Cash-Back Cards Grab the Spotlight

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Credit card customers are increasingly turning away from card “reward point” programs. With money tight in the vortex of the Great Recession, card customers would much prefer cash-like options.

Card companies are getting the picture, and responding with new cash-back-oriented card deals in early 2010. Check out Discover’s (Stock Quote: DFS) CardBuilder deal, which places a big priority on cash-back bonuses and on-time payments that can trigger cash payouts.

The Chase Freedom credit card, from JPMorgan Chase (Stock Quote: JPM) (which we wrote about yesterday in Deals of the Week), is also getting aggressive. Chase has hiked its cash-back percentage from 3% to 5%, effective March 15.

On average, cash-back credit cards pay about 1%-2% on card purchases, according to the Creditcards.com. Card companies usually cut a check for the amount of the cash back and ship it off to you in the mail. There are usually no restrictions on how you can use the cash-back money, although companies like Chase try to steer you to favored retailers via its “seasonal” cash-back programs (for example, if you buy a lawn mower at Home Depot (Stock Quote: HD) in May this year, you can earn the full 5% cash back from Chase. But if you buy a pair of skis at Sports Authority this May, that falls outside the border of the bank’s seasonal cash back program.)

How can you get in on the cash-back craze? Start with your own credit card carrier. Call them and see if there’s an option to switch from your current card to a cash-back card. If they have one, it shouldn’t be a big problem.

If you card issuer doesn't have a cash-back card, then feel free to look for a new card company. Chase, Discover and American Express (Stock Quote: AXP) are all aggressively marketing such cards right now.

When kicking the proverbial tires, try to avoid cash-back cards with monthly fees. Grab the low-hanging fruit by comparing the best cash-back credit card deals at BankingMyWay. When doing so, keep a sharp eye out for high interest rates (cash-back cards average higher rates than traditional cards — but not all of them) and watch out for penalties on late payments — they can be much higher with cash-back cards.

In a tough economic climate where cash walks the walk, cash-back cards can really help your personal financial bottom line. Just choose wisely and you’ll see that when it comes to credit cards, cash is its own reward.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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