Stuart Gentle Publisher at Onrec

Are Cash Back Credit Cards Beneficial?

Bank cards with a cash back function, when the bank returns a percentage of the amount spent to the card account in the form of money or points that can be converted into dollars, are extremely popular.

This is the simplest, most understandable and effective way to motivate customers to spend more. However, are such credit cards beneficial only for the banks or do clients get real value from them? Read on to find out!

How Much Cash Back Can I Get?

The most common cash back card scheme is when the bank gives a standard cashback for all purchases of no more than 3%. Therefore, most often banks distribute it as follows: 1% as standard cashback for any purchases and 2–5% as increased payouts from expenses in several purchase categories, such as traveling or dining out.

Many cash back cards, in addition to the refund percentage, provide a bunch of diverse bonuses, such as:

  •  additional amenities at airports
  •  extra liters of gasoline
  •  discounts in cafes and hotels
  •  offers at supermarkets

Cash Back Credit Card Example

Let's take a look at a typical cash back credit card example for a better understanding of how it works.

Bank of America Cash Rewards Credit Card

This card offers rather standard cash back conditions. For instance, you will receive 1% cash back on every purchase, 2% at grocery stores, and 3% on gas for the first $2,500 spent in stores and gas stations each quarter of the year. The card does not have an annual fee. Its APR rate is variable, ranging from 13.99% to 23.99%. You are also expected to pay 3% (minimum $ 10) for the transfer of funds.

You can apply to be a member of the Preferred Rewards which will raise your cash back for gas from 3% up to 5.25%, while the 2% for groceries could reach 3.5%. Such an increase would result in up to 75% more refunds on your purchases!

How to Choose a Beneficial Cash Back Credit Card?

Here are the best tips for you to make a choice of a cash back card:

  •  Compare the cost of the card's annual service and the maximum cashback amount.
  •  Check if the bank has a cash back limit for certain categories.
  •  When using a credit card, do not delay payment of debt, this may become the basis for refusing to pay cashback.
  •  Calculate the share of spending in categories with increased cashback from the total amount of your expenses. It is possible that a card with a cashback without categories will be more profitable. 

Are Cash Back Cards Good for Users?

At first glance, a card with a cashback is a tool that allows a client to make money on spending. But of course, the bank is not going to work with an unprofitable project. The bank's advantage is that the client increases non-cash payments and keeps the maximum amount of funds on the card. The main idea is to choose the cash back card wisely and compare it with alternatives. For instance, you could get fast loans with nearly instant approval at Payday Depot. Consider your options and spend wiser!