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Cash Back Reward Credit Cards (Getting Paid for Purchases)

Cash back reward credit cards are those that provide you cash back on your purchases; which in effect means that you are getting a discount albeit indirectly.

The reward programs are structured in two ways. One is a flat rate at which cash is offered back and the other is the tiered rate.

A flat rate benefits those who are not heavy spenders as it ensures them a certain amount of cash back on every purchase.

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A tiered rate benefits big spenders as the percentage of cash back starts out low but increases as your purchases attain a certain figure.

Cash back programs have percentages ranging from 0.5 to 2% depending on the program structure and the company.

It is recommended that you do not go for a tiered program unless you are in the habit of regularly paying off your balances and charge more than $ 1000 a month.  This is because you will not get the benefits of the tiered system unless your spending is on the higher side. Also, if you do not pay back your balance in full within the grace period then the cash back benefits will not compensate for the interest outgo.

When choosing a cash back card, go in for one with no annual fee. Of course, you should make sure that interest rates are comparable at the same time.

Some cash back cards do not offer cash back with purchases from every place. They exclude certain stores from the cash back advantage. Hence, it is very important that you choose a card that covers the stores that you generally frequent.

Another thing to be aware is the cap that a lot of cards put on cash back rewards. A lot of companies will offer you the chance to earn cash back up to an amount of 300 – 600 $ per year. After this amount of cash back is reached, even if you make additional purchases you will not receive any more cash back during that year.

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Companies pay you cash back in a number of ways. Some companies send you a check; some debit it directly to your bank account. Some also adjust your cash back with your monthly credit card statement. Some cards like the Fidelity Retirement Rewards American Express card deposit cash backs into your investment account with Fidelity.

There are a lot of credit cards in the market. Choosing the right one is getting more and more tedious by the day. There is just too much fine print to look at and too many things to keep track of when accumulating rewards.

In this scenario a cash back reward credit card makes sense because you get cash back on your purchases and that’s the end of it.

Just remember one thing – rewards come as a result of your spending. However this spending should be what you normally do. Spending when you have no need, and just to accumulate a reward contravenes financial logic and common sense. So don’t get carried away.


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