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Many
merchants and large department stores offer their
customers
credit cards
with a “cash back” option, hoping that the credit
cards will entice their customers to do more of
their shopping in their particular store, and
charge their purchases with the credit card in
order to receive the cash back
reward instead of making purchases with cash.
The two most common forms of cash back
programs will either provide cardholders with a
credit to their credit card balance when a
purchase is made using the card, or the cardholder
will receive coupons in the mail to use in the
store during the next visit in order to receive a
certain dollar amount off their total purchase
price. The actual dollar
amount of “cash back” reward you receive will
depend on the terms and conditions of the program
itself, which vary from card to card, as well as
the actual amount you charge on the card that
offers the cash back incentive.
Cash back credit cards are extremely
popular with department stores, because the only
way a cardholder can benefit from receiving cash
back is to make purchases using the credit card in
their store.
If you
are deciding whether or not a cash back credit
card is the best option for your spending habits
and credit needs, consider whether or not you are
a frequent shopper in any particular department
store. If you tend to do a lot
of shopping in a store that offers a cash back
program, it makes sense for you to obtain their
cash back credit card. The
trick to using a cash back credit card, which tend
to have a higher
interest rate
than a card without the cash back program, is to
make purchases each month on the card that you
will be able to pay off on a monthly basis.
You’ll receive the rewards, and pay minimal
interest on the purchases since you are paying
them off on a regular basis.
Not
all
cash back
credit cards are limited to a specific store,
however. There are some credit
card companies who offer a regular Visa or MasterCard
that can be used everywhere credit cards are
accepted and who offer cash back reward programs
for spending done using the card.
If you are a person who doesn’t really shop
in one specific store all of the time, you’ll want
to research the credit cards
that are not store specific that offer the cash
back rewards. Be sure to
research the terms and conditions of the card
completely before signing up, as many cash back
credit cards require you to pay an annual fee,
have much higher interest rates
than cards without cash back rewards, and in some
cases- the credit card may require you to carry a
balance from one month to the next in order to
receive the cash back benefits, which means that
you will probably pay more in interest than you
will receive in cash back credit.
Try to determine how much money you plan to
charge on the credit card throughout the year, and
then following the conditions of the cash back
program, figure out how much cash back those
purchases are likely to earn you.
Once you have these numbers, you’ll be able
to decide whether or not the annual fee you pay
for the cash back credit card is worth the cash
back you actually receive. If
your annual fee is significantly higher than the
amount you estimate you’ll receive in cash back,
you’d be better off selecting a credit card with
lower interest and no annual fee that does not
offer the cash back rewards.
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