Monday, June 21, 2010

The gift that gives back

Credit Cards When I was young I had it drilled into me that there’s no such thing as a free lunch.

Well, that’s pretty much a universal truth.

Sometimes though you can find a deal that looks like a free lunch but only because you and other people are already paying for it.

Imagine for every $100 you spend someone slips a dollar back into your account. Now it may only be 1% but with an average annual spend of over $18,000 per credit card that’s $180 that you could put back in your pocket that you’d otherwise not see.

Surely there’s a catch? What about fees or extra conditions? Well, HSBC and American Express both offer cash back options with no fees to well qualified card members with differing rates of payback. Capital One and others do have an up-front fee but depending on how actively you use your card you can quickly recoup that and earn cash back.

Like cards that offer reward points or travel miles someone has to pay for the cash-back and in most cases it’s cardholders and merchants through the fees that the credit card companies charge, and the interest that you’ll get charged if you don’t pay off your card in full each month.

With most points or air miles schemes you’re often not going to get what you want – either because the rewards expire, blackout dates on the flights restrict when you travel or you don’t have quite enough of the relevant virtual currency in the bank for what you need. With the cash rewards it might not seem as attractive but it’s a reward you can take to the bank, and unless you are saving for something specific and know you’ll amass the points or miles and be able to use them I’d take the money and run.

As we’re consolidating around HSBC we’ve getting one of their cash-back cards and we’ll see how that goes. Of course we’ll continue to obsess about paying the card off in full each month as missing just one of those would probably wipe out any value of the cash-back.

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