This article describes the various pros and cons of using cash back credit cards.
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If you are considering applying for a cash back credit card, it is best to thoroughly consider the pros and cons of this sort of card first. While cash back credit cards may at first seem to be a great idea, they are not necessarily the right choice for all people.
The Rewards of Cash Back Credit Cards
The most obvious pro of cash back credit cards is the money you receive in turn for spending on the credit card. While this is a great pro, you might not always get what you bargained for. For example, some cash back credit cards require you to spend a minimum amount before you receive your cash back reward. Furthermore, if you don’t reach this minimum amount within a specific amount of time, you might not receive the reward at all.
On the other hand, a cash back credit card may not be as rewarding as it appears to be on the surface. For example, a card that pays back 2% on every purchase may seem great. But, if this card only pays back for the first $5,000 you spend with the card, you might not actually make much money of the card. The best cash back credit cards do not place restrictions on the amount of money you can spend in order to receive cash back rewards. In addition, the best cash back credit cards do not allow the rewards to expire if you are unable to accumulate a certain amount within a specific time frame.
Annual Fees and Cash Back Credit Cards
Many cash back credit cards have annual fees associated with them. At first, this annual fee may seem well worth it because you will be gaining money back throughout the year from your purchases. Before you go applying for a cash back credit card with an annual fee, however, make sure you will be able to get back enough money to pay back the annual fee, plus keep a little extra for yourself. If you do not normally spend a great deal on credit cards, you might not earn back enough money in the year to compensate for the annual fee. Take a look at your past spending habits and your projected future spending habits to decide if the annual fee is really worth it to you. In addition, research available cash back credit cards to see if there in one that does not have an annual fee that is still well suited to you and your lifestyle.
Interest Rates and Cash Back Credit Cards
Cash back credit cards are also notorious for having high interest rates. Several have great introductory APRs, some are even 0.00%, but after the introductory period is complete, the APR can be sky high. For this reason, it is generally best to avoid a cash back credit card if you will not be able to pay the balance completely at the end of each billing cycle. If you have to carry a balance, the chances are you will end up paying more in finance charges than you receive in cash back rewards. Throw in an annual fee and you could be losing a great deal of money on this card that is supposed to be paying you.
Being the Right Candidate
If you pay your credit card balance in full at the end of every billing cycle and find a cash back credit card with no annual fee, then these cards can be great! In addition, there are a variety of types of cash back credit cards available, making it possible to find one that is well-suited to you. Some provide you with checks, others add the money you have earned directly toward paying your credit card balance, others provide innovative savings plans for college, cars, and even homes. If you fit the right profile for a cash back credit card candidate, you can truly take advantage of these cards and make them work for you.