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How to Pick the Right Cash-Back Credit Card

NEW YORK (MainStreet) — Cash-back credit cards remain among the more popular credit card offerings because they allow the most flexibility in terms of rewards redemption. But distinguishing a good cash-back card from a less-than-stellar one can be difficult, especially since a card’s worthiness often hinges on a person’s particular spending habits. Here are three ways to determine which card is right for you:

Ask yourself what you spend the bulk of your money on.

Most cash-back rewards programs offer 1% back on all purchases, with a higher percentage (typically between 2% to 5%) being offered on select product categories. Figuring out which cards offer the higher percentage of cash back on a category you spend the most on will help to ensure that you maximize your earning potential.

For instance, those who spend a lot at the supermarket would be best served by a card like the American Express Blue Cash Everyday, which features 3% back on groceries. Those who are filling up their SUV to travel an hour back and forth today might opt for a card like Pentagon Federal Platinum Cashback Rewards Card from Visa, which offers 5% back on gas. If you’re spending is varied, then it might be best to get a card that gives 5% back on a different category each quarter, such as the Discover More Card.

Ask yourself how often you are going to use the rewards.

This tip is important for two reasons. For starters, it will help you eliminate cards that put limits on cash-back earnings you are likely to surpass. It will also help you figure out whether it’s worth opting for a card with a higher annual fee. Issuers are known to offer two versions of a branded card: one that features better rewards at the expense of a higher annual fee and one that features a low-to-no annual fee, but less earning potential. For instance, Amex actually has a Preferred version of its Blue Cash card that offers 6% back on groceries, 3% back on gas and department stores and 1% back on everything else. This card carries a $75 annual fee that might be worth it to big spenders.

Find out if the card offers earning enhancers.

Finally, it might be a good idea to look into what sort of other ways you can earn cash back with the card. Issuers often offer extra cash back that’s not subject to any earning limits associated with your card in their bonus malls or on Twitter or even Facebook. Checking out which of these offerings are most in line with your spending habits can set one card ahead of another in terms of figuring out the perfect fit. For instance, maybe a particular issuer has an exclusive partnership with your favorite department store that entitles you to 10% back on those purchases.

Wondering if you should go with a low-interest rate card instead? Check out MainStreet’s roundup of 5 Questions to Ask Yourself When Choosing a Credit Card!

—Jeanine Skowronski is staff reporter for MainStreet. You can reach her by email at Skowronski.jeanine@thestreet.com, or follow her on Twitter at @JeanineSko.

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