Credit cards are not just convenient tools for paying for goods and services. They can also be a source of income if you know how to use them wisely. In this article, we will show you how to transform your credit card into a cash machine that can generate extra money for you every month.

## What is a cash back credit card?

A cash back credit card is a type of credit card that allows you to earn a percentage of your spending back in the form of cash rewards. Depending on the card, cash back rewards can be a flat rate (e.g., 1.5% on all purchases) or can vary by purchase category (e.g., 3% on dining, 2% on groceries, and 1% on all other purchases).

Cash back rewards are usually presented to you on your monthly credit card statement. You can redeem them for a statement credit, which lowers your account balance, for a deposit to your linked checking or savings account, or as a paper check sent to you in the mail. Some cash back cards feature rewards points redeemable for cash back, typically at a rate of one point to one cent.

## What are the benefits of a cash back credit card?

A cash back credit card can offer you several benefits, such as:

- Saving money on your purchases. By earning cash back on your spending, you can effectively reduce the cost of your purchases. For example, if you spend $1,000 on a card that offers 2% cash back, you will earn $20 back, which is like getting a 2% discount on your purchases.
- Earning passive income. If you use your cash back card for your regular expenses, such as groceries, gas, utilities, and subscriptions, you can earn cash back without much effort. This can be a source of passive income that can supplement your budget or help you achieve your financial goals faster.
- Enjoying other perks. Many cash back cards also offer other perks, such as sign-up bonuses, introductory 0% APR offers, travel insurance, purchase protection, extended warranties, and more. These perks can add more value to your card and enhance your overall experience.

## How to choose the best cash back credit card for you?

There are many cash back cards available in the market, each with its own features and terms. To choose the best one for you, you need to consider the following factors:

- Your spending habits. You should look for a card that matches your spending habits and rewards you the most for the categories that you spend the most on. For example, if you spend a lot on dining and entertainment, you may want a card that offers a higher cash back rate on those categories. If you spend evenly across different categories, you may prefer a card that offers a flat cash back rate on all purchases.
- Your credit score. You should also check your credit score before applying for a cash back card, as different cards have different credit requirements. Generally, the higher your credit score, the more likely you are to qualify for a card with better rewards and terms. You can check your credit score for free on various websites, such as [Credit Karma](^1^) or [Credit Sesame](^2^).
- The annual fee. Some cash back cards charge an annual fee, which can reduce the value of your rewards. You should compare the annual fee with the potential cash back you can earn and see if it is worth paying. Some cards may waive the annual fee for the first year or offer a higher sign-up bonus to offset the fee. You should also look for cards that have no annual fee or low annual fee, especially if you don't plan to use the card frequently or spend a lot on it.
- The interest rate. Another factor to consider is the interest rate that the card charges on your balances. If you pay your balance in full every month, the interest rate may not matter much, as you can avoid paying any interest. However, if you carry a balance from month to month, the interest rate can eat into your rewards and cost you more money. You should look for cards that have a low interest rate or offer a 0% introductory APR for a certain period of time, which can help you save on interest and pay off your debt faster.

## How to maximize your cash back rewards?

Once you have chosen the best cash back card for you, you can use the following tips to maximize your cash back rewards:

- Use your card for all your purchases. The more you use your card, the more cash back you can earn. You should use your card for all your purchases, big and small, as long as you can afford to pay them off. You can also use your card to pay for recurring bills, such as phone, cable, internet, insurance, and subscriptions, as long as the service provider accepts credit cards and does not charge a fee for using them.
- Pay your balance in full and on time. To avoid paying interest and fees, you should pay your balance in full and on time every month. This way, you can keep all your cash back rewards and avoid hurting your credit score. You can set up automatic payments or reminders to help you stay on track with your payments.
- Take advantage of bonus categories and offers. Some cash back cards offer bonus categories and offers that can boost your cash back rate for a limited time or on certain purchases. For example, some cards offer 5% cash back on categories that rotate every quarter, such as gas, groceries, restaurants, or online shopping, up to a certain limit. Some cards also offer extra cash back or discounts on specific merchants or websites, such as Amazon, Walmart, or Groupon. You should check your card's website or app regularly to see the current bonus categories and offers and plan your spending accordingly.
- Redeem your cash back wisely. You should also pay attention to how and when you can redeem your cash back rewards. Some cards may have a minimum redemption amount, such as $25 or $50, or may only allow you to redeem your cash back once a year or once a quarter. Some cards may also offer different redemption options, such as statement credit, bank deposit, check, gift card, or travel. You should compare the value of each option and choose the one that suits your needs and preferences. For example, if you want to use your cash back to pay off your balance, you may prefer a statement credit. If you want to use your cash back for something else, you may prefer a bank deposit or a check.

## Conclusion

A cash back credit card can be a great way to earn extra money on your purchases and enjoy other benefits. However, you need to choose the right card for you, based on your spending habits, credit score, annual fee, interest rate, and other factors. You also need to use your card responsibly, by paying your balance in full and on time, taking advantage of bonus categories and offers, and redeeming your cash back wisely. By doing so, you can transform your credit card into a cash machine that can help you save money and achieve your financial goals.

## FAQs

Q: What is the best cash back credit card?

A: There is no definitive answer to this question, as different cards may suit different people. However, some of the best cash back cards in the market include the Chase Freedom Unlimited, the Citi Double Cash, the Blue Cash Preferred from American Express, and the Capital One Quicksilver.

Q: How much cash back can I earn with a cash back credit card?

A: The amount of cash back you can earn depends on the card's rewards rate, your spending amount, and the bonus categories and offers. For example, if you have a card that offers 2% cash back on all purchases and you spend $1,000 a month, you can earn $240 a year in cash back. However, if you have a card that offers 5% cash back on rotating categories and you spend $1,500 a month on those categories, you can earn $900 a year in cash back.

Q: Are cash back credit cards worth it?

A: Cash back credit cards can be worth it if you use them wisely and responsibly. They can help you save money on your purchases, earn passive income, and enjoy other perks. However, they can also cost you money if you pay high interest and fees, carry a balance, or overspend to chase rewards. You should weigh the pros and cons of each card and choose the one that matches your needs and preferences.

Q: How do I apply for a cash back credit card?

A: You can apply for a cash back credit card online, by phone, or by mail, depending on the card issuer. You will need to provide some personal and financial information, such as your name, address, date of birth, Social Security number, income, and expenses. The card issuer will check your credit score and history and decide whether to approve or deny your application. The process may take a few minutes or a few days, depending on the card issuer and your credit situation.

Q: How do I improve my chances of getting approved for a cash back credit card?

A: To improve your chances of getting approved for a cash back credit card, you should have a good credit score and history, a stable income, and a low debt-to-income ratio. You should also avoid applying for too many cards in a short period of time, as this can hurt your credit score and signal to card issuers that you are desperate for credit. You should also compare different cards and choose the one that fits your profile and expectations.