Cash Back Credit Cards

Written by Kevin Tavolaro
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Cash back credit cards do exactly what their name implies--they reward the cardholder by providing bonus rebates on the purchases made using the card. These cards calculate a percentage of the total spent on the account, and that percentage is then offered back to the customer. Despite the term, cash rarely changes hands. Instead, the cash amount is usually credited to the card's overall balance. As a result, cash back cards can sometimes help to offset a card's interest rate by providing a return on all expenditures.

Cash back cards are only one kind of reward-based credit cards. Other cards might reward purchases with automatic discounts for some types of goods, or at particular merchants. People who travel often might prefer a card that allows the holder to accumulate frequent flier miles based on the amount of money they spend. Some cards, especially those issued by a merchant, might credit the holder's account with a rebate based on a percentage of the total amount of money spent at that store, or for specific categories of goods.

Types of Cash Back Credit Cards

Cash back cards are also often issued by a particular merchant. These cards offer a money-back reward that increases when used at the store that issued it. Some major credit cards are also issued in conjunction with a specific store, or occasionally even a particular brand. These cards typically provide cash back rewards for all purchases, but at an increased percentage when used to make purchases from the affiliated store or brand.

Although reward-based cards may appear to offer a great deal, that isn't always the case. While many cash back credit cards are capable of reducing your balance, there are some that can become more trouble than the rewards are worth. When applying for a cash back credit card, always be sure that the interest rate is not so high as to eclipse any potential rebates. Otherwise, you might find that by spending the amount necessary to receive cash back, you're actually causing your balance to swell.

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