Cash Back Credit Cards Basics 101

You receive offers in the mail all the time offering an incentive for cash back. The idea at first glance, sounds like a great idea but it may not be the right type of credit card for you. There are many things to know before you sign up.

One of the greatest things you need to do is figure out what it is you want from a cash back credit card. Do you want one where you can get cash back or are you okay with getting points that go towards merchandise? What type of merchandise does it offer? How do you access the points?

These are all questions that you need to ask when you look at the credit card offer. There will also be different incentives depending on the card.  

There are two types of cash back cards: some are general purpose credit cards that can be used anywhere and the others accumulate points towards incentives within their membership area.

As an example, a gas card given by a bank will look different than one from a gas company. Either one may give you cash back, an accumulation of points towards merchandise from their member merchants or a combination of cash back and rewards.

Some of these cards have annual fees so you will want to see whether the fees and the interest rate work together to save you money or cost you more. You will want to weigh the difference between the benefits of the card and the annual fee.

There are at least five different types of cash back credit cards and they usually fall into these categories:

Basic cash back rebates – these cards are the first set of cash back credit cards that hit the market. They give 1% back on all your purchases. They usually do not have an annual fee.

Everyday purchase cash back credit cards – these cards will generally give 5% cash back options on each purchase you make on everyday purchases. They will often give another 1% if you buy other purchases. They are the ones who define the categories.

Combination (hybrid) cash back credit cards – this is the type of card that allows members to get cash back after they have accumulated so many points. These usually offer less than 1% unless they are one of the newer cards. These newer credit cards will offer both cash back and airline tickets once you have accumulated enough points.

Tiered cash back credit cards – these cards are not as popular as they once were because of the 5% cash back cards. This type decreases the amount of cash back you get if your purchases don’t reach a certain amount during the year. 

Many of the better cash back cards are offered to those people who have a high credit score and a reputation for paying their credit card bills. You might want to check your credit report to see what the card companies will see for your convenience and for your peace of mind.