Cash Back Credit Cards – Check the Fine Print

Sep 25, 2009

The idea of getting cash back for using your credit card sounds pretty good to most of us. It’s like free money! But, whether or not you get that “free money” depends upon the fine print in your credit card agreement.

That fine print reveals many terms, such as the annual fee you might pay for using the card. You need to do the math to see if you’ll really come out ahead.

For instance, if your credit card gives you 2% back on all your purchases and the annual fee is $29, you’ll have to charge $1,450 worth of goods before you break even.

But some cards don’t offer cash back on all purchases, and some have a tiered schedule. You might get only 1% back at first, then see an increase after you’ve spent more. Some can go as high as 5%.

Next look at the interest rate. If you pay your bill in full each month, this isn’t a concern, but if you carry a balance from month to month, your interest rate could wipe out all the savings from cash back.

The next bit of fine print to read is how and when you’ll receive your cash back. Do you have to spend a set amount in a certain time frame in order to receive it? Some cards will only give you money back if you’ve reached a pre-set threshold. If you fall short by even a dollar, your cash back dissolves into nothingness.

Some cards also limit the amount you can earn. So if you’ve been planning to pay for absolutely everything with your card and pay the balance in full each month – just to get money back – you may be in for a surprise.

Credit card issuers may also restrict the stores you can choose if you want cash back.
Your card may disallow groceries purchased at Wal Mart or Whole Foods because they don’t consider them to be “grocery stores.” The same goes for fast foods and gasoline – you may have to buy from their list of approved vendors.

The bottom line, as always, is that it is in your best interests to read and compare. So don’t fall for a flashy ad if you want a cash back card that meets your needs. Click here to compare cards and choose the one that’s right for you.

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