Are Cashback Credit Cards Worthwhile?

by : Richard Adams

Whoever the person was at the Discover Card Corporation that came up with the idea for cashback credit cards is a true unsung hero in the world of banking and finance. After all, this was a revolutionary idea. Today, while there are a number of ways to make an application for a particular credit card attractive in the early days there was little more used to entice people other than offering low interest rates or offering no annual fee. Then, someone at Discover came up with the brilliant idea for a cashback credit card. For those not familiar with this particular type of card, its name implies exactly what it is: for every purchase on the card you can get a certain amount of cash back. That is, if you use the card at a specific retail store you may receive a certain percentage of cash back on every purchase. Needless to say, this idea proved wildly popular and spawned a number of different cashback cards that provide cash back on a number of services.

While this notion of receiving cash back on credit card purchases seems like a great idea, there are those who may be somewhat skeptical of the value and the benefits of such a card. This is a fair and valid skeptical viewpoint. After all, there have been many promotions that have proven to be too good to be true so it is not surprising that a number of people may look towards the various cash back credit cards on the market and wonder if they are truly worthwhile. This can be a somewhat difficult question to answer because there are such a great variety of cashback credit cards on the market that it would be difficult to offer a blanket statement of whether or not the cards are worthwhile. After all, some cards have terrible terms and conditions and others have very fair terms and conditions. However, if a generality had to be made it would be that cashback credit cards are usually quite worthwhile if you are looking for a minor discount on your purchasing budget.

If there were a criteria to base how worthwhile or not the card is it would be based upon what percentage the cash back represents. If the cash back purchase percentage is low, then it may not necessarily be all that worthwhile to make your purchases on the card. If the cash back percentage is a fairly competitive amount, then the card may have significantly more merit. Of course, if the interest payments exceed the cash back amount then the whole promotional aspect is a moot point. This can, however, be avoided if the individual opts to pay the balance completely in full every month. This would eradicate interest payments and make the cash back value increase significantly.

Another area that must be taken into consideration when it comes to deciding whether or not a cashback card is worthwhile centers on the method in which the card is paid back. In some instances, the cashback is provided in the form of adjusting (reducing) the statement balances and others will pay the amount directly and mail a check. When it comes to receiving a check, one must realize that there may be a minimum cash out amount requirement. (For example, $25 must be accrued in cash back "points" before a check can be requested) The frequency of how often you use the card will then play a significant role in defining whether or not the cashback card it worthwhile. Additionally, there will be some cashback cards that will only make their payouts on an annual basis. Is waiting a year to collect the money that you are owed acceptable? If it is, then the card is worthwhile. If not, then the card simply will not be worth it.