How To Get Cash Back On A Credit Card – Forbes Advisor

“Cashback” generally refers to cashback rewards that cardholders can receive when they complete a transaction using a credit card. It should not be confused with cashback, which you can withdraw from a bank account at checkout using a debit card. It’s also different from using a credit card to withdraw cash from an ATM – which is called a cash advance and isn’t recommended.

Many credit card issuers offer cash back rewards programs that cardholders can take advantage of to earn a small return on every purchase they make. Earning rewards certainly shouldn’t be an incentive to overspend on a credit card, but it helps to know exactly how specific rewards can be earned and redeemed. Different bonus programs offer different bonus rates, and some specify which expense categories earn which rates. Therefore, it is important to fully understand the terms of your credit card rewards before deciding which credit card to apply for.

How does cashback work?

A cash back card typically allows cardholders to collect rewards on every purchase made with the card. Some can recoup a flat percentage on every eligible purchase, while others offer increased earning quotas on bonus categories like groceries, gas, or restaurants. Accumulated rewards may be redeemed as cash, often in the form of a check, statement credit, or deposit into a bank account.

How do cash back rewards work with credit cards?

Some cash-back credit cards reward all eligible purchases with a flat percentage return, e.g. B. 1.5% or 2% on all expenses. Others offer tiered reward tiers, for example to reward spending on groceries and gas at higher prices than other purchases. Still other cards offer different redemption tiers on a monthly or quarterly basis.

Flat Rewards

Some cards, such as Cards such as the Wells Fargo Active Cash® Card (Rates and Fees) offer a flat reward on all eligible purchases. The Wells Fargo Active Cash earns 2% cash bonuses on purchases and remains the plastic standard for flat bonuses. For those looking for a simple, easy-to-track cashback, a card like this will likely be among the best options.

Tiered Reward Earning

Other cards, such as American Express’ Blue Cash Preferred® Card, offer a more complex structure for earning rewards. The Blue Cash Preferred earns 6% cashback at US supermarkets on purchases of up to $6,000 per year (1% thereafter), 6% cashback on select US streaming subscriptions, 3% cashback at US gas stations and in transit (including taxis). /Carpooling, parking, tolls, trains, buses and more) and 1% cashback on other qualifying purchases. You receive cashback in the form of Reward Dollars, which can be redeemed as a statement credit. The card has an annual fee of $95 (see Rates and Fees, conditions apply).

While cards like these usually offer bonus tiers that earn higher rewards, the lowest reward tier or “catch-all” tier for all non-bonus tier purchases is usually only 1% back – and not equal to what you could earn with the Best Flat Rate Cashback Cards.

Rotating reward categories

Some cards split cashback rewards among spending categories that change quarterly (or some other period). For example, Discover it® Cash Back earns 5% cash back on everyday purchases at various locations each quarter, up to a quarterly maximum of $1,500 in spend when activated. Plus, earn unlimited 1% cashback on all other purchases – automatically.

Note that some cards require a category activation every quarter or month before you are actually eligible to earn rewards for category purchases. And as reward categories change, cards with rotating reward structures may require additional attention to reward systems in order to realize the full potential of the rewards each bonus period.

other structures

The Chase Freedom Flex℠ is an example of a card that combines multiple approaches. The Freedom Flex earns 5% cashback up to $1,500 in categories that rotate quarterly (requires activation), 5% on trips purchased through Chase Ultimate Rewards®, 3% on restaurants and drugstores, and 1% on all other purchases .

Still others, such as Cards such as the Citi Custom Cash℠ Card offer categories that change with your spending habits: The card earns 5% cashback on purchases in one of the top eligible spending categories in each billing cycle, up to the first $500 spent per month and 1% Cashback on all other purchases.

Cashback vs Cash Advance

Cashback should not be confused with a credit card cash advance. Although the term “cashback” is often used to refer to a checking account withdrawal in the same transaction as a debit card purchase at a grocery store, for example, this type of “cashback” is very different with a credit card. Cash advances allow you to borrow money against your credit card’s credit limit by using your credit card to withdraw cash from an ATM.

Cash advances usually come with a separate cash advance APR — often higher than your card’s regular APR — and begin accruing interest the same day you borrow the cash, with no grace period. There is also usually a cash advance fee. Cash advances are not recommended because the cost of borrowing money in a cash advance is usually astronomical compared to other options to get the funds you need.

How do I get cash from a credit card?

Making a cash advance with a credit card often incurs fees and a high APR, and does not include a grace period to pay the balance before interest accrues. We don’t recommend taking a cash advance, but if you must, you can use your credit card at an ATM like a debit card. Be sure to read your card agreement carefully to understand all the terms of a cash advance before initiating a transaction.

How do you redeem cash back rewards?

Although specifics vary from exhibitor to exhibitor, you typically redeem cash back rewards earned with your credit card by making a request through an issuer’s app or website. Log into the mobile or online banking system and make a request to redeem rewards.

Many cards allow you to choose your preferred method of redeeming your cashback: you can receive your rewards as a statement, as a deposit into a qualifying bank account, or as a check mailed to you by the issuer. Some cash back cards also allow you to redeem cash back by using it for purchases during an online checkout at a partner.

Note that in some cases your cashback will be redeemed automatically and you will not be able to select your preferred option. For example, with the American Express Blue Business Cash™ card, any cashback you earn is automatically credited to your statement every billing cycle.

Below are details of commonly available redemption methods for your cashback.

Check

Some issuers may pay out bonuses by sending you a check. Depending on your card agreement, a check may be sent automatically from time to time, or you may be required to request one. A check can also be an optional cashing method, among other possibilities. Checks may be one of the slower cashing methods as you are waiting for a physical item to arrive in the mail.

statement of account

Another redemption option that many issuers offer is cashback as a statement credit. Certainly one we often see in credit card agreements we review, the statement credit returns your money directly to your credit card account by deducting the amount of rewards you redeem from your balance. This type of redemption option generally takes the least amount of time.

Bank transfer or direct deposit

Some issuers – particularly banks that also offer checking and savings accounts – offer a bank transfer or direct deposit to redeem your reward. You can redeem rewards as a deposit into an eligible checking, savings or other cash account, and many issuers make this a fee-free, fairly easy process.

gift cards

Gift cards are often listed as a cashback redemption option, but note that gift card redemptions may offer less value per reward point or dollar than other redemption options. Gift cards can also limit your options when redeeming – we usually recommend redeeming rewards for cash instead.

bottom line

Cash back credit cards receive rewards for eligible purchases and can be a lucrative advantage over paying with a credit card. Earning and redeeming cash back rewards involves nuanced terms that you should understand before applying for a credit card that offers cash back.

You should also know that “cashback” as used to refer to withdrawing cash at a merchant’s point of sale with a debit card is not the same as with a credit card. Using a credit card to withdraw cash against your revolving line of credit is called a cash advance and is generally not the cheapest way to borrow cash.

To view American Express Blue Cash Preferred® Card pricing and fees, please visit this page.