Watching Your Cash Rewards Credit Cards
It feels great when you get money back from using your credit cards. It gives you a reason to use them and you feel as though you are benefitting from shopping as you would anyhow.
Is that really a good thing? Perhaps, perhaps not. That depends on you.
Cash rewards credit cards pay you back a percentage of what you spend on them. Basic purchases generally have up to 1% cash back, while other purchases may get 5% or more back, depending on the terms of the card.
If you use your credit card a lot, this can add up pretty nicely. But that does not mean it's worth it.
Why Not?
The first reason cash rewards may not be worth it for you is if the card charges an annual fee. Effectively, this takes back some of the cash rewards you would otherwise be getting. A high annual fee is rarely worth it, especially if you only use your credit card minimally.
The second reason is that the interest rate you get is generally higher than you would be paying on a plain credit card, often by several percent. This doesn't really matter if you are not carrying a balance, but if you do carry a balance it can be a big deal.
What About When It Is Worth It?
If a cash rewards credit card is right for you and your spending habits there are a few things you want to look out for, beyond the interest rate and/or annual fees.
The first is what it takes to get the best rewards. That "up to" 1% for most purchases - how do you get there? Is it within the range you are likely to spend?
You will also know what maxes out your rewards. Some cards only allow you to get a certain amount of rebate back each year. You want to get your rewards for all your purchases, so make sure you pick a card that will give them to you.
When you are thinking about applying for a card, compare the various benefits of each. This will help you to decide which has the benefits that are right for you. What appears to be the best card at first glance may not best suit you when you look more carefully. That little bit of extra time spent choosing can save you money and allow you to earn more rewards. It is very much worth it.