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Cash back credit cards — Not for everyone
Years ago, airlines and other merchants began to offer incentives to shop with them by offering mileage or discounts to choose them over a competitor. These programs evolved into specialized credit cards. Such cards offer one of the best kinds of rewards —— hard cash. Some of those cards are for use only at a particular department store, gasoline station, or airline. Others, from MasterCard, Visa, Discover, and other large financial institutions, can be used anywhere like any other credit card. Sometimes 'hard cash' takes various forms, though. Discounts on particular items, such as furniture or gasoline, are common. Discounts range in the 1-2% range, with as much as 5% at some gasoline stations. Also available are credit card reward programs that truly do offer real money in the form of general discounts on ANY purchases. Others offer to store the cash back in the form of a negative balance on the account. Such credit can be used towards future purchases. As with any credit card offer, it's important to read the agreement carefully. Check for transfer fees, annual charges, caps or floors on purchase amounts, etc. Big ticket items can mean big rewards, but some cards do have a maximum amount allowed. Be sure to look for a cash back credit card with no annual fee and the lowest available APR. Annual fees can easily wipe out any savings or discount and cash back cards tend to have higher APRs. Of course, if you pay off the bill when it comes due, the APR is irrelevant. But there are usually months here or there where you simply must carry a balance. Incidentally, it's a little known fact that issuers are not typically REQUIRED to forego charging interest when you pay off the entire amount. Technically, interest charges begin to accumulate from the moment of purchase, not from the day your statement is created. Most refrain from charging that interest as a 'courtesy' to their customers. Read the fine print. The key to using a cash back credit card is to consistently pay off any outstanding balance when the bill comes. Otherwise, you will pay more due to the higher interest rate. Take care that your credit card reward doesn't become a punishment.
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