Here's The Basics:

In order to take advantage of cash back credit cards, first you need to evaluate your personal interests and spending habits to determine how you can benefit. Since there are so many different types of cash back incentives available, always evaluate the individual options each program has to offer. Do you earn a flat percentage on all purchases, or is the program tiered? Will you shop at "select" merchant locations, or will this be a general-use credit card? Is there a limit on how much you can earn? When and how will you get paid?

Here's Some Examples:

The best way to determine if one of these offers will work for you is to do the math! Let's take a look at some examples of how much you can earn over a 1 year period:

1. In our first example, assume you apply for a cash back credit card which pays on a tiered structure up to 1% cash back. This card also offers up to 5% cash back at select merchants and partner locations:

Category	Amount You Charge	Percent You Earn	Cash Back You Earn
First $1,500	$  1,500	.25%	$   3.75
Second $1,500	$  1,500	.50%	$   7.50
Over $3,000	$  7,000	1%	$   70
Select Merchants	$  5,000	5%	$   250
TOTAL	$ 15,000		$  331.25

In this example (assuming all charges we made at the beginning of the 12 month period), you would receive a check for $331.25 at the end of the year.

* The Discover Platinum Card is a perfect example of this type of offer!

   2.   Here's another example:

Assume you apply for a cash back credit card offering 1% cash back on ALL purchases. You can also earn 5% cash back at grocery stores, gas stations and drugstores with this offer:

Category	Amount You Charge	Percent You Earn	Cash Back You Earn
Regular Charges	$  5,500	1%	$   55
Groceries	$  2,400	5%	$   120
Gasoline	$  6,000	5%	$   300
Drugstores	$  1,100	5%	$   55
TOTAL	$ 15,000		$  530.00

In this example (assuming all charges we made at the beginning of the 12 month period), you would receive a check (or statement credit) of $530.00 at the end of the year. Assuming you paid off your purchases quickly and didn't accumulate much interest, this would all be "money in the bank"!

* The Citi Dividend Select Card is a perfect example of this type of offer!

Words of Advice:

Don't fall into the credit card company's trap! Don't misuse cash back credit cards and create a large debt you can't handle. Since interest rates are normally higher with these offers, you'll be paying more if you carry a balance with this type of card vs. a standard credit card (even with all the incentives). Make sure you can pay off your purchases quickly to avoid the additional costs.
 

Other Related Articles:

Types of reward credit cards: Find out what kind of rewards you can earn just by using your credit card! See what types are available and how they work.   Choosing the best reward credit card: Find out what factors you should consider when choosing a reward credit card. How do you pick the best offer?   Taking advantage of reward credit cards: How can I take advantage of reward credit cards? We'll show you how to earn the most reward bonuses!   Percentage vs. points programs: Is it better to earn a percentage or points? We'll show you the pros and cons of both types of reward credit cards.