Cards are an instrument of non-cash payment transactions. i.e., they represent the same as money, only in the form of a piece of plastic. They are the most widespread and widespread way of paying for goods and services. Although their popularity varies from country to country, these financial tools have even taken over the primacy of money globally.
People like to use these pieces of plastic because the money is always available to them, whether they have it or not at the time.
Depending on whether you have money on your account or use a short-term consumer loan, you usually choose between credit and debit cards. You can click here for more info to see that some card issuers provide additional perks for their client, like cashback. It offers rewards on any purchase, i.e., you get a certain amount back to your account. This percentage can vary depending on the issuer, your credit history, and financial standings.
How to Apply
Before you get a cashback credit card, you need to understand what it is and how it can benefit you. Your credit history, account coverage, and the approved limit are the basis for issuing this piece of plastic. It can be of great help if you actually make certain purchases. And getting a reward for that is just an extra benefit.
When applying for this type of loan, it’s important to consider your spending habits and budget, too. Cashback cards are not for you if you don’t have good credit. Unfortunately, many people recklessly take these and use limits to the maximum. That can be a sure way to debt and financial collapse. But if you know how to stay within limits and use a cashback option wisely, you can consider having this means of payment.
Great Cashback Deals
The financial market is quite competitive, so issuers do their best to attract and retain clients. That’s how you can run onto some pretty good deals if you shop around. These are high cashback rates, lower fees, or other perks. But, of course, you need a good credit score to negotiate more favorable terms of this ‘loan.’
Some cashback cards have exclusive partnerships with certain retailers like entertainment providers, gas companies, travel agencies, etc. These can give you eye-popping returns on purchases made there. Or you might be lucky enough to get a cashback on purchases made at different places.
Look for Favorable Rates
Some issuers offer a flat reward rate that returns the same percentage every time you use your card. Others have flexible rates that usually depend on your spending. But you can lurk for deals with unlimited cashback rates. If you use this piece of plastic daily, reward points can quickly add up.
Getting the best deals means aligning spending habits with these rewards. For example, using several credit cards of the same issuer can increase your rewards rate. Or you could pair a high-yield flat-rate card with a high-yield grocery card to earn even more rewards.
Building Credit History
Credit cards can be an excellent way to build your credit history or improve it quickly. But you have to use them wisely. One way to achieve that is to keep your utilization rate low. Simply put, you shouldn’t reach the limit. Spending less than one-third of it usually brings the most benefits.
Having more than one credit card can help you lower your overall credit utilization rate. Sure, that means paying several fees and interests. But people with good spending habits know how to get the most of these and avoid financial difficulties.
For instance, if you have a spending limit of $3,000 and use half of it every month, you have a high utilization rate. However, with a solid credit history, you can negotiate a limit increase of $1,000. That can drop your utilization ratio to 30%.
Banks and utilities regularly report your payment history to the credit bureaus. Late and missed payments can harm your credit score. Also, these can annul all the benefits you might expect from earned rewards. So taking time to examine and improve your spending habits and making payments on time will go a long way.
More tips on improving your credit score are listed on the following page:
Different credit cards provide a variety of shopping perks. Before deciding which one to apply for, you should understand what they offer. And you can choose a reward option based on the shopping perks that appeal to you. Also, you may want to consider a flat-rate, bonus category, or rotating category card.
A typical cashback credit card offers 1 to 2 percent back on every dollar spent, which means you can earn $1 or $2 back on every $100 of spending. Other cards incentivize your spending with points instead of cash. You can turn them into miles, gallons, or pounds of something from particular retailers that cooperate with card issuers.
Some issuers offer a bonus or interest-free promotion to entice new users. Others might include a lowest-advertised-price match, returns and extended warranties, and many other perks. Make sure to take advantage of these to build your credit score, avoid late payments and penalties, and enjoy all the benefits of plastic money.
Besides mentioned benefits, there are a few drawbacks to cashback cards. For example, most of them require you to wait until you earn a certain amount of rewards before you can redeem them. Then, there’s another waiting period until these become available on your account.
You can redeem your cash back rewards through statement credit, lowering your card balance. Or you can choose to deposit the funds directly into your bank account and earn interest. Use your account’s statement crediting feature if you decide to redeem cashback to your bank account.
Cashback Limits and Annual Cap
Many issuers determine the maximum amount you can earn for your card activity. Their credit cards come with an earning cap, limiting the rewards you can earn per month or year. So, to maximize your cashback, try to find a card that allows you to earn more points in specific categories.
Another thing to consider is the rebate rate, which should be fair enough to make hitting the cap doable. For example, low rates mean you have to spend a lot to earn a decent amount. And if you have a large cap, that can be quite challenging.
It’s essential to understand the benefits and limitations of cashback credit cards. You’ll have to carefully track your purchases and pay particular attention to specific spending categories to get the best cashback deal. Of course, an immaculate credit history gives you an initial advance in negotiating favorable credit card terms.
Specific Spending Categories
Cash back credit cards usually reward you for spending in various categories. But even the most generous issuers rarely exceed 5% in cash back. Also, some issuers have rotating categories, i.e., change types of rewards from time to time. So it’s good to know your preferences and where you spend the most.
For example, in the first trimester, you can earn points that can be turned into gas. In the second trimester, these can be free miles. These benefits might work for someone who travels a lot. You might use your card daily, and your cashback can add up fast. But this card will be an unnecessary cost if you don’t go too far or even don’t have a car. You’ll pay interest even though you don’t earn rewards.
High Annual Fees
Cashback options often come with a hefty annual fee. Beware of these charges, as they can wipe out all the rewards you’ve earned. That can be prohibitive for many people, but it’s certainly not something you didn’t know before applying. Issuers must be quite transparent about their costs, so always keep them in mind.
Card issuers offer rewards for using their products, but that comes with a price tag. These usually have high interests, up to 30% APR, but you can try negotiating these. So before assigning for any of these, you should check this information. If a cashback rate is high, but the interest is also high, you may want to look for another deal.
Don’t forget the amount of interest on your balance and fees for late payments. To avoid paying these, always try to pay off the balance before the due date. And if you are careful with your spending, you can enjoy all the benefits of cashback credit cards. You can look for a 0% introductory offer or transfer your balance for no additional fee. You can avoid incurring interest on revolving balances and high APRs.
Cashback credit cards are an excellent way to save money when shopping. If you run onto a favorable deal, the benefits can be definitely worth the cost. Make sure to find an affordable deal that won’t cost you an arm and a leg. Also, pay your bills on time to keep the cashback benefits as high as possible.