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The following is a WalletHub interview with Associate Professor of Economics and Director of the Center for Economic Education (CEE) Dr. Sahar Bahmani. Link to Wallethub article: https://wallethub.com/best-cash-back-credit-card/#expert=sahar-bahmani
What would you say the best cash back credit cards all have in common?
The best cash back credit cards attract those who want to be paid to shop and those who want to keep more cash in their wallet.
Cash back is a rebate of a percentage of the purchases you charge on the card.
For those who have a strong credit score of 720 or higher, you’ll qualify for the cards with the best rewards. This means that you can get 1 -1.5 % cash back on all purchases or up to 6% back in specific bonus categories, like groceries, dining, or at designated retailers. Some cards offer a cash bonus or spending a certain amount ($50-$200) within a specified time period. If you decide to go with a flat-rate cash back credit card, each purchase earns the same percentage cash back.
As an incentive program operated by credit card companies where a percentage of the amount spent is paid back to the card holder, it's important to know that these cash back credit cards are more beneficial to consumers who actually pay their credit card statement on time off every single month. If you've ever found yourself, like me, wondering how card issuers can afford to pay cash back, the money is coming from the collection of interchange fees on each transaction that merchants pay to the card issuer.
Do you think cash back is the best credit card rewards currency?
It's a great option because every time you use the card, you earn a percentage of what you spent back in the form of cashback.
For example if your card pays 2% cashback and you spend $100 in a shop, you will earn $2. While some cards will pay cashback monthly, cashback is generally paid annually.
What limitations do even the best cash back credit cards tend to have?
Cards that have the most rewards, like American Express’s Blue Cash Preferred, which pays 6 percent back on groceries, come with an annual charge of $50-$100. It is important to be aware that the interest rates are higher compared to standard cards. Understand that some card issuers even cap how much cash back you can accumulate in a year. You should also note that you must enroll online every quarter to earn in bonus categories, because they are not automatic as many people assume.
Which cash back credit card(s) would you recommend to consumers?
Blue Cash Preferred Card from American Express, as mentioned earlier, pays 6% back on groceries.
Chase Freedom is a popular option for earning cash-back.
Citi Double Cash Card.
Chase Freedom Unlimited.
Discover it® Cash Back.
Capital One Quicksilver Card.