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Shopping is fun and getting cash back on your purchases makes it even more fun. Cooperation between banks and brands has enabled consumers to get discounts and cashbacks on their purchases. New credit cards are being developed that specialize in offering these rewards.
But given the complexity of banking systems and the variety on offer, the decision is not easy. We’ve put together a comprehensive guide to the best cash back credit cards and what consumers should know about them. So let’s get right into it.
The Best Cash Rewards Credit Card
Banks offer many rewards for buying credit cards, but the ones that give you back a certain percentage of the amount spent are called cash back credit cards. For example, if you make a $100 purchase, the credit card will give you 2% back. So if the purchased goods are worth $100, you will get $2 as a reward.
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Credit cards have come a long way and banks offer them for specific purposes. This includes airline, gas, hotel and retail credit cards, among others. As each of these cards serves a specific purpose, the rewards are designed to complement it.
Cash Back credit cards are the simplest lot that reward users with points that can be exchanged for cash and equivalents like gift cards. With some cards, these points are automatically paid out and reflected on your bank statement.
But with most cards, the credit score increases over time, and the user has the freedom to withdraw it with cash, bank deposits, or checks.
However, some cards also come with a minimum limit for eligible purchases. These checks range from $10 to $100. Users get theoretically unlimited rewards on most cards, and the average cash back value varies from 1% to 2% depending on conditions and various criteria.
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Rewards points are similar to cash on some cards. But unlike currency, these points can only be used for specific purposes. You can only use them at selected grocery stores, clothing brands and airlines. Also, these points have no monetary value.
For example, say a 5% discount on certain clothing brands if the same number of items are offered. There’s no guarantee that you’ll get the same discount for an airline or grocery chain.
Also, with most cards, reward points are earned based on where it’s spent, not the amount spent. You get 10 points for buying a $50 shirt at a certain store.
But if you decide to spend the same amount on another brand, you might get 5 or 15 points. It depends on the partnership and terms between the card issuer and the brands.
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The goods that can be purchased through these points also vary depending on the bank’s policy. Over time, new brands enter and some decide to end their partnerships with card issuers. Therefore, there is no guarantee that consumers will continue to receive discounts for a particular brand.
Some credit cards offer good mileage rewards for frequent travelers. The miles you earn can be redeemed for airfare, lounge access, seat upgrades, and even dining at some airport lounges. Issuers have different policies for earning these miles.
Most cards give you miles for every dollar you spend on credit cards. But others only get rewards when the card is used on certain brands and products. Additionally, you can earn an increased rewards percentage when you use these cards for travel-related purchases.
Cash back credit cards offer many advantages, but they also have a number of disadvantages. So let’s take a look at the potential advantages and disadvantages that users can expect from such cards.
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Most credit cards have no annual fee. This means you don’t have to sacrifice your earned rewards on annual fees. However, there are some cards that have an annual fee, but also offer higher returns that make up for it.
Many credit cards offer sign-up bonuses, but only if you spend a certain amount in the first few months. If users spend this amount, the bonuses are worth hundreds of dollars.
Most credit card issuers have signed deals and partnerships with other brands that allow the consumer to enjoy discounts for them. It includes discounts on clothing brands, grocery stores, and even gas stations. The best part? The discount is in addition to the cash back that users receive on every purchase.
Credit cards have an introductory period, and most issuers do not charge an APR during that period. It’s basically like borrowing money but paying it back without interest. However, users should be aware that this will not last forever. So, enjoy the benefits, but don’t be fooled by the suggestion that you will go into debt.
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Cash prizes are the most simple and easy to use. Unlike hotel and tourist cards, you can spend them anywhere. Most cards do not have a minimum withdrawal amount. Therefore, users can use less than $10 of their earnings to make any purchases they want.
Cash Back credit cards pay higher than normal interest rates after the introductory phase is over. These APRs can be as high as 30%, which can be financially damaging to consumers who haven’t cleared their balances.
Although most cards do not place a limit on the maximum or minimum rewards that can be earned or redeemed, do so. Therefore, unless users can meet these restrictions, such cards function like regular credit cards.
Many issuers offer cash back credit cards at 0% current APR, but that won’t last forever. The average APR for credit cards is around 20% and even higher for cash back cards. APR is determined based on creditworthiness. Thus, consumers with insufficient credit will have higher APRs.
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Simply put, consumers who can pay off the balance in full at the end of each month are better off with such cards. Otherwise, paying interest will drain cash and leave you vulnerable to higher APRs.
When applying for a credit card, you will encounter several conditions that can be difficult for those unfamiliar with banking systems. Each of these terms affects the benefits you can get from the credit card.
To make things a little easier, we’ve compiled a list of things to consider before signing up. Let’s take a look at it.
So far, we’ve established that cash back cards are credit cards that give you back a certain percentage of the amount you spend. But within this category, there is another section on how much cashback these cards offer. They include:
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As the name suggests, these cards offer a cash back rate on all eligible purchases. 1% was the standard fee, but in recent years it has increased to 1.5%.
Most of these cards don’t set a maximum limit and offer a theoretical unlimited rewards of 1.5% on eligible purchases. Examples of such cards are:
Fixed rate cash back cards are the simplest. Users get the card, make purchases and pay cashback without any hassle. However, please note that not all transactions are eligible for cashback.
For example, most cards don’t offer cashback on balance transfers. Additionally, cash back benefits may be suspended if the card is not in good standing.
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These cards offer different cashback rates on different transactions. Earn 2% back on certain purchases like dining, groceries or travel. But for other transactions, you can earn a flat rate of 1.5%.
While most cards offer a balanced rate, some are very polarizing. You might get 2.5% at the top tier, but that hurts the card’s fixed rate. A niche group of users with high purchasing habits may find it useful.
Cards with rotating categories are the most unpredictable, as returns change every quarter. Such cards attract users, very high rates of income, i.e. 5%, it can be very tempting. But what most issuers try to hide is only a very limited set of 5% purchases.
Additionally, most cards require users to activate a 5% cash back rate before each purchase. Otherwise, the card also provides a standard 1% cash back on eligible purchases.
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In addition, they also have profit margins. For example, the Chase Freedom Flex pays 5% quarterly over $1,500. If the reward exceeds the specified amount, users will receive a reward at the standard rate of 1-1.5%.
Such cards are not suitable for general users, but again there may be a niche audience that sees them as ideal cards.
Cash back credit cards come with all the limitations. Some of them are common, some are specific to specific issuers. There are limited programs
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