The Return of Cash Back Credit Cards

Credit card companies are on the hunt again, looking for new customers and using tantalizing cash back reward programs as bait. In this rough economy anything laced with money seems like a good idea. With careful consideration, planning and acknowledgment of the new rules that come with the new cash back, you can use this system to your advantage.

Basically speaking, when credit card companies are talking about cash back rewards, they are saying that they will give you back a percentage of what you spend on certain things. For instance, Discovery card gives a 5% cash back reward on fashion shopping. Lets say you make a $400 purchase: At 5% you get $20 back for buying things you were going to buy anyway. Typically speaking Discovery card actually rotates what goods are available for rewards, but generally rotates between gas, fashion items, and amusement park tickets.

Many credit cards are making new rules to tie with these cash rewards, so be aware. If you pay late even once, you risk any and all rewards you accrued up until that point in time, though some will offer reinstatement fees to get you back into the rewards program. Many have annuals charges, or spending caps that make you eligible, for instance they may require a certain amount spent before its eligible for cash back. Some companies are even limiting what stores qualify for rewards. So if you’re applying for a card with cash back rewards make sure you understand all the terms and conditions, and any penalties that may come up.

There are some things you can do to kind of get an edge on these programs. First and foremost, understand your contract, including penalties for late payments and spending requirements to remain eligible for rewards. Pay on time every month to stay eligible. Try not to keep a balance you can’t pay off in a month, especially since the interest rates are high in the double digits now. Keep in mind that many cards have a maximum they will pay out, so spend what you would need to be eligible for rewards, but then not any higher as there is no added incentive to do so. Lastly watch out for expiration dates and changes half way through your program, as changes can happen with out any prior notice, and most companies have a history of doing so.