5% Cash Back Credit Cards



Maximize your cash rebates with 5% Cash Back Credit Cards

In this article, we look at the popularity of so-called 5% cash back credit cards and what the fuzz is all about with these cards.

The 5% cash back credit cards are one of the most popular type of credit cards, be it cash rebate or reward credit cards. The reason is simple : you get 5% cash rebates for spending on certain category of items.

Definition of "everyday purchase"

American Express first came up with this term in their green and gold charge cards. They defined it as purchases made from standalone supermarkets, gas stations and drugstores. They paid a higher two points for every dollar you spend on these items rather than the usual one point. Some credit card issuers also include standalone home improvement stores as well in this definition.

However, one has to be careful about the precise definition of "everyday purchases". They are defined as purchases from standalone supermarket, gas stations and drugstores. If you read the terms and conditions of all 5% cash back credit cards, you will find that the definition excludes discount stores and retailers, wholesalers. Hence, you will have to shop at a "regular" supermarket and gas stations.

The 5% cash back credit card came about when Citibank started the Citi® Dividend Platinum Select® Card. This card pays 5% rebates for every dollar you spend on "everyday purchases". You get a 1% rebate for 'other purchases". For a long time, they were the only 5% cash rebate credit card and probably one of the most popular credit cards. In July 2005, Chase introduced a similar card called the Chase Cash Plus Rewards Visa, which also pays 5% rebates on 'everyday purchases". In addition, Chase gives you the option of exchanging cash rebates for gift certificates from partner merchants. In fact, these are the only two true 5% cash back credit cards available on the market today with a simple non-tiered rebate formula. (some other cards like the Blue Cash from American Express also pay 5% rebates on "everyday purchases" but only after your annual spending exceeds a certain threshold).

Limits on rebates

The above mentioned 5% cash back credit cards impose a limit on the amount of rebates you can earn. Both Citi and Chase limit that to $300 a year. The Blue Cash allows you to earn rebates of up to $50,000 in annual spending. The reason for this cap is simple. All cash rebate credit cards these days do not charge any annual fee at all. Though these card offer perhaps the best value for consumers, they are less profitable for credit card issuers (because they have to pay out 5% rebates), especially compared to an airline credit card for example, that charges an annual fee. Credit card companies only really money if you carry a balance on these 5% cash rebate cards.

Other types of 5% cash back credit cards

Aside from the cards mentioned above that pay 5% rebates on "everday purchases", there are other type of credit cards that pay 5% rebates as well. Some gas credit cards pay as rebates as high as 5% when you use your card as their gas stations.

Discover® Platinum Card also allow cardholders to earn 5% rebates, but only when they make purchases from specific merchant partners.

Ending Comments

We have just gone through the characteristics of a typical 5% cash back credit card and other types of credit cards that paid 5% rebates. Those who want to earn cash rebates from their credit card should definitely consider any of these cards as 5% is a good rebate number. Most reward credit cards (when you do the math) pay only 1% to 2% rebates. Personally, I'd take cash anytime over reward points. And when it comes down to it, the higher the rebate, the better. At present 5% seems to be the maximum that credit card issuers are willing to give back to consumers. If you are looking for a cash rebate credit card,do not settle for anything less than 5%.




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