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Many people take advantage of credit cards that offer cash back on specific purchases. This type of cash back credit card is particularly useful for those who pay off the entire balance on the card immediately on a monthly basis, and do not maintain a balance on the card at any time.
Essentially, a cash back credit card offers you the opportunity of making money at the same time you are spending it, what better program is there than that? EVERYONE loves to make money, might as well do it while you are spending it right? How this works is this, when you purchase an item you will receive a return of a specific percentage on that purchase. Some credit card companies offer different terms such as, the percentage you receive is on the entire balance on a yearly or even monthly basis, it is important you read and fully understand all terms and conditions of your credit card. Typically you can receive returns of anywhere between .5% and 2%, this is all dependent upon the specific company you choose to obtain a credit card from. Some credit cards even offer a higher rate of return if you shop at specific retailers or purchase special items.
For example, let us say you have a credit card and they have a partnership with Wal-Mart. Now this credit card may offer you a higher cash back incentive for items or services purchased at Wal-Mart than say if you were to shop at K-Mart. Earlier in this article it was mentioned that this is particular useful for those who pay off the entire balance monthly. The reason for this is that if you decide to carry a balance each month, any cash back incentives you receive could become wrapped up within the interest you have to pay on any balance you care each month. Additionally, these types of credit cards likely have an APR that is higher than that of a card without cash back offers. Therefore, all incentives you do earn would just in turn pay off the fees and interest, which will mean that you are not taking full advantage of what a cash back credit card can offer you.
Another point to consider of a cash back credit card, you should not take advantage of any type of balance transfer offers on this type of credit card. A cash back credit card, if you transfer your balance from another card, will take all money you earn and use that to go towards paying off the transferred amount instead of towards the newer purchases. So essentially, you will lose the money you earned, making the cash back credit card useless to you.