You’re probably aware that many credit card companies offer cash back perk as part of their rewards program for some of their cards. In this scheme, a cardholder earns back a percentage of the amount he spends on his credit card purchases. Some cards even add more opportunities to their cashback program to provide their cardholders additional cashback earnings. They can sign-up in quarterly promotions or shop through partner virtual merchants to earn more benefits.
Just take note that there is a cap on how much cash you can earn back on your card purchases whether through strategic promotions or quarterly rewards programs. For example, your card company can limit your cash back to 5% for gas purchases up to $1,500 only for the quarter and give you just 1% cash back on all other purchases. It’s important that you read about and understand your card’s cash back rewards program so you can take full advantage of its benefits.
If you are really keen on the cashback reward of a card, you should be looking at the percentages that it offers and how much annual fee it charges.
For example, Uber’s new Visa card pays back 4% on restaurant and bar purchases, 3% on hotels and airfare, 2% on online purchases, 2% on Uber booking and 1% for the rest. At present, it does not collect an annual fee.
The percentages may look small, but over time, they add up to make a significant amount. Look at this: If your average monthly credit card bill is $3,000 and you pay it off in full then get just 1% back, you’ll have $30 every month. That’s an extra $360 every year for practically doing nothing.
Redeeming Your Cash Back
There are several ways to redeem the cash back. These are:
- The card company can deposit it to your account. The cash back you have earned can go directly to your checking or savings account. Some cards will even let you cash out your balance without having to accumulate a certain cash back amount. Read your terms and conditions to know your redemption guidelines and thresholds.
- The card company can give you a statement credit. In a statement credit, you’re effectively using your cash back to pay part of your credit card bill. In this arrangement, the card company applies your cash back against your current balance.
- You can get it through a gift card. Some card companies will offer your cash back in the form of a gift card or eCertificates acceptable in popular stores and merchants.
- You can donate it to charity. You can donate some or all of your cash back to a charity of your choice. The card company will transfer the designated amount directly to the account of the charitable institution that you’ve selected.
How to Increase Your Credit Card Cash Back Rewards
Among the many rewards schemes by card companies, a cashback rewards program appears to be the most beneficial for most consumers and one of the simplest. But it wouldn’t hurt to know the guidelines that can help you get the most from a cash back program.
On top of this is the caution to spend only up to what you can afford to pay off in full each month. If you don’t pay your total card bill, you will be revolving the funds and will have to pay interest or finance charges. These charges would most likely eat up any reward you’ll get. If you can’t help but carry a balance, get a low-interest card instead.
1. Choose The Right Rewards Credit Card
Check if the credit card and rewards program you picked fit your financial lifestyle. If you’re a frequent flyer, a hotel credit card or airline card may be the best for you. A gas rewards credit card might be the optimal choice if you’re always on the road.
If you want simplicity, you may prefer to have a cash-back credit card.
Many cash back cards offer several ways to redeem your rewards such as checks, statement credits, gift cards or donation to your chosen charity. Others will automatically credit your bank account for your rewards.
Remember that not all cards are equal even if they offer a similar type of rewards program. Some will have higher divisors to compute your credits and others might have minimum spending limits to qualify so familiarize yourself with the terms and conditions first.
2. Watch Out For Bonus Opportunities and Take Advantage of Them
Card companies often offer promotions and opportunities to double or even triple your rewards earnings power so watch out for them.
Many would offer increased cash back return rate every quarter to boost sales of certain product categories.
An example would be when issuers would increase the rate to 5% on gas purchases during summer when families use their cars and campers to drive to vacation places. Other companies will increase rewards during the winter holidays.
Some card issuers will ask you to enroll in their quarterly or seasonal cash-back specials so be in waiting. Check your mailbox or inbox because they mail the materials or send them online or through your mobile phone.
Another convenient way to get more rewards is by shopping through the issuer’s online shopping portals. For example, Discover offers cash back to cardholders who shop through the Discover Deals portal which features retailers such as Bloomingdale’s, Walmart, and Apple. Other issuers have similar schemes and bonuses.
3. Have One or Two Back up Specialty Cards to Cover Special Categories
There are cards that give you special bonus points when you use your card at certain places such as supermarkets, gas stations or department stores.
Analyze your regular spending in these categories to check which cards will give the highest rewards to you.
For instance, if a card offers 3% cash back at supermarket purchases, compute for your annual grocery spend and get 3% of that to know your potential cash back every year. Use that baseline figure to compare the card to other cards that offer fixed bonuses in other categories.
Or, you may want to get a card that can give you 5% back in categories that change every quarter. Of course, you have to keep up with those categories but it may be worth the effort. Just remember that usually with these card types, your spending in non-bonus categories will usually earn you only 1% cash back.
To maximize the rewards that you will earn, use your specialty card when making purchases in bonus categories (Such as Amazon, Walmart or Apple credit card) and use your ordinary card for all other credit card expenses.
4. Use Your Credit Card For All Regular And Recurring Expenses
Many cardholders have the wrong idea that to earn rewards, they need to start spending more. As a result, many end up looking for the flimsiest reason to buy things in order to jack up the spending totals.
This is a very defective strategy not just because you’re setting yourself up for debt but you may be spending a lot more money unnecessarily. If you’re like one of the average American consumers who make their day-to-day spending using their credit cards, there’s no need to spend more. Simply making your regular purchases with your cash back credit card will increase your spending total without breaking the bank.
Practically for everything the average person pays for, whether they be groceries, gas, utilities, rent, clothes, etc. he can use a credit card. You can simply consolidate all spending onto your credit card and when the card billing comes, just pay it off with cash.
5. Master The Rules
Credit cards may appear to be similar but each one has its own rules for their rewards system. Each card issuer’s system is a little bit different and learning exactly how each one work can help you maximize your points and rewards. You can redeem your points for different things – you can get a cash back, gift cards, plane tickets, items, etc.
A simple cash back probably has the least return for your points often having a 1:1 ratio – use it only when cash back is necessary.
Here's an interesting fact: when you use your points on purchases or exchanges through the travelportal, you’ll normally come out way ahead since many portals give back 1.5x to 2x when you exchange your points. Choices are many too and can come in the form of gift cards to plane tickets for flights across the globe. However, it will depend on the exchange, their current deals and promotions, and their company partners or tie-ups, etc.
Being aware of the categories and products that give you more for your points can save you more money aside from the points you’ve already accumulated. These portals usually partner with other reward portals such as hotels and airlines. If you study the exchange values on transferring points from one system to another, you may be able to get a big discount on some options.
6. Make Large Purchases Instead of Cash or a Debit Card
Do you need a new large-screen smart television? Looking at the latest laptop? Want to overhaul your wardrobe? All of these are great potentials for using your credit card. Just one transaction will instantly bring up your total spending up to a few hundred or even a thousand dollars. In the process, you will also increase your total points.
There are extra benefits you can get if you use your credit card to buy these items. You can get better fraud protection and extended warranty services from the manufacturer or store.
The important thing here is that you will use the card for convenience and rewards instead of paying with cash. This means that you already have the cash on hand to pay for these things and you really meant to buy them in the first place.
You are simply turning your planned spending into something more efficient and profitable for you.
Do not fool yourself into thinking that you need to make major purchases that you don’t actually need or can’t afford just because of the big rewards that you will get.
7. Pay Your Total Balance Monthly as They Become Due
Cardholders who revolve their balances are actually on the losing end: they don’t benefit from the rewards and they pay a higher interest rate.
Experts say that most issuers get the funds to sustain their rewards program from the higher interest rates they charge on rewards cards.
Another thing you should not do is to miss a payment. Some card issuers will forfeit your rewards if you miss a payment. The same consequence applies for long periods of inactivity on your card. You may lose whatever rewards or cash backs you’ve earned but have not yet redeemed.
We recommend that you cash in or redeem your rewards periodically instead of trying to amass a huge amount. This way, you’ll get the full value of your rewards and you lessen the risk of losing them through the expiration of the points or issues with your use (or non-use) of the card..