Are You Maximizing Your ‘Cash Back’?

Cash back is an incentive that many credit card companies offer to encourage the loyal and consistent use of their cards. For some consumers, the promise of getting cash back for specific types of purchases was a major selling point used in the selection of a particular credit card over other options available. Depending on the card you choose and the types of purchases you make, you could earn cash back in the range of one percent to five percent, or possibly even more, on those expenditures.

Cash Back Credit Cards

At one time, the leading reward credit cards offered were airline miles. These miles represented dollars you spent on travel and could be traded in for flight upgrades, flights, hotel rooms or room upgrades, or other travel-related expenses. As credit cards evolved, so did the rewards, with credit cards offering rewards that enabled you to purchase gift cards for select retailers.

Today, many credit card companies allow customers to earn cash back rewards on purchases they make at certain retailers. When appropriately maximized, this is cash back that can make a difference for your annual financial bottom line.

Tips for Maximizing Rewards

Many people who have cards that offer cash back for purchases are not taking full advantage of the cash back benefits available to them. There are a few ways you can maximize your rewards, so you get more cash back bang from your credit card bucks.

1. Choose your cash back card wisely. Different cards offer higher rewards for different categories of purchases. Popular categories include things like travel, groceries, dining out, or gas. While one card may offer one or two percent cash back on all purchases, it may offer an additional one or two percent cash back on a specific category of purchases. While gas was once a popular choice, that might not be the best way for you to maximize your cash back reward. Purchases of groceries, for example, often offers a great opportunity for maximum value, especially if you have a large family and grocery bill. With cards that reward you for grocery purchases, every time you spend money on food, you are getting cash back in your pocket.




2. Pay all your bills with your cash back credit card. Think of all the bills you currently pay each month using, a check, debit card or through online bill pay. Consider using your rewards credit card instead and you can earn cash back on things you are already spending money on. It adds up pretty fast when you consider monthly payments such as:
   • Mortgage or rent

   
   

   • Utilities

   
   

   • Mobile phone bills

   
   

   • Internet fees

   
   

   • Subscription services

   
   

   • Hotel reservations (especially for people who travel for work)

   
   

   • Health insurance

   
   

   • Auto loan payments

   Each month, these bills can add up to several hundred if not thousands of dollars. Pay them with your credit card, then immediately pay your credit card bill, so you are not paying interest on these purchases.




3. Pay attention to the details. One of the biggest mistakes people make when attempting to maximize cash back on credit cards is failing to read the fine print. It is vital to know if there are quarterly or annual limits on the amount of cash back you can earn. If there are, it might be wise to consider multiple cards, so you can employ your cash back maximization efforts accordingly to get more money back month after month.




4. Pull out your plastic for major purchases. Whether you are buying appliances for your home, electronics, furniture, or outfitting your new home office, if you are making big purchases, credit cards, especially those offering cash back rewards, are the best way to go. Credit cards can also provide an added layer of consumer protections for any disputes you might have with the seller.




5. Be aware of cash back options. Some consumers may not realize that they have several options available to them as to how they can receive their cash back rewards. Most credit card companies allow you to choose between cash back in the form of checks, gift cards, and statement credits.
   
   
   What you might not realize is that accepting these rewards in the form of statement credits may be the best way to go. Not only does it help you reduce the balance owed on the card, which is almost always good news. It also helps to increase your available credit. Which, in turn, improves your overall credit score, reducing interest rates, and ensuring a wider availability of credit for you.




6. Take advantage of bonus categories. Other things you can do to help maximize your ROI with your credit card spending is to take advantage of bonus categories each month. These allow you to earn higher cash back on specific purchases in that category.

There is not a single best cash back card that is best for everyone. Finding the best cash back credit card for you depends on your spending habits, the card’s specific rewards program and benefits, and the value of the cardholder benefits you can use. However, when you use all the above strategies together to maximize your cash back, you can get far more mileage in the form of cash back rewards from your efforts.