How to Make the Most Money from Cash Back Credit Cards

Cashback credit cards are essentially a type of credit card where it is possible for the account holder to obtain a percentage of their qualifying annual spend back from their credit card provider. This amount is generally credited to the credit card account on the anniversary date each year of the credit card account being opened. The concept alone, however, combined with the frequently misleading advertising techniques employed by providers of cashback credit cards, does mean that millions of people apply for this type of credit card when it is not the type ideally suited to their needs and spending habits. This site is devoted to looking at the benefits of cashback credit cards in full, how to maximise them and how to avoid the many associated pitfalls.

It is unfortunate but true that cashback credit cards are likely to be of benefit only to those who are in the habit of clearing their credit card balance in full, each and every month. This is because the interest charged on outstanding balances will almost certainly be many times higher than the cashback rate and more than negate the benefits. It is also likely to be higher than other credit cards on the market.

The tips which follow on this page therefore for making money from cashback credit cards will assume always that the balance is cleared each month. Those who are not in a position to make this commitment would be better served seeking a different type of credit card, such as perhaps one which offers a period of zero interest on transferred balances and/or qualifying purchases.

The first step in making the most money from cashback credit cards is in choosing the correct card. Searching Google for credit card price comparison sites in your country is an extremely time efficient way of helping you perform this task. It should be noted that the decision is not such an obvious one as simply choosing the card which offers the highest percentage cashback each year. It is vital to also consider:

1. Are there any fees attached to the credit card and if so, can they be successfully avoided?
2. What are the qualifying spends on the credit card and are you likely to make such purchases?

The points should then be deliberated as follows:

1. Reading the small print on any financial agreement prior to signing it is imperative. It may be the case that there is an annual fee of some sort attached to the credit card, or that fees are attached to a particular service you are likely to require. These factors will all require to be considered when making a final decision.
2. It will very possibly be the case that certain types of transactions performed with the credit card do not qualify for cashback. Common examples of these types of transactions are withdrawing cash from an ATM, or making a deposit to an online gaming company. These types of transactions may in addition incur an immediate one off charge and begin accruing interest from the date of the transaction.

It is worth taking some time to make these investigations in full. Take some brief notes as you go along and you will be in a far better position to a make a final, informed choice.

Drawing a very simple table can aid significantly in making your decision:

There are three things which can immediately be seen from the above table:

1. Credit Card A affords the highest cashback rate
2. Credit Card B is likely to accommodate the greatest qualifying spend
3. Credit Card C is likely to provide the highest level of cashback at the end of the year

Although the table is simplified for illustrative purposes, it clearly shows the importance of basing your decision on all relevant factors and not taking cashback credit cards and their benefits at simple face value.

It may seem obvious that using your card as often as possible is necessary in order to maximise your income. There are many people who will consider this aspect, however, only in relation to day to day expenses, or perhaps even weekly supermarket grocery shopping. Provided the cleared funds would otherwise have been available - in order that the balance may later be cleared in full - a cashback credit card can also be used in a great many other ways to significantly boost income.

Some ideas to consider for using your cashback credit card:

1. A new domestic appliance for your home, such as a TV or washing machine
2. College or other tuition fees
   
3. Repair work required to be carried out on your home or car
   
4. Flight and hotel costs when taking a trip (this can be a big one!)

These are just a few examples of where larger spends - which may otherwise have been paid by cash equivalent - can significantly boost your cashback income each and every year.

It now being established that cashback credit cards should be used wherever possible instead of available funds, it is important to look at what should happen to the cleared funds in the interim period, pending receipt of the monthly bill. Should they simply be left in a day to day bank account? If so, what credit interest rate are they likely to attract? A fraction of one percent? Anything at all?

It is much better to find an interest bearing, instant access savings account in which to keep funds pending them being required to clear a credit card bill. The interest on these accounts is likely to be calculated daily, meaning that for every day money is in them, it will be earning. This means that not only will you be earning money in cashbacks, you will be earning credit interest on the same funds as well. Yes, there will be occasions where the funds can only remain in the account for a matter of days but every single day will count in this respect in generating additional revenue. Care should be taken, however, regarding how long is required each month to transfer funds out of these accounts to a credit card or other bank account.

It is vital to ensure each and every month that a credit card bill is paid on time. When a statement is received, it will show a date by which the funds must be received by the credit card company. This will not be the same date by which the funds are required to be sent. Depending upon the payment method chosen, a certain number of days will be required for the funds to reach their destination and guidelines can usually be found on the back of a statement. Alternatively, consulting the credit card company's website or giving them a call will provide this information.

NB - Forgetting about a bill just one month in the year and being charged interest as a result can undo a lot of good work!

There is no real way to predict with any great level of accuracy how much money can be made each year from cashback credit cards. Circumstances will vary and purchases which were envisaged will not be made, just as others will crop up unexpectedly. By bearing in mind the points discussed on this page, however, you can be reasonably sure that you are following the actions required to make at the very least something approaching the most money you can from your cashback credit card.

Remember!

1. Choose your card provider and type very carefully
2. Use the card appropriately as often as possible
3. Make the most of your available funds until they are needed to pay your bill
4. Always make sure that your bill is paid on time and in full every month

Finally, it is worth pointing out and remembering that financial markets do and will change. It is always a worthwhile exercise therefore to take the time each year and re-evaluate the cashback credit cards available, to ensure that you remain with the best provider for your personal requirements on an ongoing basis.