Everybody wants to get a cashback credit card, but a lot of new users don’t know how to get the most out of it. This guide can help you get started.
If you have a shopping list that is growing each day, you may be wondering how this type of card can help you buy all of them and get more cash in your account at the same time.
A cashback credit card is a beneficial asset, but it is crucial to choose the right one. Different cards offer different benefits. Generally, an excellent card will help you cover your expenses, increase your savings, and build credit.
Here’s what you need to know when getting cashback credit cards.
Signing up
Before choosing a card, you need to have an idea of your monthly spending habits. Different cards are designed with various customers in mind. Some can give you a cashback if you travel, while others offer rewards if you purchase at certain shops. The cashback card you choose will only work for you when its reward system fits your current buying habits.
Generally, a cashback credit card suits you if:
- You have good credit. Better credit will help you get better deals, such as higher payback percentages and lower interest rates.
- You have a foreseeable buying habit. This is an excellent way of maximising rewards. A card that offers higher rates in product (or service) categories you often purchase (or use) can help you rack up your savings.
- You can make monthly payments. Paying off your balance on time is the only way to guarantee maximum rewards. Even if the card carries the highest annual percentage rate, you don’t have to worry about an increasing interest rate if you always stay on top of your monthly balance. You can even get some bonuses this way.
Sign up only for a card that you think you will use regularly. It may be tempting to send applications for multiple cards, but this can hurt your credit score, which can negatively affect you should you want to get a loan or other credit cards in the future.
Other items you need to check before signing up include:
- Required documents: The requirements for salaried individuals may vary from those who are self-employed. In the UAE, you may be asked to submit a salary certificate if you are an employee or a valid trade license if you are self-employed.
- Eligibility criteria: These include your nationality, age, and minimum monthly salary (for salaried individuals).
Note that different credit card providers will have their own requirements, so inquire about these first if you intend to apply.
Fees
Most cards come with annual fees. In general, those with higher fees offer bigger cash rewards for your purchases. To determine if the fee is worth it, consider calculating how much you are likely to spend and the average rebates you’ll get. In some cases, the cashback can be high enough to offset the annual fee. If not, you need to look for cards with lower to no annual fees.
Take note as well that there are card providers that waive annual fees for the first year for new customers on the primary card and free-for-life for supplementary cards.
Another fee to look into is the foreign transaction fee. This is often missed by applicants, and it can be hefty if you are buying online from international websites or travelling abroad. Get a card with low to no foreign transaction fees if you intend to use your card for international travels and purchases.
Moreover, watch out for late payment fees. These can pile up and may even nullify your rewards. So if the card you want to apply for comes with high late payment fees, make sure to stay on top of your monthly due dates. Consider setting up an alarm or notification on your phone or laptop so you won’t forget about these.
Annual Percentage Rate (APR)
How APR works is another crucial thing you must understand before looking into credit card offers in the UAE.
For cashback credit cards, two things that can increase your APR are a high APR on the card and the habit of carrying a monthly balance. The interest can add up over time, which can be a basis for cancelling out your cash rewards. So the key to avoiding annual interest charges is to make full and timely monthly payments.
Payback rate
Cashback credit cards will give you a certain percentage of what you spend. Most cards offer 1 to 2%, but some can give you up to 10%.
Here are some of the payback rate structures offered by providers:
- Flat rate: This will give you the same percentage of cashback regardless of the amount you spend or the shop you choose.
- Different rate: This form of cashback provides different rates depending on what you purchase. Some cards offer a higher percentage for purchases in specific categories.
- Tiered rate: This rate depends on your annual spending.
Getting cashback
Most cashback cards allow you to earn points that are converted into cash. But the details for different cards will vary.
Here are the common forms of cashback:
- Actual cashback: This refers to the percentage you earn from using the card deposited straight into your bank account. For instance, you can get a maximum of 10% cashback on specific retail spend categories like bills, supermarket, education, and transport expenses capped at a specific amount each month. However, you need to reach a minimum total amount for you to earn a cashback.
- Gift cards: Redeem your earned points using gift cards at different retailers or restaurants, oftentimes in the form of discounts. For instance, you can get a 50% discount on cinema tickets or free valet parking at famous leisure destinations and other establishments.
- Statement credit: This isn’t a straight cash deposit, but it can alleviate the amount you owe on your monthly bill.
- Travel points: Some credit cards allow the conversion of cashback to travel points so you can redeem them for hotel accommodation and flights.
Redeeming points
There are various ways to redeem the rewards you earn from cashback credit cards. These include:
- Direct bank deposit
- Check
- Rewards on credit card balance
- Gift cards or discount coupons
- Donations to your chosen charity
You may choose between two or more options. If you are ready to redeem your cashback, you can call the card provider or visit their website.
Take note that some rewards can expire, so make sure to check the card’s forfeit or expiration policy before signing up. It is better to get a card without a termination date or those with a longer cut-off period, provided that you keep it active.
Moreover, don’t forget to redeem all the rewards you earn before transitioning to another card or closing your account. Before applying for a cashback credit card, equip yourself with this pertinent information so you can maximize its benefits. More importantly, ensure the redemption options are in line with your needs.