The cash back credit cards allow the cardholder to leverage their daily expenses to earn primary and flexible reward currency, cash in the form of a check or a statement credit.
How it works
Cash back credit card is similar to other types of rewards cards except the cardholder earns cash back rather than points for every dollar they spend. The cash back is calculated as a percentage of each dollar spent. The cumulative cash back earnings are tallied every month by the financial company that issued the card, and it’s included on the monthly billing statement for future redemption.
As with other types of credit card reward programs, cash back credit cards come in various variety and have different pro and cons:
• Most cash back credit cards have a one-time bonus with a lower spending requirement
• The dollar rewards are simple and straightforward
• Most cash back credit cards do not have annual fees
• The redeem rewards options can sometimes be limited
• Some financial companies keep track of tiered rates
• Redeeming rewards which are sometimes not automatic
Cash Back Redemption Methods
Cash back rewards are easier to understand as compared to points or miles; however, they entail different types of redemption options:
This type of reward is most common to cardholders as a way to receive their cash back; it involves taking checks to a bank or an ATM. Checks are requested online or by phone from the issuing company after the minimum redemption limit is met.
• Direct deposit
Some Cash back credit card provides the options to transfer cash back regularly to the cardholder’s bank or brokerage account without the redemption threshold.
• Gift cards
Among other features, this option allows the cardholder to use rewards as gifts, they might be the same as checks but remain standard option among with cash back credit cards. Every time you are converting cash back to something else like a gift card, always ensure you get the same value as you would with a check.
Is Cash Back Card the best fit for you?
Here are some guidelines and steps that help the applicant to decide on how a best cash back credit card might suit them and their finances:
How much do you charge on your credit card?
The first step to determine the type of cash back earning potential is to analyze the average monthly spending. It’s reviewing the spending months for the purchases that might be charged to a new card.
Does expenditure suit your Cash Back Credit Card?
Consider the spending on the type of card that works best for you. If you have a low expenditure, you might be hard-pressed to earn a more demanding one-time bonus on other types of cards. The same applies to when you have insufficient spending to earn the rewards needed to offset the annual fee of a card. These outcomes make a cash back card without a fee the better choice if you have less monthly expenses on credit cards.