Thursday, March 16, 2006

Credit Cards and Cash Back

For some people, credit cards can be a serious problem. I have incredible admiration for the personal finance bloggers, and others around the country, resolutely digging themselves out from incredible debt, often with the added burden of outrageous, usurious interest rates.

But I'm one of the lucky ones; I've never been in a financial situation where I needed to rely on credit cards to get by, and I've developed the habit of paying off my credit card every month. And when you have the freedom and the discipline to do that, credit cards can be a wonderful thing.

I have a cash back credit card, and I put virtually everything I spend on it. As a result, I get back 5% of what I spend on groceries and gas, and 1% of everything else. It's one of the easiest ways to earn a little extra money-- you get cash back for money you'd spend anyway.

My card is a Citi Dividend Platinum Select, but you can get the same deal with Chase Cash Plus Rewards (plus at the moment a $100 bonus for signing up). I think those are the best deals for people who spend a moderate amount, but they have a limit of $300 in cash back per year. If that's not enough for you, there are some cards for big spenders which give 5% on everything once you've spent a certain amount (over $6,500 for the Amex Blue Cash, for example).

Now, I don't like Citigroup as a company. They have a history of predatory and abusive lending to low-income individuals (they were sued by the Federal Trade Commission for it in 2001), and although they've improved in the past few years, they still have some serious ethical issues. So I would be uncomfortable helping Citi out; that's one reason I don't have a bank account with them.

But I happen to be one of those folks that credit card companies dread. I pay my bills in full every single month-- no late fees, no obscenely high interest rates-- and I get my rewards back. I'm pretty sure I come out the winner in this relationship. Chipping away at a company like Citigroup's profits? I've got no problem with that!


Anonymous said...

Yep, that's exactly how to use credit cards!

The cash back reward you can earn from credit cards depends on your particular spending profile -- especially how much you spend in various categories (e.g. gas, grocery, restaurants, utilities, etc.)

The calculator tool at makes choosing the best cash back card (or mix of cards) easy. Given your spending pattern, it calculates your expected annual rewards for each of the leading cash back credit cards and even for your best mix of cards. See the tool at .

CreditThinker said...

I have one question for you. Can I pay by my credit card any purchases and services or no to get cash back? May be there are special shops for this and I won't be able to use advantages of cash back credit cards...

Opra said...

You see, my friend Julia is fond of shopping. And her cash rebate credit cards help her to save money while shopping. I think that such cards are convenient for those who spend much money on different purchases.

Anonymous said...

I know several people owning 0% balance tarnsfer cash back credit cards. They are very pleased as some amount of the spend money is given back. So the process of shopping is just a pleasure.