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'A rewards credit card that earns cash back is like gold' — use these 3 tips to make the most of it

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Almost 6 in 10 people have one or more rewards credit card in their wallet, according to a 2018 CreditCards.com survey of 1,218 American adults. The most popular perk: cash back.

The allure is that cash-back cards are easy to understand. There's no points-crunching to figure out the value of rewards you're earning.

"People are realizing that paying for something with cash or a debit card doesn't get them anything in return. And it doesn't cost anything more to use a credit card," says Julian Mark Kheel, director and senior analyst at travel site The Points Guy.

But you'll need to be smart about how you use a cash-back card, just as you would with any rewards card. Here's how to make the most of one.

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How to successfully use a cash-back credit card

1. Find a card tailored to your spending habits

Most cash-back cards offer a base reward of 1%-2% back, but some cards offer bonuses as high as 6% back in particular categories. Experts say cash-back cards can be valuable when those bonuses reward your spending priorities and frequent purchases, such as groceries or restaurant meals.

For example, if you do grocery shopping for a big family, consider a card that offers a bonus in that category, making the savings target "easy for families to hit," Ted Rossman, an analyst at CreditCards.com, told Grow earlier this year.

2. Use your cash rewards wisely

With a cash-back card, your rewards can typically be redeemed for gift cards, or sent to you as a check or direct deposit into your checking account. But you may also be able to get a statement credit toward your credit card balance, which Kheel says can be a smart option.

"That means instead of paying your monthly bill of say $200, if you apply $20 in cash back as a statement credit, you only need to pay $180 that month," he explains.

3. Pay off your card in full each month

If you can't pay off the balance on your cash-back card on time and in full each month, you'll start accruing interest, which more than offsets the cash back you've earned, he warns. As of late September, cash-back cards carried an average interest rate of 17.46%, according to CreditCards.com data.

Say you make $500 in purchases. On many cash-back cards, that will earn you $1 to $2 — with bonuses, maybe $5 or $6. But if you carry forward a $450 balance, you'd owe a bit more than $7 in interest.

"Making a cash-back credit card work for you means using it only to buy things that you would have bought otherwise with a cash or debit card," Kheel tells Grow.

"If you can be disciplined about your budget and not overspend, a rewards credit card that earns cash back is like gold."

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