Just discovered my credit card's "Cash Back" program. Is it really just free money? I find it too good to be true.

[u/cop-disliker69]

I was paying my credit card bill online and I found a link on the Bank of America website said I had unredeemed cash rewards, several hundred dollars. I had never noticed this before. It gave me a few options for how to redeem it, it said they could send me a personal check in the mail or I could deposit this money directly into my savings account with the bank. It says I get 1% cash back for every purchase I make, and 2-3% for certain purchases.

Is this really how it works? I get paid a small bonus every time I spend money using my credit card? And it's just free money no strings attached?

I was always taught if it sounds too good to be true, it is too good to be true. I suppose it's not that much money, because I think these hundreds of dollars were earned over like five years since I first got this credit card. Still, what's the angle here?

EDIT: Disclaimer. This is not native advertising. Bank of America is a racist, redlining, predatory-lending, family-evicting pack of jackals. This was a genuine question I asked in good faith and did not expect to get huge like this.

[u/mdhkc]

If you want to take out a "loan" and not pay a card off in full, it's not hard to find a card with a 0% introductory apr for 6-12 months. I got one (bbva visa) with a 12 or 13 month 0% intro period and used it to finance some stuff I wanted. Put $10k on it, paying $1k into it every month, good to go and will not pay interest.

[u/[deleted] → u/mdhkc]

These 0% rates are great. I opened an AMEX with 0% a few years back - I was a best man at a wedding and I knew that I was going to be the one booking the air bnb, bachelor party expenses, wedding stuff, etc - I put it all on the card and then when the other groomsmen gave me their money, I just paid everything off in full.

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Last year I opened a Chase Freedom account because my car needed a lot of work - it had 0% and I was able to pay all of it off within a few months.. softened the blow of the repair a bit.

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I pay all of my cards off in full every month - but in cases where they offer a 0% and I have a huge unexpected expense, or am carrying the financial load for other people (really only happened once for a wedding, which I did get all of my money back, thank god), the introductory 0% offers really work well. Just make sure you stick to the credit card with 0% only being for that cost - because it can be tempting to add something you have wanted and pay it off slowly ontop of what you originally opened the card for. Be responsible and have it strictly to one cost. Once that cost is paid off, and you really want/need/ or have an unexpected expense again pop up, do the same thing you just did and pay it off over time. Also be careful to not open a bunch of 0% cards at once.. really, if you are going to do this method - it's best to open 1 card at 0%.. not like 3 at 0% because that will have a negative impact on your credit score.

[u/OHTHNAP → u/[deleted]]

Chase Freedom Unlimited has no annual fee, 1.5% on all purchases, and they give you $150 for spending something like $500 or $600 the first three months.

Pretty stoked as a coin collector to make a huge purchase, pay it off right away, and have $150 waiting for the next one. But it would really apply for any big expense.

[u/[deleted] → u/OHTHNAP]

Don't forget, they also do 5% cash back on certain "categories" each month - you just have to activate them.

[u/pynzrz → u/[deleted]]

Unlimited does not do this

[u/quipkick → u/[deleted]]

How do you activate them? I have this card and have never heard of this

[u/green_team_swarm → u/quipkick]

I believe the person you responded to mixed up two cards. Chase Freedom Unlimited offers 1.5% back on every purchase. Chase Freedom offers rotating 5% back categories.

[u/pipoooooooo → u/OHTHNAP]

COSTCO! I waited for a few weeks to do my normal shopping trip at Costco because I saw the 5% deal coming this quarter.Since I am an executive member, I also get another 2% back from them, so total of 7% back with bad math.BTW, my executive Costco membership is like $120/year, but if you buy insurance form them, its like $400 less/year than everyone else, even Geico or whomever

[u/Noodlerizer → u/[deleted]]

Yes this is similar to what I have been doing. I get a new cc with 0% APR every 12-15 months after my introductory offer expires on my prior card. Right now I have 0% APR on my Amex until March then I will probably get the chase freedom. I keep a 10-15% balance on the Amex then will keep a 0 balance after March. It is nice to always have a card with no interest just in case you have to make a large purchase you need to pay off over a few months.

[u/zintegy → u/[deleted]]

Does this affect your credit score if you leave a balance on the 0% apr card and just slowly pay it off? I've never really dealt with 0% cards, but I just know that if I make minimum payments on other cards, my score will tank.

[u/[deleted] → u/zintegy]

I don't think so - I've hit 800 while keeping a balance.

[u/mdhkc → u/zintegy]

The hit to your credit score depends on the amount on all of your cards as a function of the limits on all of your cards. But it's only a hit while the balance is there, it's a net positive from making the payments on time, once you're down below ~30% total (balance as a % of total limits across all revolving lines of credit) there's no more negative impact.

[u/jgandfeed → u/mdhkc]

yeah i did that when i had a new card and also happened to be really broke for a few months. paid it off before the 0% interest period ended when I could afford to. it was effectively a few hundred a month loan for me with no interest

[u/Boacham → u/mdhkc]

Same, I got a capital one savor card with 0% apr until October 2019, so that next month I can put my boob job on it, lol. Free loan, plus reward dollars! I have the cash for my surgery now but I would much rather invest it and pay $680/month instead.

[u/originallowercased → u/mdhkc]

usually there's an up front fee on those. i'm thinking balance transfers or cash advances - or are you talking about something else? - just straight purchases and letting the balance ride for 6-12 months?

[u/[deleted] → u/originallowercased]

There's plenty of cards that offer a 0% interest rate for X amount of months with no annual fee or sign up fee.

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Chase Freedom (They actually GAVE me money with a sign up bonus) - This card carries no annual fee. The offer at the time was $150 cash back after spending $500.00 in the first 3 months after opening the account. I knew the car repair I opened the card for was already going to cost almost a thousand, so I just applied the $150.00 in sign up bonus they gave me to the bill, while paying the rest of the bill off at 0% over the course of however long the 0% interest rate lasted (me personally, the 0% on this card was 18 months I think, maybe 12.. I paid it off in 5.. so I still have 0% on it)

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The other card that this program worked great for me was the AMEX EveryDay credit card - there is also 0% for X number of months when I signed up for it, the 0% has expired, because I have had it since 2016.. I think the introductory promo rate was only for a year on that one too. But it also carries no fee - if you're looking to get a 0% card, I would say the AMEX EveryDay is way better then Chase Freedom, strictly because the AMEX Web Portal/App blows Chase out of the water.

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And yes- I am talking straight purchase and letting the balance ride while not getting hit with interest.

[u/mdhkc → u/originallowercased]

No, just purchases. Balance transfers occasionally make sense, but cash advances on a credit card almost never do.