Looking for a cashback credit card? We’ll help you find the right one.
Currently, many banks and companies offer cashback as a benefit to their clients by making agreements with commercial establishments where customers usually make their purchases.
When you purchase with a cashback card, the merchant transfers a percentage of the purchase value to the card company. The company then returns a fraction of that amount to you, based on your usage of the credit card.
Instead of accumulating points or miles, whose value you need to calculate, you receive a straightforward percentage back, which can be applied as a statement credit, a deposit into your bank account, or even a check.
Therefore, before applying for a cashback card, it’s important to follow some steps to choose the one that best suits your needs.
How do I choose the best cashback credit card?
In what way selecting the best cashback scheme is dependent upon your volume of expenditure, in most cases on a monthly basis, and the types of establishments that you shop at.
In case you determine which linear type of card is appropriate for you, now you have to consider several more expectations, which have very particular importance.
Pay attention to the details
A wise buyer will not only look at the expenditure types and the kind of card that will help them maximize the rewards; there are other details worth looking at in the contract.
When a card promises high cashback, it does not usually directly swear whether there is a high APR as well, and many come to rue it.
You should also ascertain how much the card would charge for overseas purchases and if it comes along with added values such as coverage for car rentals, price insurance, or concierge services.
These have as much importance as they may seem bothersome to read when going through the terms and conditions of the card.
Compare the annual fee to your potential rewards
Some cards have an annual fee, but you shouldn’t dismiss a card immediately because of this.
In some cases, the fee may be waived for the first year, allowing you time to assess whether the cashback you earn will offset the cost in the long run.
For example, a card with an annual fee might offer 6% cashback at supermarkets (up to $6,000 annually) and on streaming services, 3% at gas stations and on transportation, and 1% on other purchases.
If you spend around $1,000 a month on groceries, you could earn $360 in rewards each year, easily covering the annual fee.
Know your credit score
It’s crucial to understand your credit score before applying for multiple cards at once. Applying for too many cards and getting rejected can negatively affect your credit score.
Credit agencies, like FICO, might interpret this as a sign of financial trouble.
Therefore, make sure you apply only for cards for which you have a good chance of being approved.
Choose how you want to redeem your cashback
Most cashback credit cards give cardholders several options for redeeming rewards. You can usually apply cashback as a direct deposit, a check, or as a statement credit to reduce your balance.
Additionally, some cards offer alternative redemption options like gift cards, donations to charity, purchases with select merchants, or converting cashback into points for travel and more.
Keep in mind that credit card rewards only have value when you actually redeem them.
Decide if you’re willing to pay an annual fee
Many cashback cards come with no annual fee, and they still offer solid rewards. Nevertheless, there are some cards that can give higher cashback rates, but they might have annual fees.
Still, even though one must pay this additional expense, the card is likely to offer extra benefits that would make such a charge reasonable.
Before ruling out a cashback card with an annual fee, do the math to see if the rewards and perks you’ll earn outweigh the cost.
Cashback, yearly perks, or other benefits often compensate for the cost incurred.
These types of cards also come with accompanying fees; in case you pick such a card, look at the reward system and how advantageous it is before making a decision.
If you found these tips helpful and wish to know more about the responsible use of your credit card, here’s an article that will help you do just that.