If you think credit cards are primarily instruments of debt, there is a way to earn money while shopping for your favorite items or paying daily expenses. Cashback credit cards in the Philippines offer such an exciting feature and accumulated rebates can be enjoyed in various ways.
Also, you can enjoy straightforward redemptions without the hassle of calculating how much it earned as it offers simplicity in both earning and using the acquired cashbacks.
Sounds too good to be true? Read on to learn everything about the cashback program.
What is cashback program?
A credit card’s cashback program is an incentive given by banks to cardholders that allow them to earn a fraction of their net expenditures back to their accounts. In layman’s terms, cashback begets the cardholder a portion of their spending on every purchase.
With this, you can earn points that can either be converted to actual cash or use these points to purchase items at shops accredited by your provider. Also, you can use the points you accumulated via the cashback program to purchase airline tickets and gift cards, similar to other credit card features like miles and rewards points.
How does cash back work?
It works by getting the net expenditure of the cardholder. For every purchase, your credit card computes for the amount that will be “returned” to your account. Depending on the percentage included in its contract, you will get a percentage of your spending back to your account.
Typically, your provider will only allow you to redeem your accumulated cash back once you’ve reached the limit set by your provider. To get your rebate, banks will either deposit the money to your savings account or issue you a check as scheduled by your bank.
Types of cashback credit cards
Now that you’re familiar with how it works, you must consider which suits your buying behavior and lifestyle.
1. Cards bearing variable cashback rates
Also known as tiered cashback, this type comes with varying rates for different purchases and categories.
For example, if you drive daily going to work, get a card that provides a satisfying rate of cashback on gas. Foodies may avail of a card that comes with great rewards when you dine out.
Those who are in charge of settling utilities such as electricity, water, and the likes can opt for cards equipped with a great bonus when they use their cards to pay.
To maximize its benefits, make sure that the purchases or services you often avail have an accelerated cashback enabling you to earn more.
2. Cards bearing a fixed cashback rate
Flat-rate cashback offers a fixed rebate on all transactions and categories. It enables you to track your points regularly without memorizing complicated rates. Also, with a single rate, steady cashback is expected in every purchase.
Is cash back credit card good for you?
The cashback feature is a good way for cardholders to get back a certain fraction of their expenses back to their accounts. However, how will you know if cashback is good for you? And what are the factors that should make you get a cashback card over other credit card types?
Cashback cards, as opposed to others, tend to have a higher annual percentage rate as well as a higher annual fee. However, your card will be a waste, along with the amount you paid for the annual fee if you don’t use it often.
Why do you need to use it? With a high annual fee, you need to shoulder every year, you need to maximize it to make the annual fee worth it. Aside from making the annual fee worth it, regularly using your card will also allow you to rake in more cashback points.
When getting a cashback card, be mindful of the expiration date of your points. Some have an expiration date for the points if you do not claim them for a certain period. Be mindful of the expiration date and cash in your points before they turn to dust.
Cashback cards are good for you, especially if you’re regularly using them for your purchase. Just be aware that when you use you use it frequently, pay your bill on time and in full to avoid penalties.
As it comes with various perks and special privileges, note that it’s a bit costly to own. The majority has a 3.50% interest rate with annual fees amounting to P2,500 to P3,500.
To counter, we suggest availing one that generates favorable savings from the collected rebates as it can be used to pay for the interest rate and annual fee.
Tips on getting a cashback credit card
- Not everyone will be granted this type of card. It is a privilege given to those with good credit standing. For those who want to enjoy its benefits, start by knowing the factors that affect your credit score.
- Consider your lifestyle and needs when availing. Distinguish what you mostly spend on daily so you can accumulate rebates faster.
- Familiarize yourself with rules regarding the accumulation of rebates as some banks limits privileges such as installments and discounts when you avail cashback.
(This article was written on June 23, 2015, and updated on February 28, 2020.)