Getting the most out of Cash Back Credit Cards

A quick internet check indicates that there are at least 18 different cash back personal credit cards available. Each major credit card vendor offers a cash back credit card. They are popular with consumers because the idea of getting cash back with every purchase is very attractive but in order to get the most of a cash back credit card, there are five rules to follow. While each of these rules will increase your cash back amount, these rules taken together will maximize your cash back amount.

Rule #1: Never Pay Interest: This is absolutely rule number one. The moment you pay interest, you have lost your advantage because now you are simply exchanging money. The point is to have credit card companies paying you for using their product and not you paying them to use their product. The way you avoid paying interest is never carry a balance on your card always pay off the charges each month. Don’t use it as line of credit but rather as a substitution for cash.

Rule #2: No Annual Fee: This rule follows the same logic as rule #1. You don’t want to pay the credit card company you want them to pay you. If you are paying an annual fee, you are paying the credit card company and reducing the amount of your cash back. There are plenty of fee free cards to choose from so avoid annual fees. Be sure to review the offer and make sure the fee free is for the life of the card and not an introductory offer.

Rule #3: Choose the Best Offer for You: No cash back credit card is the same. Some pay you a higher rate for a few months and than drop the rate (e.g. 5% for all purchases for the first 3 months and 1% for all purchases after the first 3 months). Others pay a higher rate for purchases at certain places (e.g., supermarkets, gas stations, etc.) and pay lower at others. One card pays you a higher rate for weekend retail purchases. You need to review the offers and choose the one that will give you the most money based on your lifestyle. One word of caution, stay away from cards which have an earning cap. You don’t want to put a limit on the amount of your cash back.

Rule #4: Have a purchase goal: A truth in life is that goals motivate us. Since cash back is free money because you are obeying Rules one and two above, a goal will help you choose to use the cash back product when you open your wallet which means your cash back amount increases quicker. You will be playing the back nine with those new clubs before you know it.

Rule #5: Use it a lot: The way to get a lot of cash back is to use your cash back card a lot. What a revelation? The more you purchase, the more you earn. Your cash back credit card needs to be your card of choice because every pennies add up.