What Factors Actually Matter When Picking A Cash Back Credit Card?

A cash back credit card allows you to save some money on every purchase. These cards also allow you to build credit if you make on-time payments and keep a low balance. However, cash back credit cards have different reward structures. It can feel overwhelming to decide on the right card for your wallet.

While you can technically open multiple credit cards, you don’t want to turn it into a habit. Each credit card application results in a hard credit check, an event that will hurt your credit score. If you submit numerous credit card applications over a 14-45 day span, it only counts as one hard credit inquiry. However, the hard credit inquiries will accumulate and can meaningfully hurt your FICO score if you apply for a new credit card each month.

If you’re ready to open a cash back credit card but want some clarity on which one is right for you, these are some of the factors to consider.

Rewards Program

If you’re looking at cash back credit cards, you should start with the rewards. Cash back credit cards either offer the same cash back for every purchase or offer elevated rewards for specific categories.

For instance, some credit cards offer 2% cash back on every purchase, regardless of the category. However, other credit cards may offer 3%-5% cash back in some categories and 1% cash back for every other type of purchase.

Some credit card enthusiasts open multiple credit cards just to get 3%-5% cash back on more purchases. However, it’s simpler to have a single credit card that offers unlimited 2% cash back on all purchases.

Another detail to consider when checking the rewards program is if there are limits. Some credit cards have 3% cash back for specific categories, but you only get 3% cash back for the first $10,000 before it turns into unlimited 1% cash back.

Annual Fees

You can choose from many cash back credit cards that do not have any annual fees. You can save money by choosing a free credit card. However, credit cards with annual fees tend to have the best reward programs.

Annual fees might make sense if you spend a lot of money on your credit card. The more money you spend, the more the extra rewards will matter. However, if you have a conservative budget, you may want to stick with a free credit card.

Additional Perks

Credit cards don’t only specialize in giving you cash and other rewards for every purchase. Most credit cards come with additional perks, such as security features, 24/7 roadside assistance, and a travel concierge.

These perks vary for each credit card issuer, and it’s good to compare multiple cards to see which ones stand out.

Interest Rate and Fees

While cash back rewards are a nice perk, those benefits won’t mean much if you get deep into credit card debt and find yourself making late payments. In an ideal scenario, you can pay off your credit card balance at the end of each month to avoid interest.

However, if you regularly carry a balance, it’s important to know your credit card’s APR. Some credit cards feature interest rates above 30%, especially if you end up with the penalty rate. You can check a credit card’s interest rate and fees by heading over to the card’s terms and conditions.

Some credit cards offer 12-24 month intro 0% APR timeframes that make debt more affordable. During this intro period, interest will not accumulate on your balance. It’s still good to pay off your balance at the end of each month if you can. However, an intro window like this one gives you more flexibility in case you can’t pay off the entire bill in one month.

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