How to choose the best cashback credit card
There are various types of cashback credit cards. See how to choose the best one for you by following these tips.
Searching for a cashback credit card? Check these tips!
Even with the launch of numerous new credit card reward programs, cashback cards remain a top choice for many.
This sustained popularity is no surprise: cashback rewards are straightforward, easy to redeem, and provide clear value. This guide will help you find a good cashback credit card that best suits you and your needs.
How can I find the best cashback credit card?
To begin with, it’s important to understand what a cashback credit card is. This type of credit card allows you to earn a percentage of your purchases back in the form of cash rewards.
The choice of the ideal cashback card typically hinges on your monthly spending habits and the specific retailers you frequent.
After determining which type of card suits your needs, it’s essential to evaluate several other important factors.
Assess Your Spending Habits
To find the right cashback card for your needs, it’s crucial to analyze where most of your money goes.
This understanding will guide you in selecting a card that maximizes rewards for your specific spending patterns.
For instance, if you frequently buy groceries for a large family, a tiered rewards card with high cashback rates for grocery purchases would be ideal.
On the other hand, if you often indulge in dining out or entertainment, look for a card that offers bonus cash back in those categories.
If your expenses are more varied or you primarily spend in categories that don’t offer bonus rewards, a flat-rate cash back card might suit you better.
Consider the Welcome Bonuses and Annual Fees
While the earning rate is an important factor, it’s not the only consideration when choosing a cashback credit card.
Many cards feature enticing introductory bonuses, promotional 0% annual percentage rates (APRs) that let you make purchases or transfer balances without interest for a set time, and other valuable perks.
As you evaluate different cash back cards, be sure to weigh these additional benefits to find the best fit for your financial lifestyle.
Pay Attention to the Details
When a card advertises high cash-back rates, it often does not specify whether this comes with a steep annual percentage rate (APR), which can lead to dissatisfaction later.
It’s important to verify the fees associated with international transactions and whether the card includes benefits such as rental car insurance, price protection, or concierge services.
Weigh Annual Fees Against Potential Rewards
While some cards have annual fees, don’t be too quick to dismiss them. Often, these fees can be waived for the first year, giving you a chance to determine if the cash back you earn will outweigh the cost over time.
For example, a card with an annual fee might offer 6% cash back at grocery stores (up to $6,000 annually) and on streaming services, along with 3% back at gas stations and for transit, and 1% on other purchases.
If your monthly grocery bill is around $1,000, you could rack up $360 in rewards each year, easily covering the annual fee.
Know Your Credit Score
Understanding your credit score is crucial before you apply for several cards at once.
Submitting multiple applications and facing rejections can hurt your score, as credit bureaus like FICO may view this as an indicator of financial trouble.
Therefore, it’s wise to apply only for cards where you have a strong chance of approval.
Choose Your Redemption Method for Cash Back
Most cash-back credit cards provide cardholders with several ways to redeem rewards.
Typically, you can receive cash back via direct deposit, a check, or as a statement credit that reduces your outstanding balance.
Some cards also offer alternative redemption options, such as gift cards, donations to charities, purchases with select retailers, or converting cash back into points for travel and other rewards.
Remember, credit card rewards only hold value when you redeem them.
If you think these tips helped you and wish to learn more about how to understand your credit score, you can click the button below and see an article that might help you.
