We’ve all heard of cashback credit cards right? But do you know exactly what they are, and how they could save you money each and every month? Do you use your credit card regularly or would you be prepared to do so in place of your regular bank debit card? If so you could earn cash by using your cashback credit card. Here’s how it works:
When you make a purchase on your cash back credit card, the card provider will reward you a small percentage of the purchase as ‘cashback’. Depending on the card and provider, this can be anywhere between 4-6% on each and every purchase. So at the end of the month you will see the cash you have earned detailed on your statement.
Some companies will give you the choice of having this cash paid directly into a bank account, others will use it to reduce your outstanding balance. Either way cashback reward programmes are great for regular users, or those who make large purchases on their cards such as cars, furniture, home improvements etc.
However, don’t be tempted to ‘over use’ your card under the impression you’re earning money “so why not buy it!”. Think about it, if you wouldn’t make the purchase with cash, don’t make the purchase with the card! Although if you are responsible with your credit cards there’s a great technique to make the most of this type of reward card:
1) Instead of using your debit card and spending your salary during the month, use your cashback card for all of your day to day purchases. Make sure you use it for everything from lunches to gas to entertainment! But do make certain you do not buy more than you normally would. Simply substitute your bank card for your credit card.
2) At the end of the month, use your untouched bank balance to pay off your credit card in total, this will mean you avoid any interest charges on your account.
3) You will now see that you have spent the same amount throughout the month, but have earned 6% cashback on everything you have purchased or paid for!
For example: If you normally spend around $700 per month, by using this technique you will grab yourself $42 per month free! That’s an extra $504 per year absolutely free! However most of us also make larger purchases like holidays too! One family holiday for $5000 would earn you $300 spending money! If you’re paying for it anyway, why not benefit from it!