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5 Reasons Why You Need a Cash-Back Card in Your Wallet

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PavelVinnik / Getty Images/iStockphoto

With so many credit cards available, it can be tough to navigate all the different types. For example, hotel and airline credit cards offer great bonuses for those who are loyal to certain brands. On the other hand, travel rewards credit cards tend to come with fees, so they won’t be worth it if you don’t travel much. In that case, you may be better off going with a cash-back credit card, as they often have very few fees, among other benefits.

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Here, we’ll walk through some of the benefits of cash-back credit cards — and then, we’ll take a look at how to evaluate cash-back credit cards.

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Easy Way To Earn Rewards

Cash-back credit cards can allow you to rack up rewards quickly and easily. Some cards offer higher rates of cash back on certain spending categories while giving you relatively low rewards for all other purchases. For those who don’t mind carrying a wallet-full of cards and a checklist of which to use for every type of purchase, these cards can be highly rewarding. Then you have cash-back cards that offer the same cash-back rate for all purchases, which provide the simplicity of using just one card while still allowing you to pile up rewards.

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Minimal Fees

Premium credit cards come with enticing benefits, but they also have annual fees that can be well over $500. Thus, these cards are only worth it if you take advantage of their perks regularly. Meanwhile, cash-back cards let you optimize your spending without paying a hefty fee every year.

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Low Introductory APR

Credit cards make most of their money on interest charges on cards carrying a balance. Despite this, cash-back credit cards often come with a low introductory rate. Since these cards often come with no balance transfer fees as well, they may be a good way to pay down other high-interest debt. Or you can put a large purchase on your credit card with plenty of time to pay it off. Just note that you’ll start being charged interest if the balance isn’t paid off before the introductory period ends.

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Constant Rewards Value

While travel rewards credit cards can have lucrative redemptions, they give you points, not cash–and the value of those points can change at any time without explanation. That’s not the case with cash-back credit cards. Cash is cash and the credit card issuer cannot change its value (although the amount the cardholder receives could change if he or she has any returns or refunds on purchases made previously). Hence, with a cash-back credit card, you know exactly what your rewards will be. The only thing that can change is the rate of cash back, but that only applies to rewards you earn in the future; the cash back you’ve already earned can never be devalued. Before signing on the dotted line for any credit card, make sure to read the full terms and conditions so you know exactly what is being offered in the rewards program.

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Sign-Up Bonuses and Other Perks

In addition, cash-back cards often come with decent sign-up bonuses. Again, sign-up bonuses for cash-back credit cards are usually not as valuable as those that come with premium credit cards. However, given that cash-back cards often have no annual fee, the sign-up bonus is a nice perk. Plus, cash-back cards may come with other perks.

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How To Evaluate a Cash-Back Credit Card

When evaluating a cash-back card, take a look at the fees first. Many banks and credit unions are trying to reduce fees, meaning you should look for a card that has little to no fees beyond its APR. If the card does charge an annual fee, make sure the rewards are enough to justify that fee.  You’ll also want to look at the sign-up bonus and other perks – and the spending requirement to earn that bonus.

With their low fees and ability to earn cash back on all your purchases, a cash-back card is a handy addition to most anyone’s wallet.