Credit cards with cashback rewards are a popular way to save money on everyday purchases, but what exactly does cashback mean, and how can it benefit you? It's not just about getting a small percentage back on your purchases—it also involves a deeper understanding of how credit cards work and how to maximize your rewards. So, whether you're a cashback enthusiast or a newbie trying to get the best value out of your credit cards, let's dive deep into the world of cashback!
What Does Cashback Mean For Credit Cards Table of Contents
What is cashback?
Cashback is a reward program offered by credit card companies to incentivize customers to use their credit cards for purchases. Its primary purpose is to give a percentage of the money spent back to the cardholder. Depending on the credit card issuer and the specific cashback program, the percentage can range from 1% to 5% or even more on certain purchases.
How does cashback work?
Once you have a credit card with cashback rewards, all you need to do is use that credit card for purchases. The cashback will automatically be calculated based on the percentage specified by your credit card issuer. You will then be able to redeem your cashback in a few different ways, such as statement credits, gift cards, or straight deposits into your bank account.
Different types of cashback
Cashback credit cards can be categorized into three main types:
1. Flat-rate cashback cards: These cards offer a fixed percentage of cashback on all purchases, regardless of where you shop or what you buy.
2. Bonus category cashback cards: These cards offer a higher percentage of cashback on certain categories, such as groceries or gas, and a lower percentage on all other purchases.
3. Rotating category cashback cards: These cards offer a higher percentage of cashback on specific categories that change every few months, such as dining or online shopping, and a lower percentage on all other purchases.
Fees associated with cashback credit cards
While cashback credit cards can save you money, it's essential to understand the fees associated with them. Some cards come with an annual fee, which can range from $25 to $95 or more. Additionally, cashback credit cards usually have higher interest rates than non-reward cards. Therefore, it's crucial to pay your balance in full each month to avoid accruing interest that would negate your cashback rewards.
What Does Cashback Mean For Credit Cards Example:
Imagine you have a flat-rate cashback credit card that offers 2% cashback on all purchases. If you spend $1,000 in a month, you'll get $20 back in cash rewards. Alternatively, if you have a bonus category cashback card that offers 5% cashback on groceries and 1% on all other purchases, you might earn $25 for spending $500 on groceries and $5 for spending $500 on other purchases, totaling $30 in cash rewards for the same spending.
Now that you know what cashback means for credit cards and its benefits, it's time to make the most out of your purchases. Identify your spending habits and choose a cashback credit card that aligns with them, providing the best rewards. Remember, every time you swipe your card, you're getting closer to earning those valuable cashback rewards!
Feel free to share this guide with your friends and family who are looking to maximize their credit card benefits. Explore other guides on Flik Eco for more personal finance tips and tricks, which could impact your financial journey!