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Cash Back Credit Cards

What are cash back credit cards?

Recently in many British tabloids you must have learnt of cash back credit cards. The advertisements in the tabloids claim that you can get a certain amount of cash back if you make purchases from your credit card. Does it sound too good to be true? Cash back credit cards seems a new way of rewarding the customers who make purchases on their credit cards. This scheme offers an incentive to customers in the UK tom make more and more purchases from their credit cards. However there is a catch in here. Cash back credit cards do not carry reward points. So it is advisable to take this point into consideration before applying for a cash back credit card.

How it works?

Let's see how the whole system works. For every purchase or transaction that you make through your cash back credit card, a certain percentage of that purchase amount is retuned to you at the end of the month. The cash back amount is credited to your account every month. The percentage of cash retuned depends on the amount of the transaction and also the type of transaction carried out by the customer. Cash back credit cards are increasingly favored by many British citizens today. In the UK the average credit would be 5 per cent for hospital, medical and education expenses. The credit will be 4 per cent for cash withdrawal from international ATMs, 3 per cent for electricity or mobile phone bills and 2 per cent for domestic cash withdrawal from ATMs. The above percentages may be different for different cash back credit cards. All the credit card transactions other than those mentioned above will attract a rate of 1-1.25 per cent which again depends on your monthly carry over balance. The carry over balance refers to the amount carried forward each month after deducting payments and other credits. There is an opening annual fee and you can get your second free card in a year.

The catch

You must be thinking that the offer seems to good to be true. You are partially right. As mentioned before, the cash back credit cards are not entitled to rewards points. Second your minimum purchase amount should be up to a certain limit to qualify for cash back. Hence in case your purchases for the month are below the minimum limit then you dont get any credit in your account by the end of the month. Also certain transactions like cash withdrawals from ATMs, railway and air ticket booking attract a usage charge that may go up to 2.5 per cent. Hence even if you get a good amount of cash back on such transactions your gains would be limited. All the charges are applicable as in a regular credit card.In the case of normal credit cards you get rewards points that you can redeem at certain specific outlets and stores. The cash back is just another way of earning rewards points. The only advantage is that it is equivalent to cash and hence more beneficial. In the case of reward point you can redeem your points only at certain selected outlets of the company.



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