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

Cash-back credit cards have become increasingly popular in recent years, offering consumers the opportunity to earn cash rewards on the purchases they make. These cards often come with additional perks and features that can help save money on monthly statements or interest charges. However, with so many different options available, it’s easy to make mistakes that could prevent you from maximizing the value you can get from your cash back card. In this article, we’ll explore some common mistakes people make with cash-back credit cards and provide tips on how to avoid them.

1. Using the Wrong Card for Your Spending Habits

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 vary widely, so it’s important to choose a card that aligns with your top expense categories. Take some time to review your budget and where you spend the most money, such as gas, groceries, dining, etc. Then, look into cards that offer more cash back in those specific categories.

For example, if you spend a lot on groceries, 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. If you prefer more flexibility, the Bank of America® Customized Cash Rewards credit card allows you to choose a 3% cash back category from options like gas, online shopping, dining, travel, and more. Alternatively, the Citi Double Cash® Card offers a flat 2% cash back on all purchases.

2. Using Only One Card

While sticking with one credit card may simplify things, using multiple cards can help you maximize your rewards. For example, the Capital One SavorOne Cash Rewards Credit Card offers 3% cash back on dining and entertainment, but only 1% back on other purchases. By combining this card with the Wells Fargo Active Cash® Card, which offers a flat 2% cash back on all purchases, you can earn more rewards overall.

3. Ignoring Cards with Annual Fees

Some cash-back credit cards come with annual fees, but these cards may offer better reward rates than their no-fee counterparts. For example, the Blue Cash Preferred® Card from American Express has a $95 annual fee but offers higher cash back rates on categories like supermarkets, which can offset the cost of the fee. Make sure to compare the rewards and benefits of fee-based cards to determine if they are worth the cost.

4. Paying More in Interest Than You Earn in Cash Back

Carrying a balance on your credit card can lead to high interest charges that outweigh the cash back you earn. To avoid losing rewards value to interest charges, prioritize paying your bill in full every month. This will help you maximize your rewards and avoid accumulating debt.

5. Not Using Shopping Portals or Offers

Some card issuers offer shopping portals or specific offers that can help you earn more rewards on top of your cash back credit card. For example, Amex Offers and Chase Offers provide discounts and bonus opportunities that can multiply your rewards earnings. Additionally, cash back websites like Rakuten and TopCashback offer additional opportunities to earn rewards on your purchases.

6. Failing to Activate Rotating Bonus Categories

If you have a card like the Chase Freedom Flex or Discover it Cash Back, take advantage of rotating bonus categories that offer higher cash back rates. Make sure to activate these categories every quarter and pay attention to the spending caps to maximize your rewards. Forgetting to activate these bonuses could mean missing out on valuable cash back opportunities.

In conclusion, cash-back credit cards offer a convenient way to earn rewards on everyday purchases. By avoiding common mistakes like using the wrong card for your spending habits, only using one card, ignoring cards with annual fees, paying more in interest than you earn in cash back, not using shopping portals or offers, and failing to activate rotating bonus categories, you can maximize the value of your cash back card. With careful planning and strategic use of your cards, you can earn more rewards and save money on your purchases.

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