Gas and Groceries – the Cash Back Favorites
| August 13, 2010 |
If your credit card offers you cash back, you’ve probably noticed that the percentage rebate varies by category. For example, American Express advertises 5% cash back on gas, groceries and drugstores, and 1.5% cash back on everything else. Discover offers 5% back on gas and groceries, among other categories. Citibank actually offers 2% cash back on “rotating categories”.
Turns out, “Gas and Groceries” are habit-forming. While they may make up a small part of your household budget, you probably purchase them one, twice or even three times a week. And the card companies are hoping that you’ll get used to pulling their card out for the small purchases, so that when it comes for a big purchase, their card will be “top of wallet.”
I don’t think this falls in the “dirty tricks” category. In fact, you can use it to your advantage. You can maximize your cash back by making sure you put these small purchases on your card. And you might consider carrying multiple cash back cards to maximize your rebates when one has a higher rebate on a category.
| Share | Tweet |
I used to think that cash back rewards were a statistics game. In other words, if everybody started clearing their balance every month, rebates would have to change, or even disappear, as there’d be no money to pay for it. Then I realized that the consumers aren’t the only ones paying the card providers: retailers pay commission on each sale too. From what I understand, that’s where most rebates come from.
Is it possible that retailers in certain categories are paying a higher commission, or would the habit-forming nature of regular purchases be a loss-leader for the credit card companies?
Comment by Michael Bruce — September 19, 2010 @ 3:37 pm
I used City Bank Credit cards for a while. I am truly disppointed with dispute handling of City card management. I bought Vitamins on Internet and they turned out to be sugar pills. I returned to the merchant on time with proof of mailing. The merchant never credited the account. When I requested City bank with all the proof and documentation they indicated according to their investigation the merchant is right. They gave the merchant credit. Now I do not have the sugar pills and lost $125 and miailing fees.
BEWARE OF CITY BANK CARDS. OTHER BANKS CREDIT CARDS ARE BETTER. THEY WORK WITH YOU. LIKE US Bank and American Express. PLEASE DO NOT GO FOR CITY BANK CREDIT CARDS. A NUMBER OF MY FRIENDS HAD SIMILAR ISSUES. IS THERE IS A BETTER PLACE TO POST MY FRUSTRATION?
Comment by Vepa in Claremont — October 8, 2010 @ 11:57 am