Selecting the best cash back credit card
By Ben Woolsey
Like reward credit cards in general, cash back credit cards appeal to consumers who enjoy getting something back when they make purchases. Unlike other forms of rewards cards, cash back credit cards offer greater flexibility. Once you've decided that a cash back credit card is what you need, choosing the best one for you is simply a matter of doing a little research.
Among the first considerations is whether a cash back credit card is the best type of credit card for you. Rewards cards usually charge higher interest rates than other credit cards. For those consumers who are do not pay off their balance in whole each month, carrying a balance can make cash back credit cards too costly.
Another factor when choosing your cash back credit card is whether the credit card charges an annual fee. Since you can find cash back cards that do not charge a fee, there is generally no reason you should have to be paying unnecessarily each year, unless required by an exclusive card program like the American Express Green or Gold Card. The Citi Dividend American Express Card is an example of a cash back credit card that does not charge annual fees.
You should also evaluate the point system each cash back card uses to reward its cardholders. Some cards may offer a higher number of points for each dollar spent, but may have a limit to the number of points you can earn in a year. A credit card that pays 1 percent cash back on all purchases and doesn't limit the number of points you can earn annually may be a better deal for consumers who use their credit cards often than a credit card with a higher cash back rate that limits your annual rebate. The HSBC MasterCard Cash Back Rewards card permits the cardholder unlimited earnings.
When looking for a credit card without annual caps, American Express and Discover Card usually do not limit earnings. Some people get around low caps by getting separate credit card accounts for each spouse, switching to the second credit card after they reach the cap on the first.
You may want a cash back card that does not offer just cash, but also provides the option of rebates in the form of gift certificates or gift cards. As an extra incentive, gift certificates for use at selected merchants sometimes yield up to double the cash back. If it's bang for the buck you value, consider a credit card that provides this choice.
Timing is everything when it comes to cash back credit cards. Since rebate points often expire after a certain period of time, it is important to find a credit card that provides you with ample time to get your rewards. As well as knowing when the rebate points expire, you should learn if the credit card you like makes you request a rebate check or if you can get it automatically. You could lose some or all of your earned points if you don't ask for your rebate and allow them to expire.
And, when you find a credit card you are happy with, avoid applying for additional cards that you may not need. Each application for a credit card results in an inquiry into your credit history, which can harm your credit score. So don't add credit cards or switch between credit cards unnecessarily.
Websites such as CreditCards.com make it easy to compare cash back credit cards according to the criteria outlined above.
And, just because you didn't choose an airline credit card doesn't mean you can't use your credit card rewards for a flight. Shop around, and with all the discount air carriers out there today, your cash back can be put toward a flight that is cheaper than if you had used a travel reward credit card that limited your air miles to a specific airline.
Published: March 2, 2006
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