How earn rates work
When you get a cash back card, you’ll earn a percentage of your purchases back in cash. How much you earn, and on which kind of purchases, depends on the card you have.
Bonus earning categories
Cards may offer different bonuses for different spending categories, perhaps with limitations (such as a cap on points you can earn at the accelerated earn rate). It pays to know exactly how purchases at different retailers are categorized. For example, you may know Metro is considered a grocery spend by Visa, but you collect big there with any of your purchases from there, too. That includes services, like food delivery and products from the pharmacy aisles, too.
Other earning categories
Credit card companies often offer a second-tier earn rate that’s slightly less than the bonus categories but more than the base rate, to make their cards more appealing and useful. This is also a way that cards can better fit people with different spending habits and income levels.
How to redeem to get your cash back
Credit card companies handle cash back redemption procedures differently. The least flexible cash back cards redeem automatically in fixed intervals, either once per year or once a month. Some cash back cards let you access your cash on-demand in addition to the scheduled payouts.
How welcome offers can help you earn more
Welcome offers are one-time or temporary promotions designed to entice new applicants, and the bonuses can be very lucrative. Accelerated rewards incentivize you to spend by offering an outstanding return. Just be sure to read the fine print, so you understand what the offer is, how long it lasts and what the regular rates are when the promotion is over.
Are cash back rewards worth it?
Cash back cards can be a simple and straightforward way to make your everyday spending do double-time. A flat, across-the-board rate can be easy to understand, but sometimes those bonus categories can help you earn more. If your shopping habits mirror the shopping categories on a cash back card, it’s a definite win. But it is worth knowing the tiered earning rates of your credit, as well as the caps. Also, some cash back categories aren’t as intuitive as they might seem. Just because a big box store sells groceries, it might not be on the credit card list for that bonus category. You may want to check to see if it’s worth changing retailers and your bottom line. You also may be surprised by the retailers on the lists, too! With a little bit of strategy, you can earn back your annual fees and more.
Keph Senett writes about personal finance through a community-building lens. She seeks to make clear and actionable knowledge available to everyone.
