The card I am going to feature is my FAVORITE "cash back" card. It is the Capital One No Hassle Rewards Card.
***WAIT!*** If you don't have this card, please don't stop reading! This information is beneficial for ANY cash back card you may have! I am using this one because this is the easiest way to teach you how to navigate any card that you may have, it may save you the costly $500+ mistake I made two years ago!
Now, before I get into details, there are a few things you need to find out about your cash back card and redeeming your rewards if you don't already know them by heart:
1. How are your cash back points/miles earned? Do you get 1 point per dollar spent, or do you get 2/$ at grocery stores? Do you get 3 points for your first $1500 in purchases? These are the types of questions you need to ask yourself. It is SO important that you know how your cards will best be utilized. It is also important to know HOW MUCH you have spent in order to earn those points you are redeeming...we'll get into that in a bit.
2. Is there a limit to the points you can earn? This is a BIG one! I know that with certain Discover cards, you have a limit of getting bonus points on up to $1500 of spend in a "quarter". Then, your bonuses stop until the next quarter. Do you have unlimited miles/points earned? Does your rate of earning change during the year? Find all of this out by logging into your account and looking for the menus under "my account". Dig around, the info is somewhere. If you can't find it, just call your credit card company.
3. Do your points expire? This is quite obvious why this is important to know!
4. Is there an annual fee on the card? For the most part, I don't like annual fees. BUT, in the case of some credit cards (like the Club Carlson Hotel Card), I am happy to pay the $75 annual fee as it gives me about 4-6 nights free when I use it at cheaper hotels! But find out your annual fee, you will need to see if it is worth keeping. If you pay $59 a year, are you making more than that per year by using it?
5. At what rate do you redeem your points? I can't stress enough that each card is different with this. This is incredibly important to know...and is the reason I flubbed up and lost about $500 worth of points over a year or so of earning! FRUSTRATING!
If you have a credit card that you can redeem for cash, gift cards, charity, travel, merchandise, etc., then you HAVE to look at the rates you are redeeming your points. It is VERY easy to be deceived by how much the points are costing you to redeem!
OK...let's take a closer look now that you have the information you need:
Let's first look at this card's earning ability:
This is my card. I found this information under the "Rewards" tab on the main menu. It took me to this menu and I clicked on "How it works". You can see that my earn rate for points is 2 miles for every dollar I spend on the credit card. That's pretty good!
If you read everything, you will see that there is NO LIMIT to how many "miles" you can earn AND they DON'T expire! Yay! So far, it is looking pretty good!
Now, I forgot to take a screen shot of the "NO ANNUAL FEE", but there is none for this particular card.
*Note that this particular card is no longer available since I got it back when I was still able to get out of bed without my joints being stiff! LOL! But there are many similar ones out there.
OK, so we have already answered questions 1-4 pretty easily. 2 points per $1 spent, no expiration, no annual fee, no limits on what I can earn. Got it.
Now comes the tricky part...redeeming! Let's take a look at the "how to redeem" chart that can also be found by logging into your account. This one is under "Explore Rewards". Yours will have a similar title.
First, I want you to look at the redemption value for "CASH" which is the top red circle, since this is a "CASH BACK" card. You will see that in order to get $25 "cash back", you will need to redeem 5,000 points. OK, let's break that down:
So, we know that we earn 2 miles for every dollar that we spend. Now, if we want $25 cash back, we redeem 5,000 points. At 2 points per dollar, we know that in order to get those 5,000 points, we spent $2,500 on that credit card, right? All we do is divide the 5,000 points by "2" since we get 2/$. Hmmm...
Now, we spent that $2500 and we are getting $25 of it back. That means that essentially, we are getting 1% cash back. I guess that is typical. We can use that cash to buy other stuff or apply it to our bill. Quite handy...
BUT!!!!!!!!
Take a look at redeeming for "GIFT CARDS" which is the lower red circle. Look at the points to redeem for a $25 gift card!!! What!!!!???? We only need to redeem 2,500 miles for the $25 gift card? Hmmmm again!
So, we know that we spent only $1,250 to get that 2,500 points for the $25 gift card. Now we know we are getting 2% cash back if we redeem it for gift cards which is still like using cash at our favorite stores! We get only HALF the value of gift cards if we choose the cash option!
What! Why didn't I look at this chart before???? I cashed out ALL of my points on "cash" at one time! SO frustrating!!!! Now, I see I could have doubled my money back and gotten gift cards instead by spending the EXACT SAME amount on my card. Hmpf!
Let's see why I was so easily "tricked":
Check out the redemption chart for gift cards. Let's take Kohl's. You can get a $25 gift card for 2500 points. At first glance, it looks like you are getting 1% cash back by buying the gift card with 2500 points because 25 is 1% of 2500. Therefore, I thought it was the SAME thing as cashing out at 1% for "cash back"!
FOOLED ME!!! I DIDN'T take the time to re-check my earnings to see that I earned at 2points/$ and that I was actually going to be able to buy TWICE as many gift cards than I was just cashing out in "cash". Do you see what I mean? It is actually 2% back of my card spending!
The same thing goes for redeeming for "TRAVEL". I have a "travel" eraser that also erases $25 worth of travel with only 2,500 miles instead of the 5,000 miles it takes to "cash out" $25. This is essentially the same value as "gift card" and "charity" redemptions on the first chart in the post. Check yours!
One last thing: Merchandise Redemption:
You can see that you can redeem your miles/points for merchandise as well. Let's look at the Cuisinart Meat Flipper. It costs the same 2,500 points that it would to get the $25 in gift cards or the $12.50 in cash. Is it worth it to you to cash in $25 worth of gift cards for a "meat flipper"? It is $9.99 on Amazon right now!!! You be the judge of that! :)
Conclusion?
"CASH BACK" is the WORST option for this credit card! (Maybe a tie with merchandise redemption since I would never "pay" that much for products! But this is a "cash back" credit card!
Tricky, tricky, my friends! Do your homework before you redeem for anything "cash back"!
Please don't misunderstand me and think that you can never "cash out" without losing something. Every card is different and you need to "explore" the redemption options and DO MATH, yikes!! :)
Well, I hope you learned something today...if you did, I'd love it if you "shared" this post!
Check out my other posts on credit cards and saving money while you are here!
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