When you shop, you can save money with credit cards that provide cash back. These cards give you a predetermined percentage back on purchases, and you may use that money to pay off debt or increase your savings.
Best Cash Back Credit Cards
The appropriate card selection is crucial for maximizing your cash back. If you are willing to boost your bank account or reduce your credit card bill, keep on reading to learn about the aspects of choosing the best card for cash back available today.
A Cash-Back Credit Card: What Is It?
A cash-back credit card is a lending tool that offers a consumer a particular percentage of funds back on their purchases.
When you go shopping and use your cash-back credit card, you may not only save on purchases but also use these funds to repay your 1000 dollar loan, for instance. This is a great option for debt payoff or maximizing your savings.
The amount of cashback depends on the spending category and on the lending tool itself.
Some cards offer bonus categories where consumers can earn extra money, such as 4% back on dining. Other cards offer a flat rate and the same amount on all purchases.
What Is the Working Mechanism of the Cash Back Credit Card?
Do you want to learn more about how this type of credit card works?
- A consumer uses a cash-back card. You should know if your lending tool offers a flat rate for all categories of purchases or offers cash back on a certain spending category. Each time to cover the price of eligible purchases using your card, you obtain cash back. Bonus categories are included in some cards so consumers may earn a higher rewards rate on them.
- The cashback is deposited by the card provider. There is a cash-back balance on each credit card, so each time you may make an eligible purchase and pay cash back, it will be stored on this balance in the first place. While you utilize your card once in a while, cashback is calculated automatically by the provider. The end of each statement period is when this process takes place. Certain service providers may decide to issue cash back daily.
- Consumers obtain cash-back rewards. If you call your card provider or use your online account, you can redeem the points. Consumers have a chance to either request a check, deposit rewards to their checking account, or utilize additional money as a statement credit. You won’t be able to withdraw less than $20 in many cases.
Aspects for Choosing a Cash Back Card
You need to ask yourself a few questions when you are about to choose a new card. Which card will best suit your financial needs, purposes, and lifestyle?
Selecting the right card will bring you the most advantage and the biggest rewards. Apart from cash back, there may be extra benefits and perks so you should consider different options and compare them.
The first thing is to determine how much you typically spend in various areas and which features of the lending tool would be most beneficial for you.
Shop around for the most suitable card and consider these factors:
- APR. The data from Consumer Financial Protection Bureau states the difference between the interest rate and APR of the credit card. Interest rate is the price a consumer pays for borrowing funds and it is generally stated as an annual rate, which is called the APR. Consumers may avoid paying interest on their purchases provided that they pay their card balance in full every month before the due date. Some lending tools offer an introductory 0% APR.
- Fees. Some cards may have an annual fee. Are you ready to accept this option? What additional finance charges do you need to take into account?
- Bonus categories. Each card may be suitable for getting bonuses and perks in a certain spending category. Which category do you spend money on most frequently? You may get a card with rewards for dining or bonuses on groceries or gas.
- Cash-back rate. This rate is different among service providers. Think of your lifestyle and what categories you spend the most funds in to select a card.
Best Cash Back Credit Cards
Chase Freedom Flex
This card has no annual fee so many consumers can benefit from using it. You will be able to get 5% cash back on purchases for up to $1,500, 3% on drugstores and dining, 5% on travel expenses, and 1% on other costs.
Wells Fargo Active Cash Card
This lending tool offers you a 2% cash bonus on purchases and a $200 rewards bonus after you spend $1,000 in purchases during the first 3 months. There is no annual fee.
Besides, you can obtain mobile phone protection for up to $600. Be ready to pay a foreign transaction fee or avoid shopping overseas.
Discover It Cash Back
Consumers will get 5% cash back on their daily purchases. You will also get 1% on other purchases.
Credit card holders will enjoy solid bonuses even after their first 12 months of using this card.
There is no annual fee and no maximum rewards or minimum spending. This tool offers a 0% introductory APR for the first 15 months.
Credit Card Cash Back and Taxes
Cash-back crediting tools aren’t taxable in most cases. If you make purchases in specific spending categories and get cash back, you shouldn’t tax it.
The money you spend on shopping or getting back is considered a rebate and not your income. As for the interest rates on credit cards, they keep increasing, according to Statista.
The rates rose by 3.38 percentage points in the past four years, which means higher monthly costs for consumers. What are the reasons for this growth?
It was made illegal for banking institutions to increase rates on current balances. Nowadays, banks have decided to increase initial interest rates on new balances.
Besides, many Americans don’t do any research to seek cards with the best interest and benefits. About 38 percent of respondents don’t know the interest on their credit cards.
The Bottom Line
Summing up, if you get a cash-back credit card, you will be able to allocate this bonus to debt payoff or use it to maximize your savings.
Getting more cashback is a wonderful way to set aside more monthly funds.
If you don’t carry a balance, pay with your cash-back card for eligible purchases, check the web shopping platform for special offers and complete the welcome bonus demands, and you will maximize your rewards.