To determine if these credit cards make sense, figure out how long it would take you to earn the higher return rate using your typical monthly balance. If you can't hit the threshold quickly without an increase in spending, consider other no-fee cards that offer at least 1 percent cash back. (Watch the video that explains how to evaluate reward credit cards.)
Better rebates with annual fee?Six credit cards charge an annual fee, ranging from $18 to $59. The fees don't amount to better returns than competing no-fee cards. For instance, the FlexPerks Cash Rewards Visa Card from U.S. Bank offers 1 percent cash back on all purchases for a $40 fee, but other fee-free cards, such as the Cash Rewards Card from Wells Fargo also offer 1 percent cash back.
Always make sure to compare fee-based cards with fee-free products to see if you can get the same benefits without the cost. Would you really spend enough to offset the annual fee in rewards?
Tips for light users:
- Beware expiration dates on points. Make sure to redeem points before time runs out on accumulated rewards. Out of the 30 cards surveyed, half set an expiration date on points earned, in most cases, five years out.
- Look for low reward increments. How much do you need to earn before you can get cash back? For example, with the Citi CashReturns Card, you receive a check automatically every time you earn $50. The FlexPerks Cash Rewards Card from U.S. Bank sets a minimum redemption amount at $20.
Tips for heavy users:
- Watch out for reward limits. Four cards in our survey placed a limit on annual rebates. In addition, some cards only pay out annually, such as the Blue Cash and the TrueEarnings Card, both from American Express. If you prefer limitless returns and frequent cash-outs, make sure your card allows monthly redemptions.
- Check the ease of redemption. If you're going to be cashing in often, find out what the redemption process involves. Not all card issuers send checks or credit accounts automatically. For example, with the Citi Diamond Preferred Rewards Card, you have to call each time you want a cash rebate.
Bottom lineCash-back cards can be a great way to get a small return on your shopping expenses, but only if you can control your spending. If you don't pay in full every month, interest charges will negate your savings. Shop around for low-rate credit cards if you carry a balance.
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