Cashback Cards Comparison: Get Paid to Shop!

By Matt

Credit card companies offer cashback cards which allow the user to accumulate cash as they make purchases with their credit card.  This is an alternative to traditional flight reward programs and is popular among consumers who do not travel.  Since credit cards vary in how cash rewards are calculated, the following cashback cards comparison offers tips on which credit card is right for you.

Not all cashback cards are created equal

There are as many formulas for calculating cashback rewards as there are credit cards.  Most offer a fixed percentage, usually one percent on all purchases, with up to five percent premium payout on purchases at specific categories of stores such as grocery stores and gas stations.  Some cards only offer the premium payout at their eligible partners.  In addition to the money back bonus, some credit cards will offer a sign up bonus, usually up to $100, that will be triggered when a   specified amount of purchases have been made on the card.  Still other cards allow the user to collect points which can be redeemed for cash.

How do I get paid?

Cashback cards allow you to accumulate rewards and be paid out either by check or by crediting the amount to your credit card. Some cards allow you to claim your reward at any time, while others require the cardholder to cross a threshold in accumulated cash, say $50 or $100, before a payout will be made.  Additionally, some cashback cards have a fixed limit on the amount that can be earned in a year, for example, after $500 has been paid out no more rewards will be earned.

Cashback cards comparison: Three critical considerations

1. APR. Many cards offer 0 percent on balance transfers and purchases for a limited time period.  After that, standard interest rates will kick in.  Since interest rates can vary significantly from card to card (anywhere from 10% to 22.9%, it is a good idea to read the fine print.
2. Do you carry a balance? If so, you may want to reconsider a reward card in the first place.  Cashback cards typically carry higher interest rates and are therefore more lucrative for cardholders who pay off their balance monthly.  If you carry a balance you may want to opt for a lower interest rate in lieu of the bonuses.
3. Restrictions! If a card limits your annual reward, or restricts where you earn rewards, then it might not be right for you.  Also consider whether there is an annual fee, and if sign up bonus thresholds are feasible.

As you can see, there are many factors involved when making a cashback card comparison.  As with all contracts, make sure that you read the fine print and fully understand the terms of your cardholder agreement.