How To (Money): Spend Money, Make Money (Cash Back Credit Cards)
Credit cards. They can be a savior or the root of all evil. However you look at it, nearly everyone on this planet owns a credit card of some sort. The reason we use credit cards is so we don't have to carry cash, and with one swipe of the card and a signature, the products we purchase are ours. That's usually where the positive aspects of using a credit card stops. Then comes a slew of negative aspects...spending too much because we think we have an unlimited amount on the card, paying in installments that lead to exorbitant interest rates, etc. If it hasn't hit you yet, the negative aspects all deal with the credit card making money, and you losing money. Don't you deserve some money for using their card? Of course you do. So what do you need to do? Answer: Get a cash back credit card.
There are many cash back credit cards out there. A good place to start the comparison between different credit cards offering cash back is at creditcards.com. They list the major credit card companies and their current rates. There are a few things you need to consider before jumping right in...read the list below:
1. What do most of the places you shop accept? For example, if you primarily shop at Costco, American Express is a good choice since they only accept American Express. Discover is not as popular, but they offer high rates to compensate for this unpopularity to encourage people to use their card. If you want to be safe, Mastercard and Visa is accepted everywhere...you can't go wrong with them.
2. What do you primarily purchase? This is important since different cards offer different cash back percentages depending on what you purchase. People who drive a lot should get a card that gives you cash back for gas purchases. Likewise, if you eat out a lot, make sure the card you get gives you cash back for eating at restaurants. Some cards offer high cash back percentages for a combination of purchases. I personally have a CitiBank Mastercard that gets 5% on groceries, drugs, and gas purchases, with 1% back on everything else. The combination works for me, because I drive a lot, buy my own food, and I know no matter what, I will get at least 1% back on everything else I purchase.
3. Read the fine print. Some cards say that you get 5% back on certain purchases, but that may only last for the first 6 months or 1 year. After that, the percentage goes down to 2%. You might be better off using a card who offers 3% from the get go, this way, you'll always be over 2%. Also, check for annual fees. Basically, if the card has an annual fee, it's not worth it unless you spent enormous amounts of money that allow you get back a lot more cash back than the annual fee would cost.
4. Know the cash back limit. Make sure you know how much cash you can actually get back. For example, my credit card only allows you to receive $300 through cash back earnings for one year. Any earnings more than $300 during that year that will not be counted. Still yet, that's a lot of money...with the 5% limit, I would have to spend at least $6000 on my credit card to achieve that much cash back. Just make sure you research what your cash back limit is per year. If you spend a lot of money, you probably want a credit card that will have a higher cash back limit.
The reason I like cash back credit cards rather than reward credit cards is because I can get the cash back to spend it on what I really want. With reward cards, if you decide to trade in your points for cash, it's basically a 0.5-1% cash back rate. If you decide to purchase one of their items with points, it would ALWAYS cost more than if you bought it yourself. It's similar to playing games and Dave and Busters and winning tickets. You could have paid for the products at least 5 times cheaper than playing games to earn tickets to trade in for prizes. The only difference is that playing those games at Dave and Busters is a fun way to earn tickets. With credit cards, aquiring those points cost you money...which isn't fun. Cash back credit cards are definitely your best bet.
Stay tuned for an article on tips and tricks to maximize your cash back credit cards. Coming soon...
There are many cash back credit cards out there. A good place to start the comparison between different credit cards offering cash back is at creditcards.com. They list the major credit card companies and their current rates. There are a few things you need to consider before jumping right in...read the list below:
1. What do most of the places you shop accept? For example, if you primarily shop at Costco, American Express is a good choice since they only accept American Express. Discover is not as popular, but they offer high rates to compensate for this unpopularity to encourage people to use their card. If you want to be safe, Mastercard and Visa is accepted everywhere...you can't go wrong with them.
2. What do you primarily purchase? This is important since different cards offer different cash back percentages depending on what you purchase. People who drive a lot should get a card that gives you cash back for gas purchases. Likewise, if you eat out a lot, make sure the card you get gives you cash back for eating at restaurants. Some cards offer high cash back percentages for a combination of purchases. I personally have a CitiBank Mastercard that gets 5% on groceries, drugs, and gas purchases, with 1% back on everything else. The combination works for me, because I drive a lot, buy my own food, and I know no matter what, I will get at least 1% back on everything else I purchase.
3. Read the fine print. Some cards say that you get 5% back on certain purchases, but that may only last for the first 6 months or 1 year. After that, the percentage goes down to 2%. You might be better off using a card who offers 3% from the get go, this way, you'll always be over 2%. Also, check for annual fees. Basically, if the card has an annual fee, it's not worth it unless you spent enormous amounts of money that allow you get back a lot more cash back than the annual fee would cost.
4. Know the cash back limit. Make sure you know how much cash you can actually get back. For example, my credit card only allows you to receive $300 through cash back earnings for one year. Any earnings more than $300 during that year that will not be counted. Still yet, that's a lot of money...with the 5% limit, I would have to spend at least $6000 on my credit card to achieve that much cash back. Just make sure you research what your cash back limit is per year. If you spend a lot of money, you probably want a credit card that will have a higher cash back limit.
The reason I like cash back credit cards rather than reward credit cards is because I can get the cash back to spend it on what I really want. With reward cards, if you decide to trade in your points for cash, it's basically a 0.5-1% cash back rate. If you decide to purchase one of their items with points, it would ALWAYS cost more than if you bought it yourself. It's similar to playing games and Dave and Busters and winning tickets. You could have paid for the products at least 5 times cheaper than playing games to earn tickets to trade in for prizes. The only difference is that playing those games at Dave and Busters is a fun way to earn tickets. With credit cards, aquiring those points cost you money...which isn't fun. Cash back credit cards are definitely your best bet.
Stay tuned for an article on tips and tricks to maximize your cash back credit cards. Coming soon...
posted by Admin at
11/13/2006 09:05:00 AM
1 Comments:
Cash back credit cards are definitely the best ones to use. Don't travel all that much, so those mileage plus cards don't do me any good. You got to also watch out for high interest rates when you look for a card.
By
Anonymous, At
December 06, 2006 1:49 PM
Post a Comment
Subscribe to Post Comments [Atom]
<< Home