Cash back credit cards can be useful for someone who spends a large amount on a credit card and repays the balance in full every month. However, there is another trick to using cash back cards that allows some people to benefit even more, and this takes advantage of introductory cash back offers.
Introductory cash back offers generally return an accelerated percentage of the spend to the card holder during the first few months the account is open, usually for about three months but occasionally over a longer period. Cash back credit cards work by splitting the credit card merchant fee, charged to the shop or service provider for processing the credit card transaction, between the card provider and the card holder. This fee is usually between 1% and 2%, so it’s rarely a large sum.
However, introductory cash back offers don’t merely split the merchant fee. They also add a bit to it, sometimes raising the cash back level to as much as 5%. Although this is uneconomic in the long term, over an introductory period it’s an inducement for people to apply for the card, and some credit card providers find it a cheaper way of attracting customers than advertising.
These introductory cash back offers can be used effectively with a bit of planning. There are various life events that involve a considerable amount of spending, such as a wedding, the birth of a child, and moving house. Most people tend to save for these events or take out a loan. However, these credit cards are an opportunity for people to get some of this money back.
So when some big life event is approaching, it can be a good idea to apply for a cash back credit card that offers a higher rate of return for a short period of time. If timed properly, and if a large amount of money is spent, this strategy can see a relatively high rate of return.
