Editorial Policy

What Mom needs to know before choosing a cashback card

Tina Orem

October 28, 2014

Back in the Don Draper days, women often only had access to credit cards when their husbands or sugar daddies patronizingly patted them on the backside and told them to go shopping.

Today, it's a wee bit different: Women run the American economy, and the credit card industry knows it.

“They control some 72 percent of U.S. household budgets,” says Michael Silverstein, who is a senior partner at the Boston Consulting Group, which has done extensive research on women in the economy. “They buy the clothing, appliances, movie tickets, health care, family vacations, etc. They have the plastic in their wallet and choose which card they use.”

More women are their households' primary breadwinners, too, and a whopping 59 percent of women are the financial decision-makers, according to research from the Boston Consulting Group.

Women with children double down on that economic power, which makes a mom with a card an awesome thing. But how can moms capitalize on their card power most effectively?

There are a bevy of rewards programs out there, and smart, busy moms know that simple is often better. That's why CreditCards.com rewards expert Tony Mecia says the first step is to head for a cashback card. “There are all kinds of convoluted rewards programs out there, a lot of them travel-related. Rather than try to figure out all of those, maybe just look for a relatively simple cashback card,” he says. Most start at a base rate of 1 percent cash back, he notes, and then add bonuses for certain kinds of spending (2 percent if the purchase is at a gas station or a pharmacy, for example).

“For moms who want to simplify their life, cash back cards are an easy way to go,” says Jennifer Steckloff, author of the DealsWeLike.com blog. “Moms get cash in their pocket and do not need to worry about the best usage of points and miles.”

First, analyze your budget and see where you spend your money. Then, select and use a card at places where you get the bonus categories. Mecia says no one issuer dominates in the cashback space, so be sure to shop around. (CreditCardGuide has a link to numerous “cash back” cards to the left of this article.)

When it comes to analyzing cashback cards, however, there are a lot of moving pieces, particularly the annual fee and the cashback rate, which makes it tricky to compare credit card offers. For example, let's say your card's annual fee is $60 a year. If you get 1 percent back on groceries, you'll have to spend $6,000 a year at the store just to earn enough cashback to recoup that $60 fee. If you have an average American household that spends about $150 a week on groceries,  you're spending over $7,000 a year, which means that deal could be worth it.

Here's a handy table to help you figure out how much you have to spend in a year to earn enough cashback rewards to recoup your annual fee:

Small changes in the cashback percentage can be a big deal. For a card with a $60 annual fee, going from 1 percent back to 2 percent back means having to spend half as much to recoup the annual fee.

Also, be aware of merchant category codes (MCC) — those four-digit numbers that credit card issuers use to categorize vendors. They can really burn you if you don't pay attention.

Gas stations that are run by grocery stores, for example, may not be categorized as gas stations by the credit card company. That means that if your credit card offers extra cash back on gas, you might miss out because even though you're buying gas, you're not at what the credit card issuer considers a gas station. Look at Visa's code list, for example; you can also check your credit card statements — they'll show you the MCCs for each of your transactions.

The last step in capitalizing on cashback cards, Mecia says, is to pounce. “Try to charge everything you can instead of writing checks. In our house, for example [with three kids], we used to write checks for deposits for summer camps and sporting activities and things like that. Now you can charge just about all of that stuff, and we do. It doesn't mean we're paying more overall, but we are putting more on credit cards and writing fewer checks,” he says.

Steckloff has a great tip for keeping things straight on cashback cards. “Many cashback cards have bonuses on various purchases, such as restaurants, grocery stores, gas, etc. Taking a sharpie and writing the bonus on the card can help a busy mom know which credit card is best to use on every purchase,” she said.

Mecia says there is one thing that can trip up moms and test their prowess as household CFOs: overkill. “It should go without saying that you should not be in the business of applying for rewards cards if you carry a balance on your cards or have trouble managing cards and remembering to pay on time. Late fees and interest charges will cost a lot more than you would earn in rewards,” he cautions.