Are Cash Back Credit Cards Worth It?

Cash back credit cards offer a cash reward for consumers who use this type of card. Generally, cash back credit cards will offer a certain percentage of the dollar amount spent through the year refunded back to the consumer. This offers incentives for a consumer to get and use the cash back credit card. There are a few things a person should keep in mind if he or she is considering applying for a cash back credit card. First, do the terms and conditions make it a better card than other available cards? Second, will the temptation to carry a balance on the card cost the consumer more money than the cash benefit will provide?

Terms and Conditions

The terms and conditions of any credit card should be examined carefully by a consumer before the person applies for a credit card. A person must look past cash back bonuses, introductory rates, airline miles and other reward programs to see the nuts and bolts of the credit card. Not examining the terms and conditions of a card carefully can cause a person to end up choosing a card that will cost them more than other available cards. To avoid this, consumers must do the math. The terms and conditions should be weighed against the reward packages to really find out the cost of each card.

A person should also look at the terms carefully to see when and how rewards are available for use. Does the airline card have blackout dates? Does the rewards card offer rewards the cardholder would actually want that are attainable? In the case of the cash back credit card, does the amount coming back come with any unreasonable terms to receive it?

Carrying a Balance

To accurately evaluate how much each card will cost and benefit a person, that person must determine if he or she will carry a balance on a new card and if so, how much. A person must be very honest with him or herself when determining if he or she will carry a balance on a new credit card. This is because if the consumer is not honest, he or she will not be able to accurately determine how much each card option will really cost.

By carrying a balance, particularly with a rewards card like a cash back one, a person is likely to be hit with higher interest. This higher interest rate will translate into a higher amount of finance charges (determined by the interest rate on the particular card), making a person's cash back reward null as that person will be paying more than his or her reward in finance charges.