When shopping for a new credit card, often, consumers make the mistake of focusing mostly on the two characteristics that we hear about the most: the interest rate and the fees. While these two items are very important and should be considered carefully, there is more to look at than just APR and fees. Often, these are the items that are evaluated the most because a majority of credit card customers don’t pay their cards in full each month so APR becomes a factor.
Some consumers do practice good credit habits and pay their cards off in full each month and for them, the APR or annual percentage rate isn’t as important. If you are one of those people, you might want to look at a cash back credit card.
Does a cash back credit card mean that at certain times you will receive an envelope with crisp new cash to spend on whatever you want? No, but some cards are not far off of that. If you are looking for a card that is purely a cash back card, you will find many credit cards that send you a rebate check normally once a year that equals some percentage of your purchases.
Just like APR, credit card companies often do not make it easy for you to calculate your rebate. While the practice of complicated calculations to throw off the consumer is getting more transparent and easier to understand, it still normally isn’t as easy as 3% of your annual purchases.
Do you remember the Discover Card? This card was introduced in the mid 1980s and was the first card to offer a cash back rebate and no annual fee. In the 80’s, these two benefits were virtually unheard of to consumers so this, coupled with lower merchant fees for the retailers, made the discover card a hit.
While it didn’t overtake rivals like Visa or American Express, it did force these companies to offer cash back cards of their own. From then until now, cash back cards have been a staple with nearly every credit card company or issuing bank offering at least one.
Since the 1980’s, cash back cards have evolved and now, not only can the consumer have a card that pays a cash rebate, other cards pay the rebate in the form of airline miles, gas rewards, charitable donations, or investment products like 529 college funds. The consumer can find cards in just about any category where they are spending the most.
Most cards like this require you to have good or excellent credit. There are a small amount of cards that offer those with damaged credit a chance to financially rebuild while still earning rewards points but those cards are rare.
Remember one very important thing: Just because it offers you points, rebates, and gadgets and trinkets, that doesn’t mean that you should allow yourself to get in to interest trouble just to get your rebates. You cannot hold a balance on your card because the interest rate you are paying will be more than your rewards so in the end you will still lose money.