Cash Back Credit Cards Disadvantages

If you are lured by everything ‘free’ it is unlikely that you will not be lured by a cash back credit card. And to the compulsive card user, it’s completely inescapable. The credit card company hereby gives users a chance to win back some of the money that they owe on a card and it almost sounds like a dream. But do you know that the picture is not so rosy in truth? Grabbing at this piece of plastic could actually translate to problems for your money. Here’s how!

You don’t get the signing bonus that easily

Typically cash back credit cards come with a signing bonus. However, read up the details and you will find that you are not entitled to the money until you perform certain amount of transactions on your card and make purchases to a stipulated requirement.

Minimum usage is must

A cash back credit card almost always comes with a minimum usage stipulation to get the rebates and the rewards, which means that if you do not use your card enough, you wash your hands off the offer. Now what does that mean? It precisely means that you need to spend big on your card to chase the rebates. This however has its downsides. For one, you spend more than you actually gain in form of rebates. Secondly, by striving to get some cash back from your credit card company, you end up overspending, and thus ruining your financial stature.

It’s also important to note whether the amount of cash-back that you are entitled to is capped at a certain limit. If so, it means that no matter how much you spend on the approved categories throughout the year to get cash back, there is a maximum that you can get, which is not unlimited or proportional.

All rebates on credit cards are not dazzling

While you might be feeling that getting cash-back rebates of 2%, 3% or 6% is a good idea, in reality most rebates are limited at 0.25% - 1%. Higher rebates are mostly provided on select stores and brands that are not so easily visited. And some cards - to make things difficult for consumers - keep on switching their big rebate stores often, so that racking up deals become harder. And yes, you need to work hard to keep a trail of their switches to pull any savings.

High APR

Cash back credit cards in most instances come with a high APR. This implies that any outstanding balance on this card can make you pay considerably more than a regular card. And if you get swept off your feet by low/zero promotional rates, you will be disappointed to know that they change shortly.

Also, if you miss 2 consecutive minimum payments on some of these cards, you can lose all accrued rebates that you earn to date.

It’s important therefore to read the credit cards fine prints before you sign up for a cash back card. Remember that all such cards are appended with rules regarding expirations and redemptions.

Also, do compare cards from different providers head-to-head before subscribing to any – the credit card industry is highly competitive and you may need to study them closely to make a good choice.

If you are concerned about how to get a Credit Card, the lot of banks has introduced a convenient “Credit Card Apply Online” system and so, you can apply for it on line. You can route your application through reputed sites like BankBazaar.com also. Once you submit the required documents, the bank verifies them and issues the card very quickly. The point is that the card issuing process of the bank has been completely streamlined and hence, you can get your card sooner than you expect.

Sponsor Ads

• Ad Space Available - Rent it Now!

Report this Page

Created on Dec 31st 1969 18:00. Viewed 0 times.

Share on APSense

Comments