How To Choose Cash Rewards Credit Cards

Cash Reward Credit Cards can be an excellent way to earn a little extra money for an individual who can keep themselves on a budget and manage their debt wisely.  Cash Rewards credit cards are more beneficial than other types of rewards cards because they give the rewards earner the flexibility to spend their rewards on anything they want as opposed to earning miles or credits towards a department store.

The best cash rewards credit cards are generally reserved for only those individuals with excellent credit scores, with lesser rewards available to those with a good or fair credit history.  The rewards available for each credit card vary quite a bit depending on who the creditor or bank is.

The first thing a person should consider when opening a cash rewards account is how much money they spend, and what they spend it on.  This is important because some banks and creditors will offer special promotions i.e. 5% cash rebate on gas, or 3% cash rebate on travel and dining out.

After an individual considers their monthly or annual credit card expenditure budget, the person should estimate how much in cash rewards they would receive from each potential credit card.  A credit card with 5% cash back on gas and 1% back on all other purchases may be much more beneficial for one person than another person who doesn’t drive.

After considering what to expect in the form of rewards each month, one must consider how much they carry in the form of a credit card balance each month.  If one carries a $5,000 balance, interest each month will be $62.50 based on a 15% interest rate.  (Interest rates are generally higher for cash rewards credit cards because banks attempt to entice borrowers into using higher interest credit cards by offering good rewards).  If the same individual can get a non cash rewards credit card for 9%, interest would be only $37.50 per month, a savings of $25.  In many situations the increase in interest expense will exceed the cash rewards each month.

After considering the potential rewards and the potential additional expense of a cash rewards credit card, one should be able to determine which card would be most profitable for them.  The potential rewards earner should be sure to pick which card is best for them and apply for only that one card as applying for multiple could negatively impact their credit score. 


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