The Most Common Cash Back Card Mistakes

Cash back credit cards can be a great asset. They offer you a chance to earn money by making everyday purchases. However, many people that use these cards and don’t fully understand how to maximize their potential. Here are a few of the most common mistakes consumers make with cash back credit cards.

Not Paying your Balance in Full

One of the easiest ways to reap the benefits of your cash back card is by paying your balance in full each month. With many cards, it’s an all or nothing situation. You either pay the balance and receive all of our cash back or pay a partial balance and receive nothing. Make sure you read the rules of your card’s cash back program. This will ensure you’re getting the most bang for your buck.

Making Low-Value Redemptions

Using your cash back wisely is another important element of having a card with these capabilities. An article written by Devin O’Rourke for millionmilesecrets.com elaborates on this by saying, “Not every cash-back credit card is the same. They all have unique benefits and different ways to redeem your cash back. My Bank of America® Cash Rewards credit card used to limit redemptions to a minimum of $25, but now you can redeem any amount of cash back. There are still some cards out there that limit the cash-back redemption to a certain threshold before you can redeem. But you won’t have that issue with the Capital One Savor card. Cash-back points are generally valued at face value or one cent per point. So if you’re redeeming 2,500 cash-back points for a $20 gift card to Amazon, that’s a low-value redemption.”

Failing to Meet Minimum Spending Requirements

To reiterate, it is so important to understand the terms of your cash back card. You need to make sure you read the fine print. Part of that fine print includes knowing what your minimum spending requirement is. If you sign up for a card where you’ll never meet the minimum spending amount, it’s virtually useless in terms of cash back rewards.

Keep in mind that generally speaking, your annual fee, cash advances, cash-like instruments (such as money orders), and returned purchases do not count towards your minimum spending requirement. Additionally, the clock starts ticking on your minimum spending time period when you are approved, not when you receive or activate your new card.

Have a strategy when opening up a new credit card. Do this around the Holidays, birthdays or even an anniversary when you’ll be making a lot of purchases or larger purchases. Open a card before planning and paying for a big trip. Set yourself up for success by making a plan so that you can take full advantage of whatever welcome offer and benefits are associated with the card.  

Thinking All Cash Back Cards are the Same

You’ll find different rewards and incentives with each cash back card you look into. One of the biggest mistakes consumers make is thinking they’re all the same. This is why research is a crucial element in selecting the card that will best suit your needs. If you choose a card that offers large cash back rewards for dining and entertainment and you’re a massive homebody who doesn’t like to go out, that card is probably not the right one for you. Select a card based on what you purchase most frequently in order to earn as many rewards as possible.

Selecting a Card Based Solely On the ‘Welcome Offer’

A large and exciting part of opening a credit card is redeeming whatever ‘welcome offer’ comes with it. Sometimes the incentive is so enticing, it makes you want to sign up right away. However, you would be doing yourself a disservice. If you sign up for a card and can’t meet the requirements in order to earn the welcome offer, it would be a waste. Keep this in mind when you’re researching various cards. Remember that even if a welcome offer seems small, it’s worth looking into as long as you can meet the requirements to earn it.

The above mentioned article goes on to say, “Consider perks like rental car insurance, extended warranty protection and trip or baggage delay coverage, when you’re deciding if a card could benefit you.” Weigh the pros and cons of all perks!

Cash back cards are a great financial tool when you use them correctly. Avoid these common mistakes to maximize your rewards.