Cash Back Credit Cards – Advantages and Disadvantages

If you are addicted to spending with your credit card, a cash back card may be a good option for you. While a cash back card helps you earn as you spend, it is important to understand how it works before you sign up for one. Here are some advantages and disadvantages of this type of card – read on to learn how to use it wisely.

How Does it Work?

When you use your credit card to buy something, the merchant pays a commission to your bank or service provider. On a cash back card, your card issuer shares some of this commission with you when you make certain kinds of purchases.

The total cash you can receive in this way is either mailed to you as a check or added to your total credit at year end. You can get back as much as up to 2% of your total credit card spending in this way. Currently, credit card issuers are competing with each other to get more customers and you may even find some 5% cash back cards in the market.
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