Cash Back Credit Cards: What’s the Difference?

This article is sponsored by PenFed Credit Union

It seems like everyone is offering a cash back rewards credit card these days — from banks to big box stores to online retailers. Using a cash back card for purchases can be a smart idea. After all, if you need to spend money — either on everyday purchases like groceries or unexpected expenses like auto repairs — why not make some money back? But what should you look for when trying to decide which one is right for you? Here are a few tips to help guide your decision.

What are the restrictions?

Some cash back cards only offer their maximum benefit on a portion of total monthly purchases. That limits how much you can earn each month. Some offer rewards only on limited items — like gas or travel — and some even limit which stores you can purchase from in order to get rewarded.

Other cards offer tiered systems or rotating categories where you can earn a higher percentage on certain items or at certain retailers and a lower one elsewhere. Obviously, the fewer restrictions, the more places you can earn your rewards and the easier it is to know if you’re earning cash on a purchase.

Also research how you can redeem your rewards with a given card — how often, how quickly and in what form (e.g., as a check, credited to your account, etc.).

Consider the source

Another important difference between cards is the issuer. A credit card issued by a particular store is only going to offer you rewards on purchases from that store, while cards supported by payment networks like Visa®, MasterCard® and American Express® are going to be more widely accepted at a variety of locations.

In addition, a credit card issued by a credit union may offer a lower rate or fewer fees than one backed by a bank. According to a study by the Pew Charitable Trusts*, median advertised interest rates on credit union cards were about 20 percent lower than those on bank-issue cards. Of course, your final rate will depend on a number of factors, including your credit score and other financial considerations.

Know yourself

Do you pay your card off in full or carry a balance each month? If you carry a balance, getting a lower rate is key. Do you typically use your card for every day purchases or only for emergencies? How flexible your card is will determine where among your typical purchases you can earn cash. Knowing how you use your credit can help you maximize the benefits of using a cash back credit card.

* From Bankrate at

For more information, visit the Credit Card Center at, or call 800-247-5626

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