Cashback credit cards are popular choices because they provide instant gratification with each purchase, often in rewards points or cashback dollars. For example, many cashback credit cards offer 1% cash back on every purchase, plus an additional 1% cashback when you pay your bill on time each month. Thus, you’re earning 2% cashback on all your purchases. But what does that mean? What kind of cashback are we talking about here? And how do you know if your credit card offers enough cashback to be worth using?
Ways to Increase Cashback
If you’re already in a rewards program, there are still ways to earn more. For instance, don’t be afraid to upgrade your card. Sure, it might come with an annual fee—but consider that as a price for a higher reward rate (and potentially better perks). Plus, keep in mind that different cards could offer different sign-up bonuses and ongoing promotional rewards.
If you tend to carry a balance from month to month, avoid any rewards that cap or reduce points/cash back at $1,000. At $2,000 or even $3,000 per year in purchases per person, those caps can really cut into a big earnings opportunity.
According to experts at SoFi, “Make 12 monthly on-time payments of at least the minimum payment due, and we’ll lower your APR by 1%.” If you are already a member of SoFi, that means you can save up to $1,000 per year for every $10,000 in outstanding student loan debt.
Signs That You Are Ready for a Higher-Earning Card:
- You always pay your balance in full each month, and you never carry a balance. There’s no point earning rewards if you’re losing money by paying interest.
- You have excellent credit (an average of 750 or above). It’s difficult to find a great high-earning rewards card for people with poor or fair credit.
- You have a good income. You need to meet certain income levels to qualify for some of these rewards cards.
Always think about what you’re going to do with your rewards—don’t just earn them. If it makes sense, plan your spending around specific redemption opportunities. Don’t pay an annual fee unless you can get more than 1% in rewards value.
The Best Ways to Redeem Rewards
Redeeming rewards is easy—if you’re willing to spend your points. You can often get a better deal using your points for travel than using them for gift cards, for example. It’s smart to calculate how many points it will take to get what you want and to weigh that against how likely you are to use it. Most rewards programs have good redemption rates, but some are not so great—so do some research before you apply. And don’t forget about taxes and fees!
If you’re looking for a new card and want to maximize rewards, use a credit card with cash back rewards. You can also use a credit card reward calculator to determine how much you can earn from each card.