Common mistakes to avoid when using a cash-back credit card

Cash-back credit cards are a popular choice among consumers who want to earn rewards on their everyday purchases. These cards offer cash rewards on the purchases you make, with many also coming with other perks and features that can save you money on your monthly statement or on interest charges. However, with so many different options out there, it’s possible that you’re not using the best card or strategy to maximize the value you can get from your cash back card. In this article, we will discuss some common mistakes people make with cash back credit cards and how to avoid them.

1. Not using the right card for your spending
One of the most common mistakes people make with cash back credit cards is not using the right card for their specific spending habits. Cash back rewards programs come in all shapes and sizes, so to avoid leaving real money on the table, you should check that you’re using the right card for your specific spending habits. Review your budget and where you spend most of your money (i.e., gas, groceries, dining, etc.) and determine how well your current card aligns with those specific spend categories. Take some time to look into other cards that might provide more cash back based on your top expense categories.

For example, if you spend a lot on groceries and want a card with no annual fee, the Blue Cash Everyday® Card from American Express offers 3% cash back on groceries at U.S. supermarkets, U.S. gas stations, and U.S. online retail purchases on up to $6,000 per calendar year in purchases for each category (then 1%), and 1% cash back on other purchases. If you spend a lot in different areas of your budget and want more flexibility, the Bank of America® Customized Cash Rewards credit card could be a good fit.

2. Only using one card
While sticking with just one credit card makes things simpler, you could still get more value by using multiple credit cards. Even if your card’s rewards program hits all of your top spending categories, you could benefit from using different cards for different types of purchases. By combining multiple cards, you can maximize your rewards on various spending categories and earn more cash back overall.

3. Excluding cards with annual fees
Many cash back credit cards don’t charge an annual fee, but some cards with an annual fee make up for the cost by offering even better reward rates than their no-fee counterparts. While it’s natural to be hesitant about cards with annual fees, it’s important to consider the potential rewards and benefits that these cards offer. Cards with annual fees may provide higher cash back rates, better welcome offers, and other valuable perks that can outweigh the cost of the annual fee.

4. Paying more in interest than you’re getting in cash back
One of the biggest mistakes you can make with a cash back credit card is carrying a balance and paying high interest charges on your unpaid balance. To avoid losing some of your rewards value to interest charges, prioritize paying your bill on time and in full every month. By paying off your balance in full each month, you can maximize the value of your cash back rewards and avoid accruing interest charges that could negate the benefits of earning cash back.

5. Not using shopping portals or offers to earn more
Some card issuers have shopping portals or specific offers that can help you earn more rewards on top of what your cash back credit card already offers. By taking advantage of these offers, you can multiply your rewards haul on certain online and in-store shopping trips. Additionally, cash back websites like Rakuten and TopCashback can help you earn even more rewards on your purchases.

6. Not activating rotating bonus categories
If you have a card that offers rotating bonus categories, such as the Chase Freedom Flex or Discover it Cash Back, it’s important to pay attention to the current quarter’s bonus categories and activate them to earn extra cash back. By taking advantage of these bonus categories, you can earn as much as 5% cash back on certain purchases, up to a specified spending limit. Failing to activate these bonus categories or forgetting to use them while shopping could result in missing out on valuable cash back rewards.

In conclusion, cash-back credit cards can be a valuable tool for earning rewards on your everyday purchases. To maximize the value you can get from your cash back card, it’s important to avoid common mistakes such as not using the right card for your spending, only using one card, excluding cards with annual fees, paying more in interest than you’re getting in cash back, not using shopping portals or offers to earn more, and not activating rotating bonus categories. By being mindful of these mistakes and adjusting your approach to using cash back credit cards, you can ensure that you’re getting the most value from your rewards and maximizing your cash back earnings.

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