The name says it all…get cash back, when you spend money on your credit card. Sounds like a pretty good deal or is it too good to be true?! We’ll let you decide as we investigate the ins and outs of cash back credit cards. Like all reward credit cards make sure you take the time and compare what’s on the market and find the card that best suits you, your lifestyle and spending habits.
Cash back credit cards work in the same manner as other reward credit cards like platinum and frequent flyer in that every time you use your card to make a purchase you earn reward points. However, with cash back cards your points are converted to cash unlike other reward cards where you redeem your points for things like products and flights.
Cashback credit cards are fairly new to Australia so it’s crucial to understand your money reward options before choosing that new piece of plastic to sit in your wallet.
2. Rewards cashback: Earn reward points every time you use your cash back credit card. Watch your points accumulate and when you’re ready convert them to cash. The money will then be paid into your account as credit or a lot of providers will send you a shopping gift card. This could be for $20, $50 or $100 and are to be spent at a particular retailer such as David Jones, Myer, Bunnings, Rebel and Caltex. This may sound like a great idea but you’ll have to spend between $14,000 and $20,000 to receive $100 cash back. Learn more about credit card reward programs here.
Just how much cash you receive for your spending will depend on the type of card you have and the provider. There are hundreds of cards in the market so use the nifty Mozo Rewards Revealer tool to compare cashback credit cards and find one with the best value.
Here are a few examples below. You’ll see you have to spend a lot on your card to get value out of it, as the annual fee can cost you more than what you can earn in back in cash. Hence why it’s important to compare cards to find the best deal for your spending and lifestyle habits.
Annual Spend: $10,000
Rewards Card: Bankwest – More Mastercard
Annual Spend: $20,000
Rewards Card: American Express – Essential Credit Card
Cashback: $138 (rewards net value)
Annual Spend: $50,000
Rewards Card: ANZ Rewards
Cash back card have the same fees as standard credit cards. The main fee you’ll be hit with each year is the annual fee and as we’ve mentioned above, this can be pretty high.
If you’re out and about and find yourself in a situation where you need cold hard cash try not to use your credit card to withdraw money from the ATM. If you use your cash back card your provider will slap you with a cash advance fee this is usually around 3% on the amount you take out.
Heading overseas? If so, be aware of a currency conversion fee for every time you use your rewards card to make a purchase. This fee also applies when you make a purchase online at an international store.
In this day and age with technology there really is no excuse for paying your credit card bill late. Pay after the due date and you’ll be hit with a late payment fee. This fee can be easily avoided by setting up a direct debt or automatic transfer.
For tips on avoiding credit card fee click here!