In today’s competitive credit card market, many financial institutions offer types of benefits to consumers as a way to entice credit card users to apply for their organization’s card. These rewards are often points which cardholders may use for various goods and services.
Another popular benefit is cashback credit cards.This type of program began in the 1990’s as an incentive to gain consumers attention. Since that time, the cashback benefits of credit cards are increasingly popular with consumers. Sometimes the cash back card can be confusing. Here are some steps you can take that will help you understand cash back cards and learn how to get cash back from your credit card.
How Cashback Credit Cards Work
• Earn Cash Back through Purchase Points
This type of reward is uncomplicated. For every dollar you spend with your credit card, you earn a point. The points have varying values ranging from 1% to 5% of the amount purchased. On a $100 purchase with a point system value of 1%, you will earn one dollar when you make a $100 purchase.
• Earn Cash Back through the Percentages
This system is very similar to the point system, except the points are removed from the equation leaving a simple percentage to cashback conversion.
How Purchases Earn Cashback
There are several different methods that credit card companies use when determining how consumers earn cashback rewards.
• Rotating Purchase Categories
In this system, a credit card company will change the percentage of cashback earned on a quarterly basis. This involves breaking consumer’s purchases into categories and offering different reward percentages for different types of purchases. The most popular categories are gasoline, groceries, entertainment, and other purchases. In the rotating system, each category has a different percentage value each month. For example, a card company may offer 5% cashback on gasoline; 3% on groceries, and 1% cashback on all other purchases for three months. The following quarters, the categories will have different cashback percentages. This system is common, but it can be difficult to know if the card is right for you.
• Tiered Category Cards
Many consumers find that a credit card with a tiered organization of purchase categories is beneficial. With these cards, the percentages for each category do not change. If your card offers you 3% cashback on purchases of gasoline, then that is your amount of cashback. Often, card companies will allow you to choose how you would like your cashback percentages distributed among the tiers. If you understand your purchasing habits and are willing to plan your purchases, this sort of card can be a great advantage.
• Flat Rate Cashback Card
The flat rate card is by far the easiest cashback card available. All of the credit card purchases made with this card have a set percentage of cashback. The amount of cashback is usually between 1.5% and 2%. If you are not interested in calculating various percentages for the cash back categories, this could be the right card for you.
Research Different Card Options
Once you understand how cashback credit cards work, the next step is to do a little research about the differing offers from the major credit card companies. It is important to look into what is available before you apply for a credit card because every application for a new credit card can negatively impact your credit score.Too many inquiries about your credit history by various credit card companies will lower your overall credit score. Many credit monitoring services will suggest credit cards to their customers based on the consumer’s credit report. These typically show you the card you should apply for that offers the best chance of acceptance. This eliminates the need for more applications and checks on your credit report.
How to Apply
The credit card application process is straightforward. Once you decide which card has the greatest chance of acceptance and the cash back benefits you want, you can fill out an application at the credit card company’s website or call the company and request an application by mail. Often credit card companies will allow you to apply over the phone. You may be able to find out your application status almost immediately if you are applying online or over the phone. Applications made via the post office will take longer. By following these steps, should be able to secure a great cash back credit card quickly and be on your way to rewards that you can use.