Cash Back Credit Cards

Cash back cards are one of the most popular consumer cards and for good reason. These types of cards work on a simple concept: the consumer earns cash rewards for their purchases. As opposed to a points rewards system, which requires the consumer to go through the redemption process, cashback rewards come directly in the form of cash. The form of cash back rewards depends on the type of cash back card you have. In general, you can find three different categories of cash back cards:

1. Flat rate cash back
2. Tiered cash back
3. Bonus category cash back

Types of Cash Back Rewards

Flat rate cash back cards refer to a rewards system where the card offers a fixed rate of cash back on purchases, regardless of category. This type of rewards system is ideal for those who have a fairly random purchasing history and do not spend heavily on one or two categories.

Tiered cash back rewards work on the basis of differing cash back rates depending on the category of spending. With these forms of cards, you will receive a standard cash back rate on most purchases and then higher cash back rates on certain categories, which most of the time include gas, groceries, dining, entertainment and travel. Therefore, if you spend regularly, but especially on a few broad categories (i.e. you drive often or eat out regularly), then this is the ideal form of cash back.

Lastly, bonus category cash back rewards work on the concept of revolving categories. Cash back cards offering this type of reward work similar to tiered cash back rewards, with the exception that the categories that offer the highest rate of rewards change with time. Therefore, this card is great for those who are detail-oriented and are willing to regularly update their purchasing behaviors depending on the cash back rewards.

Redeeming Cash Back

While there are many ways to redeem your cash back rewards, these are the most common ways to do so:

1. Statement credit - this is a method of using your cash back rewards to pay back your credit card bill. Instead of receiving cash, your cash back rewards will be used toward paying your credit card balance.
2. Donations /charity - if you are not spending much or earning many rewards but still want to continue your card, it would be advisable to simply donate your rewards to charity. In most cases, your card issuer will let you directly transfer your cash back reward to a charitable organisation of your choice.
3. Gift cards/coupon - many card issuers may be able to offer your cash rewards in forms of gift cards. In some cases where the card issuer offers gift cards with partnered organizations, these cards may offer an extra value or may offer prices that are less than the retail value.
4. Online retail - you can often use your cash back rewards and redeem them at online stores that are partnered with your card issuer.

Considerations

There are many further points to take in mind when acquiring a cash back rewards card. Many cash back rewards cards have different rewards expiration dates. Some cards enable you to redeem rewards as long as the account is open, whereas others only let you do so for a fixed period of time.

Furthermore, some cash rewards cards also sometimes impose caps on how many rewards you can earn. Cash rewards cards tend to come with higher purchase APR than other cards. It is also important to remember that in order to earn the higher rewards rates, you need to register your card online. Keeping up with new promotions and updates will also ensure that you make the best use of your rewards card.

Getting the right cash back rewards requires you to consider a multitude of factors. One very important factor is your credit score. A higher credit score will not only improve your chance of acquiring a cash back card, but it will improve your chances of getting a cash back rewards card with a high rewards rate. Cash rewards cards that demand higher credit scores offer much higher rewards and lower interest rates than other cards that require lower credit scores. Lastly, you should identify your spending patterns in deciding what type of cash back rewards card you should get.