An Introduction to Cash Back Credit Cards

Spread the love

 

I realize that for many, even hearing the words credit card may evoke a visceral reaction. This is likely due to misconceptions about credit cards. An idea that somehow, they are inherently damaging or risky.

However, you have nothing to fear from credit cards as long as you remember to be responsible and pay your full statement balance on time every month.

NEVER look at credit as “free money,” because that sort of mentality can lead to you making purchases that you may be unable to pay off. Only use the credit card to purchase things you can afford with cash; basically, treat it like a debit card. You should use a credit card for all your purchases for many reasons. The three main reasons are accruing rewards, consumer protections, and increasing credit score.

cash back credit cards

Cash Back

At the core of a cash back card is the cash return on spending. For every dollar you spend on that credit card, you will receive a percent of that back in the form of cash or statement credit. The rates differ depending on the card, but every credit card will give you a minimum of 1% back. Many cards give bonus cash back on specific categories. The American Express Blue Cash Preferred, for instance, gives 6% back on grocery purchases. Look at it as a 1%-6% sale on everything you ever buy.

Cash back cards also come with “new user” sign-up bonuses that can be lucrative. Scroll down below to see some of the current best offers.

Have you ever gone out to dinner with friends and had to split a bill seven ways? If possible, you should always pay for it then get paid back later. With the availability of P2P payment apps like Venmo or Square Cash, as long as your friends are reliable, getting reimbursed is super easy. However, why would you want to be the one having to do this? Because in paying the bill with your credit card and getting reimbursed by your friends later, you are earning cash back for their meals.

Let’s say 10 people go to dinner and the total is $200 after tax and tip, with each person paying $20 each. If you paid for the whole bill with a Chase Freedom or Discover It card during a restaurant quarter, you would get 5% cash back (though 1% during non-restaurant quarters), or $10 back for that meal. At $20 per meal, you essentially only spent $10 on your own meal due to the cash back return. Furthermore, you’d be $200 closer to hitting the sign-up bonus spend requirement on the card. The Chase Freedom has a $150 cash bonus after spending $500 on the card. If you did this $200 outing with a large group of people three times, the $600 total puts you over the $500 minimum spend required to earn your $150 bonus. That $150 plus $600 x 5% bonus equals $180 total you’re receiving, for spending only $60 total on those 3 meals.

Higher tier rewards cards can yield even more benefits or cash back, but if you are new to maintaining credit or do not have a high enough credit score to qualify, you may be better off with a cash back card.

Credit Score Improvement

Even more important that accruing extra cash is the positive impact that credit cards can have on your credit score.

The earlier you open a card, the earlier you get a start on your credit history. Having a long, established credit history with perfect payment history will increase your score and leave you open to receiving the best (lowest) interest rates when you one day need a mortgage, lease, or loan. This is because it shows banks that you know how to handle credit responsibly. Average Age of Credit accounts for 15% of your FICO score, which is nothing to sneeze at.

Consumer Protections

Most credit cards offer consumer protections that debit cards do not, like extended warranty, return protection, price-match protection, theft protection, travel insurance. These vary based on the specific credit card you have.

Protecting against fraud is a major benefit to using credit cards. If your debit card is stolen, that’s a direct line of access to your bank account. Even if you’re not liable, it may take time for you to have access to those funds again while the bank sorts out the fraudulent charges. If a credit card is stolen or hacked, all you need to do is cancel the charge, cancel the card, and get a new number while the bank deals with everything else.

Best Cashback Cards for beginners:

I’ve included direct links to the application page for cash back credit cards. Please note that the links for both Chase cards are referral links, and if you feel like using them, it can go a long way to help maintain this website. You should, however, pick whichever card makes most sense for your spending. Ie: if you spend mostly on groceries and gas, it makes way more sense to use the AMEX Blue Cash Preferred. Make sure to read all the terms and conditions associated with your cards. The information below is a quick summary. 

1. Chase Freedom

Chase Freedom cash back

 

2. Discover It

  • 5% Cash Back on rotating categories every quarter, such as dining, entertainment, groceries, and gas
  • 1% Cash Back on all other purchases
  • Double Cash Back- No sign up bonus, but at the end of the first year, Discover will double the total amount of cash back you earned that year
  • 0% intro APR on purchases (14 months)
  • Free FICO Credit Score
  • No Annual Fee
  • Apply Here

discover it cash back credit card

 

3. American Express Blue Cash Preferred

amex blue cash preferred cash back credit card

 

4. Citi Double Cash

citi double cash cash back credit card

 

5. Chase Freedom Unlimited

chase freedom unlimited cash back credit card

 

 

6. U.S. Bank Cash+

  • $100 cash bonus after $500 spend on purchases within the first 90 days of account opening
  • There are 5%, 2%, and 1% cash back categories (Must designate a category to receive 5% cash back on, and designate one for 2%)
  • 5% Cash Back on first $2000 spend in designated category
  • 2% Cash Back is unlimited on a designated category
  • 1% on all other purchases outside the 5% and 2% categories
  • No Annual Fee
  • Apply Here

us bank cash back credit cards

 

7. Bank of America Cash Rewards

  • $150 cash bonus after $1,000 spend on purchases within the first 90 days of account opening
  • 2% at grocery stores and wholesale clubs, and 3% on gas for the first $2,500 in combined grocery/wholesale club/gas purchases each quarter
  • 1% Cash Back on all other purchases
  • 0% intro APR on purchases (12 billing cycles)
  • 10% customer bonus every time you redeem your cash back into a Bank of America checking or savings account
  • No Annual Fee
  • Appy Here

bank of america cash rewards

Leave a Reply

Your email address will not be published. Required fields are marked *