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Cash back basics

May 02, 2011

Counting your loyalty rewards points might be fun, but there’s nothing more gratifying than earning cash back on your credit card purchases. Cash back incentives deliver instant value in real dollars and cents terms.

But like any rewards programme, there are ways to maximize the value you derive. Here’s how to make the most of today’s credit card cash back rewards programmes.

Pay it back. Sure, you can spend your cash back reward on any item of your choosing, but if you’re carrying a balance on your credit card, one of the smartest moves you can make is to pay down the credit card balance with your cash rewards.

In fact, in some cases, cash back rewards are delivered at year end and that’s the perfect time to pay down the balance on your holiday-shopping credit card statement.

Keep it simple. The beauty of a cash back rewards programme is its simplicity. So if you find a programme that involves complicated earn rates, tiers and thresholds, be sure you understand the details before you apply. The best reward is a no-nonsense credit card that delivers cash back without unnecessary restrictions and stipulations. All the more reason to always read a credit card’s fine print regarding its cash back rewards programme.

 Freedom as a feature. You may want to use your credit card to purchase items from a wide array of products, from groceries to gasoline. That’s why it’s important that your credit card’s cash back rewards programme reflects your buying habits by granting you cash back on a variety of items including groceries and retail goods that are important to you. Other key features to look for are purchase security and zero liability fraud protection.

Don’t look a gift-horse in the mouth. Don’t take earning one percent cash back on your purchases for granted, but try to consider the long-term benefits of cash back programmes. After all, the cash you receive can add up quickly based on your day-to-day spending habits.

At first, earning cash back rewards on your credit card purchases may not seem like a financial windfall, but tapping into a program that reflects your buying habits can be one of the simplest and most gratifying ways to reap rewards for purchasing everything from the daily essentials to vacations.