Are you Cashing in on the Full Potential of your Cash Rewards?
Find Out if a Cash Reward Card is Right for you.
Ahhhh, the sweet smell of cash! If you aren’t nodding your head in approval then you haven’t tasted the sweetness of a cash rewards credit card.
Cash rewards credit cards offer you cash rewards points every time you charge a purchase to your credit card. Every time you reach a certain balance on your credit card (this varies per cash reward program, but typically you receive $25 for every $2,500 balance you reach), you will receive a check in the mail. With other cash rewards credit programs you may be given reward points towards certain participating retailer’s products.
Cash back credit card don’t always reward you with cold hard cash, many reward you with discounts on products, credit cards and etc. For example payouts with cash rewards credit cards include:
- Cash back in the form of a paper check in the mail when a minimum balance is reached.
- Rewards points that translate into cash discounts of products from participating retailers.
- Cash deposited directly into a savings account in your name.
- Cash deducted off the balance of your next credit card bill.
- Cash that can be donated to the charity of your choice.
- Discounts on air travel or vacations
- Money that goes towards gas purchases.
Cash Back Credit Card vs. Reward Credit Card
There is a lot of confusion between a cash back credit card and cash reward or points credit card.
Cash back credit cards
- Typically pays you a cash reward in check or rewards points when you reach certain minimum balances ($25 for every $2,500 balance is common).
- With cash back rewards you can spend the money at any retailer of your choice and collect cash back points.
- If you choose the cash go towards your credit card balance, cash rewards programs typically pay approximately 2% of your credit card balance.
- The interest rate on a cash back credit card is higher than a non-rewards card.
- You will collect less points through purchases on a cash back credit card, compared to a rewards credit card, but your can collect cash back point absolutely anywhere.
- The payouts are lower on a cash back credit card than with a rewards credit card.
- You don’t receive free cash in monetary form with a rewards credit card.
- With a rewards credit card, rewards points are only gathered when you make credit card purchases from participating retailers only.
- A reward credit card pays approximately 5% of your credit card balance.
- The interest rate on a rewards credit card is higher than a non-rewards card.
- You can collect points a lot more quickly with a rewards credit card than you can with a cash back credit card, but only when you shop through participating retailers.
- The payouts are higher with a rewards credit card (you typically make 5 points on every dollar spent) than with a cash back credit card.
- Many rewards programs make you accumulate a certain amount of rewards before you can redeem them.
- Some rewards programs let you redeem points in cash.
There are obvious benefits to both cards; however you should choose based on individual needs and shopping habits. If you know that you won’t shop at participating retailers than the freedom of a cash back rewards card is preferable; however if you shop exclusively at participating retailers than you will collect double the points and rewards through a rewards credit card. Look into each rewards program to find out which one offers the most benefits to you. For instance a rewards points credit card is of little use to you if you don’t like any of the retailers on its participating merchants list.
Tips for benefiting from you cash back credit card
Know what kind of charger you are - Cash back credit cards are for you if you don’t carry a large balance on your credit card from month to month. If you do beware of the high interest rates attached to cash back credit cards.
Are the annual fees worth the rewards? – Most cash back rewards credit cards do charge an annual membership fee. However if your cash back rewards will far surpass the $50 annual fee; than perhaps the card is worth it. Do your calculations before signing up for a cash back card with a merchant list you’ll never take advantage of.
Know the terms – It’s not up to the credit card company to make sure you are reaping in your cash rewards – it’s up to you! The credit card company doesn’t care if you ever see a check in the mail or a discount from participating retailers. They only care about you annual fee and that you pay your bills on time or with interest – that’s all! So be aware of participating retailers or balance minimums that will get you rewards. Many retailers will also have special double and triple points promos. It’s up to you to be aware of these so you can take advantage of them.
Charge-a-holics! – Excuse the term, I know it sounds like an addiction, but those who charge every monthly purchase to a cash back rewards card and then pay off the balance at the end of the month are the ones that benefit most from rewards programs. We’ve already established that both cash back and rewards cards are based on your purchases. For example, cash back credit cards usually don’t pay out until your balance reaches a minimum of $2,500 – and that’s typically only with a $25 check. However if you charge all of your purchases in one month to your cash back card, you can spend upwards of $10,000 – that’s $100! Similarly, with rewards credit cards, your points accumulated depends on your purchases – for example you’ll get 1% to 2% on purchases or 5 points for every $1 spent. It makes sense that the more you spend the more points you’ll accumulate towards other purchases. My point is, if you pay the annual fee for cash rewards credit card – use it!
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