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What Are the Most Important Things to Know About Cash Rewards Credit Cards?

Aug 17, 2007
A good cash rewards credit card is a wonderful thing. Getting money back on money you have spent can be a real treat. But often they will cost you more than you get back... by far.

So it's important to know if a cash rewards card is right for you. And that means you need to look both at what it will cost you to own and use it, and what you will get back from the card.

The most basic thing to look at is the interest rate. While you will get the most benefit by not carrying a balance, most people will at least occasionally carry a balance. Your typical cash back card will have a higher interest rate than a card without any rewards attached. However, the rates will vary from card to card, and that is one factor you should consider.

But don't fool yourself into thinking only the interest rate matters when looking at the expenses of your cash back card. The fees matter quite a bit too. Some will have annual fees. It is pretty easy to find cards that do not have an annual fee, so I would suggest dismissing those just offhand. Otherwise you risk the annual fee being more than what you get back each year.

Watch out for the limitations placed on your rewards. Getting cash back means you don't have to worry about travel blackout dates or other such limitations that other kinds of rewards may have, but they can still limit what you get.

A common limitation is what you can earn per time period. If you're likely to spend more than needed to get to that point, you won't want that card.

The percentage you get back may also vary. 1% is no longer the only possibility. Sometimes the card will give higher rates back for certain types of purchases, such as gas, or if you buy from certain stores. If you spend a lot in the areas that you get extra back from, these can be well worth your while.

If you have a balance to transfer, check for special deals on transferring that balance. Sometimes you will find deals offering a 0% interest rate on balance transfers. You'll need to watch for balance transfer fees, but if there are no fees, this will be an excellent deal.

You will need to figure out what is most important to you. If you pay your balance off every month, the interest rate will be less important than what you get back. If you only spend a little, limitations on what you can earn won't matter so much.
About the Author
Stephanie Foster runs http://www.knowyourcreditcards.com/ as a resource to help people find the right credit cards. You can learn more about cash rewards credit cards at her site.
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