One of the fundamental truths about cash-back credit cards is how easy it is to accrue “free” money. If you already spend a lot on credit cards every month, there is almost no reason why you would not want to use a cash-back card and earn a reward.
The hope is that using a cash-back credit card will build up good credit and allow you to take advantage of cash-back benefits. This might include cards focusing on rotating 5% categories or cards offering special percentages on groceries, gas stations, or even extended warranties.
How Do Cash-Back Credit Cards Work?
Using and earning with a cash-back credit card couldn’t be any easier as it’s basically spend and earn. It’s really that simple as you earn a small amount of money with every purchase. It’s absolutely pennies on the dollar, but the reality is that these pennies add up, and if you spend a lot, you can earn big month after month and year after year.
For example, consider a credit card that earns 1.5% on every purchase, without any exceptions. This means that if you spend $3,000 per month on credit cards between all the purchases and automatic payments you make, you’re earning a “free” $45 every month, or $540 annually, just for making the purchases you were already going to make.
Said another way, cash-back credit cards help you earn rewards, which some people like to look at as discounts on their purchases. The bonus is that some purchases, like groceries, can even earn up to 6% if you use the right cash-back card credit, and these rewards can add up much faster.
Why Should You Get a Cash-Back Credit Card?
The answer to this question might have been different five, maybe even ten years ago, but today, cash-back credit card options have improved significantly. Not only can you get sign-up bonuses worth hundreds of dollars, but we have gone from the best cards earning just 1% cash back to 1.5% being the standard and 2% becoming the next most likely standard reward percentage.
Simple Terms
One of the biggest reasons cash-back credit cards have become so popular is their simplicity. There are fewer hoops to jump through now, and it’s more about spending, swiping where possible, and watching the reward values add up.
Better yet, the rewards you are earning now don’t expire, whereas rewards used to have an expiration date, generally one year from the period they were earned. Today, these limits don’t exist, which means you can build up cash-back rewards for years and then cash out hundreds, maybe even thousands of dollars in rewards that can be spent on anything, including your existing credit-card balance.
Various Options
Between Flat-Rate, Tiered, and Rotating category cards, you also have plenty of options to help you earn even more rewards every month. If you love the idea of rotating categories, a 5% bonus on grocery and gas station fill-ups can help you earn even more rewards during the year.
The same can be said for those who love tiered-earning cards, which can help you earn a certain percentage on dining and entertainment, with a smaller earning percentage on everything else. Depending on how much you spend and on what, you can smartly put together a wallet full of cash-back credit cards to help you earn even more on almost everything you might purchase in a given month.
No Annual Fees
With rare exception, most cash-back credit cards don’t have annual fees, so you earn these cash-back rewards without the crushing weight of knowing you might have to pay the credit card bank money every year.
You’re Already Spending Money
Ultimately, the best reason to earn a cash-back credit card, beyond its benefits, including purchase protection and extended warranty, is that you’re already using a card. If you’re someone like me who puts every family expense on a credit card except for a mortgage and car payment, you’re already in a good position to earn reward money.
This means you can earn money back on the streaming service subscriptions you watch every month, the cell phone bill you’re already automatically paying, and all of the impulse shopping you like to do online. In these instances, having a cash-back card is a no-brainer. Otherwise, you’re just leaving “free” money on the table.
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