Before, credit cards are exclusive for wealthy individuals who can afford to pay for the high interest rate that comes with it. Thus, only the elite class of the society has the power to make “cashless purchases” using this piece of plastic contraption. However, many credit card companies realized that this kind of product can also be useful to moderate-income individuals in terms of financing their expenditures that their cash cannot handle anymore. That is why majority of Americans nowadays own a single credit card.

Carrying a credit card is not just that you can afford to pay for the interest rate and other applicable charges. Instead, it is one of the best alternatives that you can use in case you run out of cash in times when you need it most. You need to pay for your electric bills, existing mortgages, tuition fees of your children, and other essential expenses yet you do not have enough cash to pay for those expenses. This is when credit cards take charge of all your expenditures in times when you are running out of cash.

Aside from the financial aid provided by credit cards, many individuals find these cards to be quite rewarding as well. The marketing strategy used for attracting potential clients now becomes the ultimate advantage for credit cardholders to use their credit cards for most of their purchases and bill payments.

If you are one of those individuals who want to get something out of using their credit cards, a cashback credit card will certainly work for you. This credit card offers you reward every time you make purchases or pay your monthly obligations using the card itself. Rewards may come into the form of rebates and financial incentives. There are also credit card companies that provide instant points that can be exchanged for premium items such as free airline tickets, free dining pass, or gift certificates.

There are variations in terms of rewards given by cashback credit cards. One of which is cashback credit cards that have zero APR or annual percentage rate on purchases and transfer of balances from credit cards having high interest rates for the first year. In this variation of cashback credit card, you will be able to earn 1 percent back for every purchase that you will make. Aside from earning rebates, you are also entitled to extended warranties, unlimited protection for purchases, and personal accident insurance for the cardholder. As previously mentioned, it is interest-free for the fist 12 months. However, there will be an applicable APR after the introductory period, which is around 10.8 percent, depending on the credit card company.

Another variation of cashback credit cards are those offered within a specific vendor, such as a vehicle manufacturer. Just like the previous variation, it has no annual joining fee and APR during the first year introductory period. You will be able to earn rebates at 1 percent rate on any purchase that you will make 1 percent for any vehicle purchase, and as high as 3 percent on purchase of vehicles owned by manufacturers sponsoring the cashback credit cards you are using. Credit card companies tie up with several companies in providing specific rewards to their cardholders in the form of rebates or discounts on purchases.

It feels good that you can expect something out of what you are spending. Who knows, you can fly to the Bahamas or own a brand new Mercedes Benz for free by just using your cashback credit card.

According to recent research, over a fifth of us now use a card that offers cashback or a rewards scheme, and the number has recently overtaken that of balance transfer users for the first time. So why has a seemingly simple feature such as cashback displaced the once mighty balance transfer deal in our priorities?

Credit cards have always suffered from the perception that they are expensive to use, with high interest charges and penalty fees – a reputation, it has to be said, that isn’t altogether undeserved. Cashback cards give us the opportunity to turn that on its head, and actually come out on top financially by using our cards for everyday purchases.

For every purchase you make, a cashback card will effectively give you a refund of a small percentage of the purchase price. In the early days of cashback, this percentage was so small it was hardly worth considering – a 0.25% rebate was virtually worthless to most people with moderate spending habits. These days however, the figures are much more attractive, with a 3% rate not uncommon as an introductory offer. This kind of rebate is definitely worth having, and if you use your cashback card for all of your day to day shopping, the numbers can mount up surprisingly quickly.

What’s more, if you use your card purely as a convenient payment method and not as a means of borrowing, and repay your full balance every month, then you’ll avoid paying any interest fees or charges. This means that the money you ‘earn’ through cashback is totally free money – you’re being paid simply to buy your usual shopping with a card rather than with cash.

Sounds good? Well, it’s not hard to see why this kind of card has increased in popularity, but there are a couple of points to think about before applying for an account.

The main problem is that most of the time, you’ll only receive your cashback once a year, either by check or refund to your account. This is fine for most people, but the cashback offer will be dependent on you sticking to the credit agreement. If, even accidentally, you make a late payment then you’ll have broken the terms of your agreement and will lose all the rebate you’ve been building up. Keeping up to date with your repayments is therefore even more essential than normal with a cashback card.

Secondly, many cards feature a ‘spending limit’ over which no cashback will be earned. Most such limits are fairly generous, but check to make sure your expected annual spending on the card is within this limit if you want to maximise how much total rebate you can get.

So, are cashback cards the future? If you’re a regular spender who can clear your balance in full every month, then they are very worthwhile indeed, but if you’re planning to carry a balance then you might be better served by getting a card with a lower standard rate and no cashback or rewards feature.