Right now, we are all trying to find out how to get a little more for our money. The events of the last eighteen months have left us all feeling a little more budget-conscious, and any opportunities to save or to make a little extra money are more than welcome. Things are looking brighter out there, but we still need to be sensible. That is why so many people out there are looking into whether cash back credit cards are right for them. Now, it is always sensible to do your research before you commit to any financial agreement, so let’s break down what you need to know about how cash back credit cards work.
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What Is a Cash Back Credit Card?
Simply put, a cash back credit card is similar to a rewards credit card. The card provider offers rewards for money spent on the card, like air miles on a travel reward card. With a cash back credit card, you get a cash reward for money spent. For example, if your cash back credit card offers a 1% reward rate, you will earn a dollar for every $100 that you spend using the card.
Why Do Credit Card Companies Offer Cash Back?
Credit card companies offer cash back rewards to encourage you to use the credit card instead of using cash or a debit card. We all know that there is no such thing as free money, but we are also smart enough to take advantage of a good reward when we see one.
What Are the Different Kinds of Cash Back Credit Cards?
Cash back credit cards are often split into three categories. The first category covers cards with flat rewards rates. That means that you get the same cash back reward regardless of where you are spending it. There are also tiered reward cards, which offer you an incentive to spend in particular locations. A gas reward will offer a higher reward rate at gas stations, while a dining reward card will reward you more for spending money at restaurants and eateries.
Finally, a rotating reward card will, as the name suggests, rotate the percentages every few months. While you may be looking at a higher percentage for some months of the year, it is important to note that this is a better choice for anyone with more than one credit card who does not mind keeping track of the changing rates.
Cash back reward cards also offer additional benefits that vary depending on the provider. There are different ways that you can redeem your rewards. Some people prefer to have the cash rewards transferred directly into their account, but you can also apply for a cheque or gift cards.
Do I Need a Good Credit Score for a Cash Back Credit Card?
Generally speaking, you would need a fair or good credit score to be eligible for a cash back credit card. There are cards that offer higher cash back rates, but these are offered to those with very good credit scores. We are all feeling more optimistic about our future at the moment but remember that borrowing and missed repayments will be marked on your credit score. It is worth noting that some cash back credit cards require a monthly payment, but there are some which are free to apply for.