Updated on June 28, 2021
You probably receive a lot of credit card offers. But how do you determine whether or not you should apply?
Nearly every card comes with benefits. These can range from low interest rates and cash back to rewards points and store discounts. When choosing a card, you want to get the one that’ll pay the biggest return for you and your family. Determining what that means will help you decide which credit card offer to act on.
In many cases, a cash rewards credit card with no annual fee is the most practical choice because of the many ways you can use the rewards. Here’s what you need to know about this type of card.
One way credit card companies make money is by charging cardholders fees and interest. One common fee is an annual fee, which is a yearly charge for having the credit card account open. The amount of an annual fee can range widely.
Some credit cards may seem appealing because they have a low Annual Percentage Rate (APR), but they might carry an annual fee, often overriding any savings you get from paying less in interest. An annual fee guarantees that the credit card company makes money, even if the cardholder pays off their monthly account balances and accrues little to no interest.
The best credit cards come with low interest rates and no annual fee, but where do you find them? A good place to look for credit cards with no annual fees is at a credit union. Because credit unions are focused on saving their members money, you’ll often find credit cards with no annual fees and lower APRs at these not-for-profit financial institutions.
A cash back credit card gives you the opportunity to earn cash rewards, or cash back, on purchases. Generally, it’s a percentage of each purchase that’s returned to you in rewards.
For example, those who have our Founder’s Card receive 2%* or 1.5% cash back on every purchase. Say you pay $5,000 for a new refrigerator and dishwasher for your kitchen. You can earn $100 back on that purchase with a 2% cash reward.
Cash rewards credit cards provide a smart way to earn money on purchases you’d typically make. For instance, if you have a family of four, you can easily spend $1,000 each month at the grocery store. If you pay with a credit card that gives you 2% cash back, you’d earn $20 in rewards each month, adding up to $240 each year, or nearly a quarter of your monthly grocery budget.
Of course, you must pay off your credit card balance regularly to avoid accumulating debt and negating your cash rewards with monthly interest fees.
The simplest answer is cash rewards offer the greatest flexibility. When you earn rewards in the form of frequent flyer miles or points for retail store purchases, you may face restrictions as to when and where you can use them. With cash rewards, you typically receive the money on a monthly basis, and you can use it how you choose.
PSECU offers a cash rewards credit card with no annual fee, no category restrictions, no earning limits, and no reward expiration dates. Learn more about our Founder’s Card, and find more tips on saving money on our WalletWorks page.
*You can earn 1.5% cash rewards on purchases. You can earn 2% cash rewards on purchases if you maintain a PSECU checking account and qualifying monthly direct deposit(s) of at least $500. See the Visa® Founder’s Card and Visa® Alumni Rewards Card Rewards Program Terms and Conditions for full details.