewards, may extend credit to those with good scores.
You need to know where on the FICO scale your credit score falls before you attempt to apply for any credit card.
FICO Score Guide
300-579 Very Poor 16% not offered credit or only secured credit
580-669 Fair 17% subprime borrowers who obtain high APR credit cards
670-739 Good 21% average borrowers who pay bills on time
740-799 Very Good 25% obtain receive better than average APRs
800-850 Exceptional 21% obtain the best APRs on credit cards
The Annual Percentage Rate (APR) on Cash Back Credit Cards
Cash Back Credit Cards were made for people who pay their bills off completely at the end of the month. That is because this type of credit cards generally features a higher interest rate than others. You are paying for the privilege of getting money back every month. By paying your bill in full every month, you avoid the interest payments. This increases in importance as the interest rate rises.
You need to pay it off completely every month so that the interest does not eat up the payback. The idea to devise every possible angle to max out the cash back reward.
Read the card details very carefully. It may offer a low sign up introductory interest rate, but that could jump to a high interest rate six to twelve months into the life of the card. One example of this card is the Wells Fargo Cash Wise Visa card. It gives you a zero percent rate for 15 months which then jumps to 15.49 to 27.49 percent, a variable interest rate.
Prepare for the Fees on Cash Back Credit Cards
If you are accustomed to no-fee credit cards, prepare for a shock. These cards typically carry annual fees ranging from $50 to $100. The higher fee cards usually offer bigger cash rewards for purchases.
How do you know if the fee is worth the cash back reward? Calculate how much you would get paid if you moved all your spending to the cash back card. If it more than covers the fee and you can avoid the interest payments, it makes the card worth it. If you would lose money though, look for a credit card with no annual fee or a low annual fee.
Never pay late. You will get charged a late fee and it will hurt your credit. Just one of these fees can cancel out the money you made on the cash back. You must make timely payments.
Do you travel to other countries? Do you shop on international websites? You will get charged a foreign transaction fee. Shop around for credit cards with no or a low foreign transaction fee.
How to Redeem Points on a Cash Back Credit Cards
You will have a selection of ways to choose from regarding how you want to get paid. Different cards offer different ways to redeem or cash out your earned points. You could do any of the following:
- Mail a check.
- Have a direct deposit sent to your bank account.
- Apply the cash back reward to your credit card balance.
- Get a gift card for a retail store such as Amazon or Walmart.
- Donate the cash back to a charity you choose.
Most cards allow you to cash out from the bank’s website or by phoning their customer service center.
How Often Do You Get Money Back?
How often you get paid varies by the card. You might get a percentage back every month or you might have to wait until you hit a minimum payout amount such as $20.
Depending on the cash back credit card, the rewards can expire. Here’s where you need to very carefully read the credit card agreement, check your credit card’s expiration date and check its website for the forfeit policy. Some credit cards do not expire. As long as you keep your card active, you keep your earned points.
There are also cards that enforce a cutoff time for redemption. This typically falls between one and five years. If your points do expire, redeem them on a regular basis of six to twelve months. If you ever decide to close your credit card, redeem the points first. This also applies to if you decide to transfer your balance to another card to save money on your exorbitant interest rate. Do not forget because if you zero out your balance, you could render your card inactive thus losing all of your points. Yikes!
How Do You Get a Cash Back Credit Card?
These cards make a perfect fit for you if you have good credit and you can pay your balance every month. The better your credit score, the better interest rates, and higher payback percentages you will get. You also need to have predictable spending habits. You need to spend enough on the card each month to earn the rewards, but little enough that you can pay it in full at the end of the month.
Start at Loanry.com. This credit card shopping trick can help you find the ideal credit card for you. It makes it really easy to shop for a good credit card for you. Every time you apply for a credit card or a loan, your application results in the creditor making a hard hit to your credit report to obtain a copy and report that you asked them for money. But Loanry does a soft check, so there’s only one of many advantages.
You Got It!
After your card arrives, you need to carefully review what you can spend on the credit card. If you go over your limit, they will charge you fees which will drive you further over your limit.
Also, pay attention to what you can earn points or cash back on and what you cannot. You will not see cash advances listed as something on which you can earn cash back. Remember that when you see the ATM after the fourth or fifth beer. You cannot earn cash back on a cash advance. Cash back only comes from purchases.
The opposite will happen when you make a cash advance. The credit card company charges you the money for the ATM use. If they do not own it, the company that owns it will charge you, too.
Then you get hit with the cash advance fee. You think the $3.50 or $5 non-member ATM fee was a lot. Wait until you see your credit card statement and find out that the cash advance cost you $25. Wait? That was all the available credit you had left? Nope. They do not care. It is theirs now.
First, pay it off every month in full and do not let your credit limit get near the maximum.
Be ready. Those fees will kill you.
As great as cash back credit cards sound, they have much higher fees and interest rates. Be careful if you decide to take one out without having a full-time job and a savings account capable of covering a few months full payments. They can help you make back some money in the right situation. If you travel a lot and want free flights or hotels, go for it. If you just want a starter card, a simple credit card, go for something with a super low-interest rate and low fees. That makes a great card for learning the ropes.
Carlie Lawson writes about business and finance, specializing in entertainment, cryptocurrency and FOREX coverage. She wrote weekly entertainment business and finance articles for JollyJo.tv, Keysian and Movitly for a combined seven years. A former newspaper journalist, she now owns Powell Lawson Creatives, a PR firm, and Powell Lawson Consulting, a business continuity and hazards planning consultancy. She earned BAs in Journalism and Film & Video Studies from the University of Oklahoma. She also earned her Master of Regional & City Planning at OU. Her passion lies in helping people make money while reducing risk.