Credit card also known as plastic money is a financial instrument that is designed to help consumers access revolving credit. In lay man’s terms, this card allows the holder to buy things or pay for services up to a limit approved by the card issuer. The card holder however, has to pay at the date agreed upon say monthly or biweekly. Failure to do so will attract penalties which often translate to high interest.
There are many types of these payment medium and they are relatively easy to get. The requirement for getting one is largely the same but with slight variations from one issuer to the others. You can visit: https://www.experian.com/ for more information on the basics of these instruments.
Due to the relative ease of accessing this instrument, some people have fallen into mountains of debt. But truth be told, if used prudently, they can actually help one navigate their finances and carry out some projects that may have otherwise been outside their income bracket. In this article, we will focus mainly on options that come with cash back rewards. This will help you make an informed decision so as to get the full benefit of this financial instrument, so stay with us.
Different Types of Credit Cards
There are different types of plastic money and they are most often delineated by the perks and rewards that they come with and the target consumer they are meant for. However, there are 2 basic types and they are secured and unsecured cards. The secured options are the ones that you borrow money against a deposit that you make in your checking or savings account.
Although you make a deposit for secured plastic money, they can also carry a balance just like the regular credit cards. The unsecured options on the other hand are the regular type that allows the holder to borrow money without any deposit and pay at the stipulated time.
These two options can come with any of the reward systems. Below are some of the different options:-
- Travel Credit Card – These types offer the holder the chance to earn reward that have to do with travel. What this entails is that the holder can earn credits that they can use for any type of travel purchase. The points/credits can be transferred to hotel or airline programs. Some of these types of plastic money also allow you to earn credits for specific programs such as hotel loyalty or frequent flyer programs.
- Business Credit Card– These are specifically designed for businesses and it helps business owners to separate their business finances from personal finances. The terms and conditions of these options differ from one issuer to the other. They can also come with any reward system just like personal cards.
- Student Card- These are also referred to as starter cards because they are designed for young people who do not have credit history. It helps them build their credit history when they use it responsibly.
- Store Credit Card – These ones are designed specifically for particular stores and they allow the holder to make purchases and pay later. The terms and conditions for these cards are definitely different from regular plastic money.
- Cash Back Card– These ones enable the holder to earn cash back on their spending. We will discuss this in more details below. Meanwhile you can visit the website of companies that offer these options to find out all that the card entails.
Understanding Cash Back Credit Cards
These cards like we mentioned briefly, allow the holder to earn statement credits or cash back on their spending. The way the reward on this type of card is dispensed depends on the issuing company. Some issuers offer flat rate rewards while others give bonus points in different categories such as travel or dining.
There are some issuers that offer bonuses in categories that can change every quarter of the year and also flat rate on purchases that have no bonus. A good number of cards in this category do not come with annual fees. However, some that have more generous reward schemes and bonus offers usually charge a small annual fee.
This card option is best for people who spend frequently and more in categories such as dining and groceries. But it is recommended that they look out for the card that has varied reward systems. The flat rate cards are recommended for those that spend on a wide variety of things on a daily basis.
Benefits of Cashback Credit Cards
Just as with every type of plastic money, this option comes with a number of benefits and they include the following:-
- Cash rewards – Different options have varied reward schemes but they all offer a flat rate of 1.5%.
- Possible 0% APR offers –The 0% APR will allow the holder make huge purchases or service existing debts with zero interest.
- Shopping perks
- Possible sign up bonuses
- Comes with no annual fees- Most of these cards do not come with annual fees. This means that the holder does not need to sacrifice the rewards for a fee.
Cons of Cash Back Credit Cards
Although these cards come with a lot of benefits, there are a few downsides that must be considered before you make a choice and they include the following:-
- Does not come with travel rewards.
- Some options have a limit on the amount of reward that one can earn.
- Travel cards most likely waive foreign transaction fees but cash back cards do not.
Conclusion
Credit cards are essential financial instruments that if used responsibly can be of great benefit to the holder. We have discussed different options of this instrument with more focus on cash back cards. We also listed some of the benefits and cons of this option. It is recommended that you examine the pros and cons of all the options available to you so that you will make the best choice for you.
