Credit cards are a popular alternative to cash, which some people now consider as an archaic form of payment. It gives you a certain degree of financial freedom that no other payment mode has ever reached. In recent years, credit cards have gone beyond being mere charge cards and have metamorphosed into avenues for earning exciting rewards.
Amongst the various options, money back rewards surpass other types of rewards cards and are often the personal favorite for many individuals.
How money back credit cards work
Credit cards carry fees payable to the issuer that apply to both the cardholder and the receiving party. The one, which applies to the receiver of the payment, is what issuers share with cardholders in the form of cash incentives. So when you make a purchase with your money back credit cards, the amount that the merchant pays to the issuer becomes your money back reward. Meaning, the issuer, usually a bank, shares with you its gains from your credit card use.
More you charge more you earn
Money back credit cards give you cash incentives commensurate to the amount charged on the card. In other words, the more you use your credit card the more rewards you earn. Typically, card issuers offer different money back rates depending on the kind of credit card transaction and the goods or services acquired. Purchases made through credit cards have the highest cash back rate.
This is specifically true on grocery purchases as it holds high rates, which can go up to 6% for most issuers. Rates can also increase whenever the issuing company gives out promotional money back rates to increase revenues on finance charges within a specified duration. For instance, some issuers give out increased reward rates but that is only effective within the first few months of credit card use.
Total win-win situation
The rewards system assumed by money back credit cards benefits both issuer and cardholder. This is what makes it the most preferred form of reward by consumers and issuing companies as well. However, you have to make full payments on your credit card bill as leaving a balance will counteract your earning potential and nullify your rewards in essence.
Money back credit cards are growing in popularity lately and are now a staple for discount shoppers. If you wish to get one, credit experts strongly recommend knowing how to get the best rates so you can effectively maximize your money back earnings. As always, read the fine print before you sign-up for money back credit cards or any financial product in general.
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