Complete Guide to Choosing the Best Cashback Credit Card
Discover how to find the right cashback credit card.
Currently, many banks and companies provide cashback as a benefit to their customers by partnering with commercial establishments where customers often make purchases.
When you make a purchase with a cashback card, the merchant transfers a percentage of the purchase value to the card company.
The company then gives you a portion of that amount back, depending on your credit card usage.
Instead of earning points or miles, whose value you need to calculate, you receive a clear percentage back, which can be applied as a credit on your statement, a deposit into your bank account, or even a check.
Therefore, before applying for a cash back credit card, it is important to follow some steps to choose the one that best suits your needs.
How to choose the best cashback credit card?
The way you choose the best cashback scheme depends on your spending volume, typically on a monthly basis, and the types of establishments where you make purchases.
If you decide on the type of card that suits you, you must now consider several other expectations, which are of particular importance.
Pay attention to the details
A savvy buyer will not only look at the types of expenses and the type of card that will help maximize rewards; there are other details worth reviewing in the contract.
When a credit card promises a high cash back reward, it often does not directly guarantee if there is also a high APR, and many regret it later.
You should also find out how much the card would charge for purchases abroad and if it comes with additional benefits like car rental coverage, price insurance, or concierge services.
These are as important as they may seem annoying to read when reviewing the credit card terms and conditions.
Compare the annual rate with your potential rewards
Some cards have an annual fee, but you shouldn’t dismiss a card immediately because of this.
In some cases, the fee may be waived during the first year, giving you time to evaluate whether the cash back you earn will offset the long-term cost.
For instance, a card with an annual fee might provide a 6% cashback at supermarkets (up to $6,000 annually) and on streaming services, 3% at gas stations and on transportation, and 1% on other purchases.
If you spend about $1,000 a month on groceries, you could earn $360 in rewards each year, easily covering the annual fee.
Discover your credit score
It is essential to understand your credit score before applying for multiple cards at once. Applying for too many cards and being rejected can have a negative impact on your credit score.
Credit agencies may interpret this as a sign of financial troubles.
Therefore, make sure to apply only for those cards for which you have a good chance of approval.
Choose how you would like to redeem your cash back
Most cash back credit cards provide cardholders with various options for redeeming rewards.
Usually, you have the option to receive your refund as a direct deposit, a check, or as a credit on your statement to reduce your balance.
In addition, some cards offer alternative redemption options such as gift cards, donations to charities, purchases at selected merchants, or converting cash back into points for travel and more.
Please bear in mind that credit card rewards only hold value when you actually redeem them.
Consider if you are willing to pay an annual fee
Many cash back credit cards have no annual fee and still offer strong rewards.
However, there are some cards that may provide higher cash back rates but could come with annual fees.
Still, even if you have to cover this additional expense, the card is likely to provide extra benefits that make that charge reasonable.
Before dismissing a cash back credit card with an annual fee, do the math to see if the rewards and benefits you will earn outweigh the cost.
Money back, annual benefits, or other perks frequently offset the incurred cost.
These types of cards also come with additional fees; if you choose one of these cards, review the rewards system and how advantageous it is before making a decision.
If you found these tips helpful and want to learn more about responsible credit card use, here is an article that will help you do so.
