Finance

What Is A Cashback In Credit Card And How Does Cashback Work?

Planning to apply for a credit card but got confused with the vast range of credit cards on the market. There are different types of credit cards available in the market and one of them is the cashback credit card. In this article, we have covered everything about cashback credit cards that you must know before applying for a credit card. Without any further ado, let’s jump into it. 

What is a cashback credit card?

The incentive on the cashback credit card typically revolves around the percentage of your shopping amount. You get some percentage of spendings back into your account. You do not have to worry about the redemption process and the rewards never get expired on the cashback credit card. Some of the popular cash back credit cards are HDFC Bank Millennia Credit Card, Citi cashback credit card, Amazon Pay ICICI Bank credit card, and the list goes on. Most cashback credit cards are preferred for the shopping category

How does cashback work?

Cashback credit cards work similarly to other credit cards. You use your card for shopping and after swiping the card you get a cashback credit to your account. You need to carefully read the rewards program on your credit card before using it and know which transactions let you earn reward points. And after that use, your credit card for those transactions only as it will allow you to maximize the benefits on your credit card.

Pros and Cons of having a cashback credit card:

The pros of the cashback credit cards are as follows:

  • Cashback credit cards are ideal for first-time credit card users because the membership fees on these credit cards are generally low.
  • You do not have to worry about the redemption process because the rewards are directly credited to the credit cardholder’s account. 
  • The cashback earned on the credit card never expires.
  • You can easily build a good credit score with a cashback credit card.
  • You get to understand the working of a credit card.

The cons of the cashback credit card are as follows:

  • You do not get as many offers and benefits as would get on the other types of credit cards.
  • If you do not use your credit card properly then you can lead into a possible debt trap.

Bottom Line:

To summarise, cashback credit cards are good for those who are thinking of starting their credit journey as they will help them to understand the working of a credit card. The rewards are directly credited to the account and they never expire what do you want with a credit card. In order to build a good credit score and a good standing account, you need to keep the credit card dues clear all the time and maintain a low credit utilization ratio. Cashback credit cards are the best credit cards to start your credit journey with.

Do share your experience with a cashback credit card and how you managed to make the most out of it in the comment section.

Additional Reading – Can Closing an Old Credit Card Affect Your Credit Score?

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