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What exactly is a cash back credit card? Could it really save me money?

By , CardRatings contributor
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    American Express is a CardRatings.com advertiser.

    Yes, cash back credit cards can help you save a few pennies on every dollar you spend. Some cash back cards don't charge an annual fee, while others let you pay a higher fee in exchange for larger rebates. The way you shop and spend can help you choose the best card for your lifestyle:

    • Category-specific cash back cards. Most of the rewards cards you'll see promoted on television and online offer bonus rebates when your purchase falls into a featured category. Chase and Discover both tout no annual fee cards that can earn a higher percentage of cash back when you opt in to quarterly promotions. Your other purchases will earn between 0.25 and 1 percent cash back, depending on your card and how much you spend each year.
    • Flat-rate cash back cards. If tracking all those categories and caps sounds like a big hassle, you may prefer a card that offers a consistent rebate on most purchases. For instance, the Capital One Cash card provides a 1 percent rebate throughout the year, followed by a bonus worth half your annual rebate amount when you make 12 monthly payments on time.
    • Affinity cash back cards. Your relationship with a particular broker, store, or website can earn you even more rewards. If you keep a retirement or brokerage account with Fidelity Investments, your Fidelity Investment Rewards American Express Card can automatically deposit your 2% cash rebate.

    A note of caution: avoid using cash back credit cards to carry a balance. If you do, the finance charges you'll pay will quickly eclipse any of the rebates and rewards you'll earn during a typical year. On the other hand, if you use your cash back card like it's a debit card and pay it off every month, you can potentially save hundreds of dollars every year.

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