The Pleasures of Those Cash Back Rewards: Credit Cards that Give Back -

By Mark McNease

I like earning the extra income on money I’m spending anyway. If you’re like me and you never carry debt, it’s a win-win.

I didn’t need another credit card, and I haven’t carried debt in at least 15 years. I pay my statements every month, having been strongly encouraged to do that when I met my now-husband Frank in 2006. After many years of paying interest, it was a jolt to the system, but it’s a habit I’m very happy I got into. I don’t necessarily spend less, but I never pay interest, and that makes those cash back dollars and rewards points worth the occasional new card.

I’ve had an Amazon Chase card for years, and usually take the cash back amounts against my Amazon account. Sometimes I’ll cash it out instead. And a year ago we joined Costco. Between the discounts and the cash back that accumulates every month, it’s been worth it.

Then along came Venmo. I like Venmo a lot, and it’s very popular with younger people. I use it to pay our cat sitter, as well as to be paid at book fairs, for workshops, or anything else people want to buy from me. They recently launched a credit card, with the promise of a $200 bonus if I spend $1000 in the first six months. I think I’ve already done that! In addition to that, which requires a bit of delayed gratification, I also accrue monthly cash rewards. So far, for my first ca-ching: $19.91, which I transferred immediately to my bank account.

The world we live in is constantly changing. I write perhaps two checks a year, and I have not been inside a bank for a couple years at least. Someday they won’t even have banks. In the meantime, I like earning the extra income on money I’m spending anyway. If you’re like me and you never carry debt, it’s a win-win.

A guide to choosing and using credit cards with perks

Many credit cards offer rewards and cash back programs that can help you save money, earn free travel, or get discounts on your favorite products and services. But how do you choose the best credit card for your needs and goals? And how do you use it wisely to maximize your rewards and cash back?

What are credit card rewards and cash back?

Credit card rewards and cash back are incentives that credit card issuers offer to their customers to encourage them to use their cards more often. Rewards and cash back can come in different forms, such as:

Points: You earn points for every dollar you spend on your card, and you can redeem them for various rewards, such as gift cards, merchandise, travel, or statement credits.
Miles: You earn miles for every dollar you spend on your card, and you can redeem them for free flights, hotel stays, car rentals, or other travel-related expenses. (NOTE: I don’t fly often, and would be happy never to again, so miles are not of interest to me, but they are to a lot of travelers.)
Cash back: BINGO! You earn a percentage of your purchases back as cash, which you can receive as a check, a direct deposit, or a statement credit.

The amount and type of rewards and cash back you can earn depend on the credit card you choose, the categories of spending you use it for, and the redemption options you have. Some credit cards offer flat-rate rewards and cash back, meaning you earn the same amount for every purchase, regardless of the category. For example, you might earn 1.5% cash back on every purchase you make with your card. Other credit cards offer tiered or rotating rewards and cash back, meaning you earn different amounts for different categories of spending, and these categories may change periodically. For example, you might earn 5% cash back on groceries, 3% on gas, and 1% on everything else, or you might earn 5% cash back on a different category every quarter, such as restaurants, online shopping, or home improvement.

How to choose the best credit card for rewards and cash back?

Choosing the best credit card for rewards and cash back depends on your personal preferences, spending habits, and goals. Here are some factors to consider when comparing different credit cards. My experiences are noted:

Annual fee (not for me): Some credit cards charge an annual fee, which is a fixed amount you have to pay every year to use the card. Annual fees can range from $0 to hundreds of dollars, depending on the card. Some credit cards may waive the annual fee for the first year or offer a sign-up bonus that can offset the fee. Generally, credit cards with higher annual fees offer more generous rewards and cash back programs, but you have to weigh the benefits against the costs. If you don’t use your card enough to earn enough rewards and cash back to cover the annual fee, you may be better off with a no-fee card.
Sign-up bonus (Venmo!): Some credit cards offer a sign-up bonus, which is a lump sum of rewards or cash back that you can earn if you meet a certain spending requirement within a specified time period after opening the card. For example, you might earn $200 cash back if you spend $1,000 in the first three months of having the card. Sign-up bonuses can be a great way to boost your rewards and cash back, but you have to make sure you can afford to meet the spending requirement without going into debt or overspending.
Reward rate: The reward rate is the amount of rewards or cash back you earn for every dollar you spend on your card. The higher the reward rate, the more you can earn. However, you also have to consider the categories of spending that earn the highest reward rate, and whether they match your spending habits. For example, if you don’t travel much, a card that offers a high reward rate on travel may not be the best choice for you. You may be better off with a card that offers a lower but consistent reward rate on all purchases, or a card that offers a high reward rate on categories that you spend more on, such as groceries or gas.
Redemption options: The redemption options are the ways you can use your rewards or cash back. Some credit cards offer more flexibility and variety in their redemption options, such as allowing you to transfer your rewards to other loyalty programs, book travel through their own portal, or redeem for gift cards, merchandise, or statement credits. Other credit cards may have more limited or restrictive redemption options, such as requiring a minimum amount of rewards or cash back to redeem, charging fees or taxes for redemption, or expiring your rewards or cash back after a certain period. You should look for a credit card that offers redemption options that suit your preferences and goals, and that don’t devalue your rewards or cash back.

How to use your credit card wisely to maximize your rewards and cash back?

Once you have chosen the best credit card for rewards and cash back, you need to use it wisely to maximize your benefits. Here are some tips on how to do that:

Pay your balance in full and on time every month: This is the most important rule of using any credit card, but especially one that offers rewards and cash back. If you don’t pay your balance in full and on time every month, you will incur interest charges and fees that will negate the value of your rewards and cash back. You will also damage your credit score, which will affect your ability to get the best credit card deals in the future. To avoid this, you should only use your credit card for purchases that you can afford to pay off in full by the due date, and set up automatic payments or reminders to ensure you don’t miss a payment.
Use your credit card for all your eligible purchases: To earn more rewards and cash back, you should use your credit card for all your eligible purchases, as long as you can pay them off in full and on time. This means using your credit card instead of cash, debit, or other payment methods whenever possible. You can also use your credit card to pay for recurring expenses, such as utilities, subscriptions, or memberships, as long as they don’t charge a fee for using a credit card. However, you should avoid using your credit card for purchases that charge a fee for using a credit card, such as taxes, tuition, or rent, as the fee may outweigh the rewards and cash back you earn.
Take advantage of bonus categories and offers: To earn more rewards and cash back, you should take advantage of the bonus categories and offers that your credit card offers. For example, if your credit card offers a higher reward rate on a certain category for a limited time, you should try to use your credit card for that category as much as possible during that time. Or, if your credit card offers a special offer or discount on a certain product or service, you should consider using your credit card to take advantage of that offer. However, you should only do this if you were planning to buy that product or service anyway, and not use it as an excuse to spend more than you can afford.
Track and redeem your rewards and cash back regularly: To make the most of your rewards and cash back, you should track and redeem them regularly. You can use your credit card’s online portal or app to check your rewards and cash back balance, activity, and redemption options. You should also review your credit card statement every month to make sure you are earning and redeeming your rewards and cash back correctly. You should redeem your rewards and cash back as soon as you have enough to get what you want, and before they expire or lose value. You should also choose the redemption option that gives you the most value for your rewards and cash back, such as travel, statement credits, or gift cards, depending on your preferences and goals.

This has all been based on my experiences and opinions. Not everyone wants to take advantage of cash back and points rewards. A lot of people don’t care! And if you carry a balance, paying interest every month, it’s a much better idea to pay off that balance and keep it paid off. A $50 reward doesn’t balance out $75 in interest.

It works for me, and I’ve started adding the cash back to my income spreadsheet, just so I can see what I’ve earned as the months go by. Seeing an alert that I have $19.90 waiting for me to transfer to my bank account is a nice little breakfast bonus.

Questions, comments, suggestions? Contact Editor AT LGBTSR.com