Nothing makes a credit card more enticing than the promise of receiving cash back with every purchase. Such an arrangement makes perfect sense in the minds of people who’re going to use their credit cards with or without incentives. But grabbing at the first cash back credit card offer that comes your way could create problems for your finances. Points and privileges still have their place, but card issuers recognize the power of luring consumers with cold, hard cash.
There’s no question that the credit card industry is still immensely profitable. Issuers manage to draw sensible consumers in with promises of free money and juicy bonuses. But responsible consumers need to consider why card issuers would make these offers to begin with. Although it might be gratifying to think that they want the best for us, the reality is that we can’t count on them being so kind.
Cash back cards may not be all you expected if you don’t choose the right card. Pay attention to the following points to come out ahead of the credit card company.
Don’t Make It A Game
Your ploy to open several new cards just to cash in on the signup bonuses then cancel them after you receive the cash will backfire. Opening and closing credit cards at random will hurt your credit score. Remember that your credit utilization ratio is factored into your final score so any increase in that percentage will cause your score to drop. Apart from that, you’ll forfeit your rebates on the cards if you don’t meet certain limits. And if you overspend just to qualify for the rebates, you’ll hurt your finances more than anything else.
Do The Math
Don’t get sucked in by attractive 2-6 percent cash back offers. The average cash back rebate is 1 percent, so be wary of unusually high offers. If you fail to read the conditions of those high percentage rebates, you’ll realize too late that they’re restrictive or almost impossible to obtain.
For instance, some cards promise 5 percent returns on groceries. But if you do most of your grocery shopping at a membership warehouse, you won’t qualify for the rebate – card issuers typically exclude some types of stores from their programs.
Revolving categories also make it harder for card holders to keep track and get the benefits of high percentage deals. What’s worse, is that you have to sign up to be included in the higher rebate categories. So if you go shopping without explicit confirmation from the credit card company, the rewards will never materialize.
In other cases, you have to agree to high annual fees in order to qualify for the inflated rebates. According to reports, over 65% percent of card holders never cash in on their rebates. The cloudy terms and constant roadblocks by card issuers are both reasons some consumers give up in frustration.
Read The Fine Print
Every card has its own set of rules as it relates to redemptions, expirations and forfeitures. For example, a late payment could lead to the loss of months of accumulated cash back rebates. Imposed pay increments are another way that card issuers hold back some of your money. So if your account has an irregular amount – as often happens- it will sit in the account until you reach the required minimum.
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