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How to Maximize Your Cash Back Rewards

How does a Cash Back Credit Cards work?

Cash back credit cards pay you back a percentage of each eligible purchase. The money may come as a check, bank deposit or statement credit.

Some cards earn a flat cash back rate, meaning you earn back the same percentage on every transaction. For example, the Capital One Quicksilver Cash Rewards Credit Card earns 1.5% cash back on all purchases. Compare that with the Discover it Secured Credit Card, which earns 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, and 1% back on all other card purchases. 

How to Maximize Your Cash Back Rewards

How to Maximize Your Cash Back Rewards

Here is how you can reap more cash back rewards without necessarily spending more on your cash back credit card:

  • Avoid carrying a balance. This is the No. 1 rule with any rewards credit card.
  • Step away from your cash back credit card if you start carrying a balance. Revolving balances can lead to paying more in interest than you earn in cash back. But the worst part? You could end up with credit card debt.
  • Choose a card that matches your spending habits. A rewards card with bonus categories that align with your normal spending can help boost your cash back earnings.
  • Look for a sign-up bonus you can achieve. Sign-up bonuses can be a great way to earn a lot of cash back quickly, but don't spend money you wouldn't have otherwise.
  • Earn extra cash back. Some cards offer a bonus for referring new cardholders or extra cash back for adding an authorized user.
  • Remember the cash back card's other benefits. Your cash back credit card might offer purchase protection, extended warranty coverage or other perks.
  • Ask for a retention offer. Your issuer gives you this incentive to keep your card, but securing one could take some good old-fashioned negotiating. You might be able to get an annual fee waived or reduced, for example, but you will need to call the issuer and request it. The higher your credit score, the better your chance of success.

How to Redeem Cash Back Rewards

Cash back credit cards offer some flexibility when it comes to redemption options. You may be able to use your rewards for a statement credit, a mailed check, a deposit in your savings account or a gift card. Some cash back credit cards give you access to online portals to book travel or for discount shopping.

But every cash back credit card has its own rewards program, so read it thoroughly to understand how you earn rewards and what your redemption options are. When you're choosing a rewards credit card, make reading the rewards program a part of your selection process.

Can I Get a Credit Card With Bad Credit?

Rewards credit cards usually require you to have pretty good credit to get approved. If you're rebuilding credit, you might focus on a secured credit card to boost your credit score. This type of card requires a security deposit, which usually becomes your credit limit. It's a sound way to improve your credit, and some of the best secured credit cards even have rewards.

In the meantime, pay all of your bills on time, and if you do get a credit card, keep a low balance. Payment history and available credit make up 65% of your FICO score.

Alternatives to Cash Back Credit Cards

Cash back credit cards are popular for those who want to save on everyday expenses. And some cash back cards even offer a way to save on travel, too. Here's a comparison of cash back cards with other types of popular credit cards.

  • Cash back vs. travel rewards: Cash back cards help you save on your daily expenses, and they tend to have simpler rewards programs, although some do offer tiered cash back categories and bonus categories. With the best travel credit cards, you can save money on travel expenses, and many of these cards also offer rewards on lifestyle categories. There are also airline-branded credit cards that can be a good choice for someone who prefers a specific airline. Travel rewards cards have rewards programs that are a little more complex, but you also get generous rewards.
  • Cash back vs. low interest: If you plan to carry a balance on a credit card, which is not recommended, you're better off getting a low-interest credit card. All rewards cards, including cash back cards, have higher interest rates. Credit cards use compound interest on any balance you carry, so your debt will grow faster with a rewards card.

What’s the highest paying  Cash Back Credit Cards?

The credit card that earns the highest cash back for you will differ from the card that earns the most cash back for your neighbor. If you spend more on dining out and she spends more on groceries, you'll each earn the most cash back from different cards that reward your individual spending habits.

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