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There are many cash back credit cards out there that are being offered by many credit card companies. By the reason of competition, credit card companies are looking for ways of having a good share of the market size. That is why they usually come out with different card products to care for different card user groups. So, whether you are a heavy spender, high income earner or low income earner, you will find card products that will meet your needs. If you know how to shop for credit cards, you will be surprised to find out that credit cards are not only for people with good or excellent credit scores. There are credit cards that are specifically designed for people with bad credit.

How Do cash back credit cards work?

If you hold a cash reward credit card, your card issuer will pay back to you a certain percentage of the purchase you make through the card. This amount you receive back on your purchase is known as cash back reward. The amount of cash back reward you will get varies between 0.5 to 2.5% of your purchases (net of returns) depending on the rate being offered by your card issuer. The reward can be paid directly to you or credited to your credit card.

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How to Shop for Cash back credit cards

If you are shopping for cash back credit cards, there are many features that you can watch out for. But before you start shopping, it is important that you understand that cash back credit cards are not for people with bad credit. Cash back credit cards are essentially for people with good or excellent FICO score. If you don’t know your FICO score, the best place to start is to find out what your credit score is. This will help you to determine whether you are eligible for a particular cash reward credit card or not. You can apply for your free credit report from AnnualCreditReport.com. You are entitled to one free annual credit report from each of the three major credit bureaus every year. If you spot any error or inaccuracy in your credit report, you should endeavour to follow it up for correction. Having the errors or inaccuracies in your credit report corrected can improve your credit score with few points. Such little improvement in your credit score can make a difference as you may be qualified to apply for cash back credit cards. For an example, if the credit score requirement for a cash reward credit card is 700 while your FICO score is 698, just additional 5 points can help you do the magic.

Features of cash back credit cards

I tried to compare the features of some cash back credit cards, I realised that even though the credit card companies seem to offer the same products, the features of the available cash back credit cards are not the same. If you are comparing cash back credit cards, below are some specific features anyone shopping for cash back credit cards can look out for. However, I like to mention that no cash reward credit card will have all the features. You just need to choose the one that offers you the features that suit you and forgo the ones that are not that relevant to your needs.

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• Cash Back rate: Credit card companies don’t offer the same rate as incentive to their customers. While some offers 0.5%, there are few credit card companies that offer as high as 2.5% cash back rewards. Also, you may like to find out if there is any cap on the cash back rewards you can enjoy or whether it is unlimited and it covers all purchases.
• Cash reward bonus: Besides the variable cash back rewards you can enjoy on your purchases, some credit card companies will pay you cash reward bonus of a fixed amount if you spend up to a certain amount within a period of time after your signing up.
• Expiration: You may need to find out if your cash back reward can expire or it will be available for use at any time. Some credit card companies offer cash back rewards with no expiration attached to it as long your account remains open.
• Category restriction: Before you sign up for any cash back reward card, you should find out if there is a restriction as to the category of purchase that will qualify for incentive. If there is category restriction on a card, it means that you will only be paid incentives on the purchase you make on such category of products or services only. Every other purchase outside that category will not enjoy any incentive. Also, the credit card issuer may offer category changing. This means that the fact that a category of products or services qualifies for incentive now does not mean that it will qualify for incentive next time.
• Minimum amount to redeem: Some credit card companies will not pay your cash back rewards until the amount has reached a particular amount. So, if you are not a high spender, your cash back may linger for a long period before you will be able to access it. If the card issuer is the type that their cash back rewards usually expire, you may lose your incentive if you are not able to accumulate enough rewards within the specified time frame.
• No annual fee: Before you grab a cash reward card that promises high and attractive incentives, you should endeavour to find out if you will be paying annual fee. You need to understand that credit card companies are out to make profits. If they are paying you high incentives, they must be making their money from somewhere else. One of the ways they recoup their money is through annual fee that consumers pay on their cards. In most cases, there will be a trade-off between high cash rewards and annual fee. Some credit card companies may not charge you annual fee but they will not pay high incentives to their card holders. Those that charge annual fee will likely pay higher cash back rewards. If you are not likely to spend much on your cash reward card which may allow you to enjoy huge incentives, it may be better to opt for the cash back reward cards that charge no annual fee.
• No foreign transaction fee: One of the benefits of using credit cards is that you may not need to convert your cash into another foreign currency before you can shop overseas. When you use your card to shop in another country, the transaction and currency conversion are done seamlessly. And you can even get the conversion done at good exchange rates. However, you must hold a credit card that is accepted in the foreign countries. When you use your card outside your own country, certain costs are involved in relation to the conversion and clearing. But your card issuer may pay the costs on your behalf. If this is not the case, you may be charged foreign transaction fee. For people that usually travel regularly, the cash back reward cards that don’t charge foreign transactions fee may be ideal. Also, shopping for credit cards that offer cash back rewards on air travels category may help put money back to their pocket.
• Balance transfer fee: There is no doubt that receiving cash back on your spending is enough motivation to wanting to transfer your balance into a reward credit card, especially if you are paying high interest on your card balance. However, you will need to pay balance transfer fee on the amount you are transferring from other cards. It is usually in the range of 3% of the transferred amount. You should compare the amount you will need to pay as transfer fee with the savings you tend to make from interest payment and the cash back you will enjoy on your spending. However, if the cash reward bonus is your motivation, this can be a trap. You will need to quickly pay off the transferred balance. Therefore, you may not have enough money to make significant purchase in order to enjoy the cash reward bonus.
• 0% Intro APR. 0% Intro APR means that you will not need to pay interest on the transferred amount within a specified period of time. It is your responsibility to find out the duration of the 0% Intro APR and what it covers. It will be a good deal if the 0% Intro APR covers both your purchases and the balance transferred. A 0% Intro APR credit card with longer duration will give you more time to pay off your card balance without having to pay interest on the balance.
• Annual Percentage Rate (APR). Don’t be carried away with the 0% Intro APR offer as it will not last forever. The best thing is for you to pay off the card balance within the 0% Intro APR period. The APR after the initial 0% Intro APR period has expired is always higher than the normal APR. If you are not sure you will be able to pay off the card balance or you want to carry balance on the card, it is good that you find out what the APR on the card will be after the expiration of the 0% Intro APR. The lower the APR the better.

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• Customer service: Customer service is very key to any product or service. Don’t think you will not need the help of your card issuer after you have gotten your card. You should neither assume that they will be there when you need them. Even, credit card companies know the importance of good customer service. That is why some of them specifically mention customer service as part of the benefits of using their cash back reward cards. However, whether they actually render good customer service is what you may need to find out.
• Free credit scorecard. Knowing your credit score per time can help you ensure that your credit is in a good shape. Few credit card companies offer free credit scorecard and also inform their cardholders about the number of recent inquiries on their credit.
• Free Social Security Number Alerts: It is not good to fall victim of identity theft. As part of the benefits that come with some cash back credit cards, some credit card companies send you alerts when your Social Security Number is used on an unscrupulous websites. This can save you some future headaches as you will be able to quickly take necessary actions before your identity is used to carry our transactions that can jeopardize your finance or put you into trouble.
• Fraud coverage: You can enjoy coverage if your card is lost or stolen. But you will need to report to your card issuer as soon as possible. Terms and conditions will definitely apply.
• Monthly payment due date: You should not make the mistake of assuming that your payment will become due exactly at the end of the month. The payment due date may not necessarily fall at the end of the month and this may not be convenient for you. Some cash back credit cards will allow you to choose the payment due date that is convenient for you.
• Opportunity to increase credit line: Any time you use your credit card, you are actually borrowing money from the card company. However, there is usually a cap called credit limit as to how much you can be allowed to spend on your card. Your credit limit is a function of the result of the assessment of your creditworthiness. That is, your ability to pay back your loans and card balances. You may have the opportunity to increase your credit line but this may involve paying a fee.

Warnings

Cash back credit cards offers can be very tempting. Consumers can be tempted to keep spending in order to qualify for rewards. Chasing rewards can make one end up in debts. For this reason, it may be helpful to consider the following points:

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• Don’t spend more than you can pay. The best way to enjoy cash reward credit card is not to carry balance on the card. The interest amount you will pay may cancel whatever cash rewards you enjoy. As mentioned above, the APR on cash back credit cards are usually higher than the regular credit cards. It is of no gain if a consumer has to pay interest of $100 on card balance as a result of buying what he can’t pay back in a bid to enjoy $50 cash rewards. If you don’t want to run into this trap, you need to be discipline about the way you spend.It is better that you establish a budget for yourself and ensure that you keep to it. Planning ahead about what you need may prevent you from making impulse buying.
• Read terms and conditions: Credit card companies will only advertise the attractive parts of their products. Before you sign up to any card whether cash back credit cards or otherwise, it is important that you read the terms and conditions attached to the offer.

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