One of the most popular credit card formats today offers the best cash-back perks. There’s just something about earning money every time you make a purchase that feels good. While you’ll never make back what you spent, even a tiny percentage back can add up big over time.
Simply stated, a cashback card earns a percent back, usually between 1-2% of the amount paid. In other words, spending $500 at Walmart will earn 1.5% back on the most common cash-back cards, equivalent to $7.50 as a cash reward.
The Appeal Of Cash Back Cards
Working off the example stated above, the appeal of credit cards that can earn you cash-back rewards is that they are straightforward. All you have to do is go about your day as you would with your traditional spending and watch your earnings add up.
Unlike travel rewards cards that have a variety of gotchas and warnings, cash-back cards are as easy as it gets in how you use them and earn money back. It’s really as easy as just paying with a card and then seeing the rewards appear at the end of every billing period.
These cards are easy and popular because they already align with your spending habits. Are you someone who shops frequently at the grocery? There is a cash-back reward card for that. The same goes for someone who fills up with gas multiple times a week.
Benefits of Cash Back Cards
Whether it’s a card with flat-rate rewards between 1-2%, category-based rewards that offer higher rates for groceries or gas, or even rotating categories, all these cards have benefits. Along with an attractive sign-up bonus offer, the cashback benefit can be strong.
Earning all of your points is almost effortless as you are simply accruing rewards based on spending habits you already had. Better yet, the value of the rewards you are earning is true value. In other words, you aren’t necessarily earning points with a cash equivalent as you would with a travel card. Instead, you earn actual cash value for almost any purchase you make worldwide.
Perhaps most notably as a benefit, most cash-back credit cards don’t put any expiration dates on the cash back. This would allow you to accrue points for years before taking advantage of a payout or even placing a balance toward an existing credit balance.
Where Cash Back Shines
To see why cash-back cards are the easiest way to earn money, consider them in real-world scenarios. If you frequently shop at grocery stores to feed a whole family every month, you’ll undoubtedly want to look at the Blue Cash Freedom card by American Express. With 6% cash back on all grocery store purchases, the real-world value is easily seen.
The same can be said about making large purchases. The cash-back return will be higher if you spend $3,000 on a single purchase, like a large appliance or a vacation. It won’t come as any surprise to learn that the more you spend, the more you earn.
If you have a credit card with rotating categories like the Chase Freedom card, you can see even more benefits every quarter. While shopping at Walmart might only earn you 1% nine months out of the year, you can earn 5% cash back on every purchase at Walmart for one quarterly period of three months.
Maximize Cash Back
While earning cashback with this type of credit card is easy, you still have to ensure you maximize your earning potential. First and foremost, try to pay off all your balances in full. If you are earning interest, it will essentially negate any cash-back benefits you gain. The same goes for annual fees, which can often offset the value of any cash-back promotions, even if the yearly cost is minimal.
Separately, track any promotions, like rotating categories, that will help you earn big during various times of the year. Of course, pairing flat-rate credit cards and category-based cards will help you gain the most amount of money possible.
Ultimately, you should be okay if you can avoid the temptation to overspend when you have a specialized category available. While you must track these category changes, it’s more important not to go overboard and spend more than usual, only to earn a small amount of cashback.
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