Cashback Versus Other Credit Card Incentives

May 7th 2016

The battle for credit card supremacy is as hotly contested as ever. New credit cards from an array of different financial institutions rise each quarter to challenge the already established credit card companies. A major part of an average credit card company’s marketing strategy is a rewards program that incentivizes customers to choose their card. The rewards offered cover everything from cash back to airline miles and lots more in between. Still, though the range of reward types varies among credit cards, the standard pitch for a new credit card remains the cash back feature.

Cash-back is a program that offers customers a rebate for new purchases and other activities. Some of the cash-back stipulations are limited to specific types of purchases, and the rates vary. Cardholders can expect to get anywhere from 1% of new purchases to up to 5% cash-back for select purchases, such as gas or travel.

When choosing the card that’s right for you, comparing cash-back rewards and a slew of other rewards will help you determine which card will provide you with the most, depending on your spending habits and other priorities. Consider these factors when choosing your next credit card:

Cash Back Rewards

With a snappy name like “cash-back,” you can expect a credit card offering cash-back rewards to provide you with a rebate on your purchases. One aspect to consider is the stipulations required to take advantage of the rebate opportunity.

The most common type of cash-back involves receiving a rebate for specific types of purchases. Some cards offer cash-back rewards on specific categories of purchases, like gas, new purchases or balance transfers. Few cards offer an across-the-board cash-back program that allows you to get a rebate for all purchases made using the card. The rate of the rebate is often a relatively slim percentage (commonly 1% to 5%), but the total rebate amount can add up quickly, depending on the type of spending habits you employ.

Rebates are also applied to your balance at varying intervals. For example, some cards offer you a rebate once a month, while others allow you to accrue your rebate over an entire year, at which point you will receive a credit for all of the cash-back you’ve earned on your statement after a full year of spending.

Other Rewards

One of the most commonly offered credit card rewards involves airline miles. Customers who use an airline miles rewards card can earn credits to be used for airline travel, as well as other travel-related accommodations. The stipulations on airline mile credit cards are established to provide cardholders with a set number of “miles” per dollar spent using the card. These miles accumulate and can be redeemed for travel-related discounts on flights or hotels or for special accommodations, like cruise cabin upgrades and special travel tours and packages.

Credit card customers who spend heavily with their cards and also travel will find a wealth of opportunities in the airline miles rewards. If you don’t travel as much or prefer a different array of rewards, there are credit cards that offer rewards for groceries, gas purchases and several other incentives.

Gas and grocery rewards programs use your spending to determine discounts on gas and groceries at select outlets. Discounts are either applied when you make purchases at the preselected grocery chains or gas stations or accumulated as you choose which purchases to apply the savings to. Before you choose a card based on gas and grocery rewards, check the terms to ensure that the types of rewards offered match your spending habits, apply to the chains you use or can use and allow you to choose a card that does not come with onerous conditions or other fees.

The Best of Both Worlds

Choosing the best credit card for you often comes down to determining which set of rewards matches your lifestyle and spending habits the closest. In rare cases, you will be able to choose a credit card that offers a more comprehensive rewards program, making the choice easier to make. These all-of-the-above cards offer cash-back, gas and grocery savings, come with no annual fees or service charges and come with a competitive interest rate and billing format. The comprehensive cards often come with a higher threshold for qualifying, and customers with anything less than a stellar credit history may find it difficult to obtain the best rewards cards.

As competition for credit card customers continues to intensify, you can expect to have a wide range of choices for your new credit card. Offers are unveiled often, so be sure to browse all of your options thoroughly before committing to one credit card over the others.

Image Courtesy of Khantipol via Flickr


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