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Cash back credit cards: Show me the money!

By Ben Woolsey

Cash back credit cards are one of the greatest innovations since sliced bread. Most carry no annual fee, are accepted by merchants the world over and allow you to earn a cash back rebate on virtually every purchase or cash advance you make with the credit card. But not all cash back credit cards are created equally, especially when it comes to how the reward is actually paid to the customer.

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This raises the question of how do you determine the way you get paid cash back rebates and which is best? Unfortunately, there is no particular rhyme or reason to how cash back rewards payments are made and especially how the credit card issuers disclose this information. A great place to start, however, is to review the credit card offer's terms and conditions. On the CreditCards.com website, this information can be found by clicking on the "Apply Here" button located next to every card offer. This will take you to a page with a blank application that also includes an underlined link called either "terms and conditions" or "pricing and terms", depending on the banking partner that issues the credit card.

Once you click on the terms and conditions link, you will be taken to a rather lengthy page that contains all the APRs, fees and other conditions of card membership. Usually, under a section called "Rewards" you will find the language that describes how your cash back will be earned and paid to you. These are the fine print details that will allow you to determine if you prefer one sort of cash back reward process over another. When deciding which credit card best suits your needs, comparison of cash rebate delivery procedures can be as important as other more common card features, like intro rates and fees.

The methods of cash back payments can be as varied as the number of reward credit cards on the market. These include statement credits, checks, gift cards or deposits into special bank accounts. Any one method is not necessarily better than another. It generally boils down to whatever type of repayment that you find most rewarding. Some people find a statement credit to be the simplest and most direct method of receiving their cash back. This type of payment tends to be the most immediate, since it is most often made on a monthly basis. The down side of statement credits is that it can be perceived as a mere reduction in outstanding credit card debt, rather than cash in hand.

Cash back credit cards that pay customers with a check generally do so at the end of a calendar year or after the cash back rebate has reached a certain threshold, such as $25. The great thing about getting a check is that it seems like a gift and is a really tangible manifestation of the cash back reward that has been earned by using the credit card. The only potential negative of getting a check is that it can take a little longer to earn, since an earnings threshold must be met, or you have to wait until the end of the year before it comes in the mail.

Some credit card issuers require customers to call to order their cash back rebate check. Others send it automatically, regardless of the amount earned. These can be important details to understand before signing up for a card and can only be understood by studying the card terms and conditions.

Another potential benefit of those cash back reward programs that pay by check is that many allow you to choose to receive your final reward in the form of a gift certificate, normally involving a much higher (sometimes double) value than if getting a check.

If you are the type of person who always pays off their credit card balance every month, a cash back credit card is a great choice. But before you choose, do a little research and decide what will give you the biggest bang for the buck.

To comment on this story, write Editors@CreditCards.com.

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Published: January 2, 2006


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