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The Highs And Lows Of Cash Back Credit Cards

Jan 24, 2008
When it comes to cash back credit card deals, the idea of getting something for nothing is what attracts people to these products. This article aims to assess whether this is the truth or whether you might be better off getting a better deal for your money elsewhere. Some of the credit cards products on the market offer cash back, which means that you receive a certain amount of money each year for using the card, but when you look into the returns you receive compared to the money you spend, is it really worth investing in one of these cards over other card types such as the reward scheme credit cards?

The way in which cash back credit cards work means that the amount of money you receive as 'cash back' is a percentage of how much you have spent on the card, usually between 0.5 and 4%. The cash back you earn is then given to you either as a cheque or is debited to your credit card account annually. The essential premise is that the more money you spend on your credit card the more you receive. It can be a good strategy, particularly if you use your credit card carefully - for example, the prospect of earning money simply paying for your normal groceries is quite appealing, as long as your interest payments don't outweigh the cash you earn.

As with all credit cards, the only way to get the best out of a cash back card is to pay back the balance in full every month. This means you are not paying interest on the money you have borrowed and losing out on your cash back. Before choosing your card look into what the APR is set at after any introductory period, and make sure you can afford to pay the monthly repayments to avoid paying over the odds.

The importance of reading the small print when entering into any credit agreement can't be stressed enough, especially when some cards charge well over the average 16.9% APR (such as cards created for those with bad credit ratings or CCJs). Always staying one step ahead of fees and late charges is the name of the game as a credit card holder as avoiding these will only help to boost your credit rating.

As with all credit card products it is advisable to invest in card protection, so that should you lose your job or become ill and are suddenly unable to make repayments you won't have to pay extortionate late fees and charges. Covering you in the event of identity fraud online in cases such as Capital One card protection can give you peace of mind even if your card is stolen. Choosing the most expensive card protection can add to your outgoings in the short term but could save you a fortune in the long run.

Other benefits of choosing a cash back credit card include the extensive interest free period you automatically qualify for when paying for goods with your card as part of the credit card introductory offer. The average time frame is 50 days, allowing you to fully pay off the balance on your card whilst still taking advantage of the protection the credit card offers on your purchases. Cash back cards also are a beneficial investment if used in conjunction with other reward features inherent in your credit card deal. Some cards, for example, have retail affiliates and using your cash card instead of your debit card with these retail outlets will also benefit your balance as well as qualifying you for additional bonuses. Check who your card is associated with and you could use this relationship to your advantage.
About the Author
David Kelly has reviewed how to reap the rewards and avoid the pitfalls of cash back Credit Cards. Are they something for nothing or whether cash back credit cards really do add up?
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