The Highs And Lows Of Cash Back Credit Cards

When it comes to cash back credit card deals, the idea of getting something for nothing is what attracts people to these products. This article aims to assess whether this is the truth or whether you might be better off getting a better deal for your money elsewhere. Some of the credit cards products on the market offer cash back, which means that you receive a certain amount of money each year for using the card, but when you look into the returns you receive compared to the money you spend, is it really worth investing in one of these cards over other card types such as the reward scheme credit cards?

The way in which cash back credit cards work means that the amount of money you receive as 'cash back' is a percentage of how much you have spent on the card, usually between 0.5 and 4%. The cash back you earn is then given to you either as a cheque or is debited to your credit card account annually. The essential premise is that the more money you spend on your credit card the more you receive. It can be a good strategy, particularly if you use your credit card carefully - for example, the prospect of earning money simply paying for your normal groceries is quite appealing, as long as your interest payments don't outweigh the cash you earn.

As with all credit cards, the only way to get the best out of a cash back card is to pay back the balance in full every month. This means you are not paying interest on the money you have borrowed and losing out on your cash back. Before choosing your card look into what the APR is set at after any introductory period, and make sure you can afford to pay the monthly repayments to avoid paying over the odds.

The importance of reading the small print when entering into any credit agreement can't be stressed enough, especially when some cards charge well over the average 16.9% APR (such as cards created for those with bad credit ratings or CCJs). Always staying one step ahead of fees and late charges is the name of the game as a credit card holder as avoiding these will only help to boost your credit rating.

In order to earn rebates on cash back credit cards it is important to pay off the credit card balance each month in full. If the card isn't paid off in full then interest will be applied to the card, which will usually far exceed any potential earnings from the cash back deal. For example, the Egg Money Master Card gives a standard 1% cash back per year, with a minimum payment of 5, but the APR is 7.9% which, while the annual interest is low compared to other credit cards where the average is 16.9%, is still enough to counteract your annual cash back returns.

Other benefits of choosing a cash back credit card include the extensive interest free period you automatically qualify for when paying for goods with your card as part of the credit card introductory offer. The average time frame is 50 days, allowing you to fully pay off the balance on your card whilst still taking advantage of the protection the credit card offers on your purchases. Cash back cards also are a beneficial investment if used in conjunction with other reward features inherent in your credit card deal. Some cards, for example, have retail affiliates and using your cash card instead of your debit card with these retail outlets will also benefit your balance as well as qualifying you for additional bonuses. Check who your card is associated with and you could use this relationship to your advantage.

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David Kelly has reviewed how to reap the rewards and see the warning signs of cash back Credit schemes. Are they something for nothing or whether cash back credit cards are effective?

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