If you use your credit card to make purchases, you may be wondering how cashback works on credit cards. It’s easy: the credit card company pays you a fixed percentage of the purchase price, known as cash back. However, you can choose to earn more cashback by spending in specific categories. Cash back on credit cards has several benefits, including the ability to earn points towards future purchases. Here are some of them.
Credit card companies make money through merchant fees, which they share with cardholders. Rewards credit cards, on the other hand, pass on some of these fees. For example, a 3% merchant fee may be passed on to cardholders, allowing them to redeem two-thirds of that fee. Other cards have a flat percentage cash-back scheme, which means that you’ll always get the same percentage back for every purchase.
When choosing the right credit card, you should consider the cash back rate, bonus categories, and annual fees. Depending on your lifestyle, a cash back credit card may be better for you than one with a high bonus rate. A credit card with a high cash back rate may be best for you if you tend to pay off your balance every month. You should also consider your spending habits and monthly expenses to determine which card offers the best rewards.
Many people use cash back credit cards to make purchases. Cash back credit cards usually offer 1% or 2% of purchases in cash. In other words, if you spent $1,000 on clothing, you would receive $10 in cash back. Some cash back credit cards offer 5% cash back, which would mean you could earn up to $100 in cash over a statement period. That’s a pretty decent rate, but the cash can add up.