Before the days of our modern market system, cash was the primary currency for the exchange of goods. Every dollar used to carry it’s amount in gold, meaning that people would rest assured that their cash had real value backed behind it.
Nowadays, cash is backed solely by the good faith of consumers and producers.
Credit cards go even further. The money you spend, owe, and receive is merely a digit on your screen. Credit card companies have taken advantage of this fact, and can now offer special rewards that weren’t possible in the past.
By using different company credit cards, you can earn cashback while spending. This post will help guide you through this operation, and will give you a better understanding of the way modern day credit card companies operate.
Note: Check out the following cards to earn one of the best flat cashback opportunities across all purchases: Wells Fargo Cash Wise card, the Chase Freedom Unlimited card, or the American Express Cash Magnet card! For a wider variety, see more credit card bonus offers here.
How It Works
Credit card companies want to reward you for committing to transactions while using one of their cards. Every time you pay for an eligible item (which would be defined by the cards issuer), the issuer will pay you back a small percentage of the items cost at the end of the period/billing cycle. Different cashback rewards cards will pay different amounts.
Most of the time it’s somewhere around 1-2%, but some may go as high as 5%. Let’s look at an example. If you pay 100 dollars over the course of a statement period with a flat 2% cashback card, you would get $2 at the end of the period.
There are different types of cashback cards as well. Some will reward you higher amounts of cash depending on the specific activities/purchase categories you use your card on. Let’s take a look at the three types of cashback reward cards.
Types of Cards
- Flat Rate
- As mentioned in the How It Works section, Flat rate cards offer you a small flat percentage of cash that you earn back at the end of every statement period. As an example, you could earn a 1% cashback rate on every single purchase.
- This type of card is nice to have because you don’t have to worry about what types of products you’re buying with your card. Almost all purchases apply, allowing you to have a stress free shopping experience.
- Category Rotation
- These cards are going to net you more bang for your buck. After a certain amount of time, different item categories will be advertised to earn cashback on, e.g. grocery stores/gas stations etc.. Most of these cards offer high rewards, such as 5% cashback on these categories. However, you have to manually apply for the rewards every time the category changes.
- This type of card is useful for people who are planning to go on a shopping spree. However be warned, it is up to the cardholder to remember which products apply and to sign up for when the category changes.
- Similar to the Category Rotation type, the Tiered type of card will offer bonus cash depending on what you use your card on. However, this card offers special rewards to multiple types of products at one time. For example, it could offer 6% as gas stations, 3% at department stores, and 1% on all other spending.
- This card is nice to have if you shop a lot of a certain category of products, but you have to keep track of where to use it in order to get the best rewards.
Ways to Redeem Cash
- Statement Credit
- Statement credit is the simplest method to redeem the cash you have earned. With this method, you redeem your cashback rewards to help pay for your credit card bill. For example, if you had a credit card bill of $100 and you had earned $40 in cashback rewards, you would redeem the $40 to help pay off the bill, which means $60 would be remaining.
- Gift Cards
- Some credit card companies will allow you to use your cashback earnings on various gift cards. This is a great way to use the extra money on a brand that you like.
- Direct Deposits
- Some companies will allow you to request your cashback rewards be directly deposited into your checking or savings account
- Paper Check
- You might have the option to request the cash you’ve earned to be mailed to you as a check.
Different issuers have different ways of handing out their cashback rewards, so make sure you check their website to get all the information.
Picking out which credit card to use can be a daunting task, but having the information over cashback rewards can make the process a little less tiring. Each card is unique, and it’s up to you to decide which one will be of the most benefit to you.
Take advantage of any perks you can to be sure your credit cards are acting as the valuable financial tools they should be. If you find these posts informative, be sure to check out more of the on HMB! Also check out our posts for the Best Bank Bonuses and Best Bank Savings Rates!
The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author’s alone.