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Earning cash back with a credit card is one of the best ways to save money while making everyday purchases. Thankfully, cash-back rewards are more accessible than ever and can require less effort than some of the other credit card rewards programs out there. There’s no downside in choosing a credit card with cash back rewards, as long as you stay up to date with card payments.
What Is Cash Back on a Credit Card?
When choosing a credit card, you may want to familiarize yourself with the programs offered by the best reward credit cards. That’s the first step to answering the question “Can you get cash back with a credit card?” Cash back is a credit card rewards program that enables a cardholder to earn a small rebate for every dollar spent using the card. These rewards either materialize in dollars or as points based on the card, but every issuer calculates the amount of cash back on a percentage basis.For example, the Secured Sable ONE card earns 2% cash back on every purchase with companies like Amazon, Uber, Uber Eats, Whole Foods, and Netflix. This means that, for every $100 spent using these services, the cardholder will receive $2 back. For all other purchases, this card earns 1% cash back, or $1 for every $100.It’s important to compare the various cash-back credit cards to find one that best matches your spending needs and payment habits. You should know how credit cards work for a start. To help you narrow down your choices further, it’s helpful to think about reward structures broken down into three categories:
Flat-Rate Structure
A flat-rate cash-back reward is the most straightforward approach to earning cash back. It means you will get the same percentage of cash back without having to worry about reward category limitations or quarterly activations. Flat rates are typically lower (1-2%) than rotating cash-back rates.For those who want to go with this route, the Wells Fargo Active Cash card offers 2% cash back on all purchases and a $200 cash rewards bonus after spending $1,000 on purchases within the first three months.
Rotating Cash-Back Structure
Rotating cash back requires more attention from the cardholder but yields bonus cash back on specific purchase categories that are more rewarding than flat-rate rewards. Cash-back bonuses usually go for 5% or higher, but the categories are limited and subject to change. For example, the Blue Cash Preferred® card from American Express offers some impressive rates of cash back from purchase categories.
Hybrid Cards
Hybrid rewards credit cards are different from typical rewards credit cards. You can use them on their own to earn cash back with various options for redemption, or you can pair them with other eligible cards to convert the cash to points. The Secured Sable ONE card has a reward structure that earns both 2% bonus rates and has a fixed rate of 1% on all other purchases. So it includes both flat-rate and rotating cash-back structures. In addition, this card will match every dollar of cash-back accrued by the end of the cardholder’s first year.
How to Use a Cash-Back Credit Card
While it’s always worthwhile to learn credit card terms, earning cash back with a credit card is simple. Use select cards on qualifying purchases, and the credit card issuer will calculate the percentage of each purchase based on the rules of the card. This means the customer gets a bit of cash from every eligible purchase made.Likewise, for cards that offer bonus rewards for certain types of spending, such as restaurants, transit, and streaming services, the best way to maximize cash back is to spend using your credit card in those areas. The cash back you earn might appear insignificant at first, but over time and with normal use, the rewards can add up to a nice gift.But most importantly, you should always avoid interest charges by paying your balance in full. Otherwise, it’s best to use a card with the lowest possible interest rate, which won’t be a cash back card.
Can You Get Cash Back at Stores With a Credit Card?
To earn cash back at stores with your credit card, customers need to use a card that offers cash on an eligible purchase, which can be anything from groceries to gas to almost anything else you can purchase with a credit card.
What Is a Credit Card Cash Advance?
When you make a credit card cash advance, it’s like withdrawing cash out of a credit card account. In other words, it's like taking out a short-term loan–with hefty fees.Nearly all credit cards will impose a cash advance fee for these transactions. This is in addition to any fees charged by an ATM. Also, cash advance APRs are higher than the interest rates on credit cards when used for purchases. Adding to that, most banks don’t offer grace periods on cash advances, meaning that interest will likely start accruing immediately. All of the above could lower your credit score depending on how much you borrow. If your goal is credit score improvement, then proceed with caution with a cash advance.
Difference Between Cash Back and Cash Advance
Can you get cash back with a credit card? To know the answer, it’s important to spot the differences between cash back and a cash advance. A critical difference between a cash advance and cash back is “cash now” and “cash later.”On the one hand, cash advances are short-term loans against your credit line as a cardholder. On the other hand, cash back is essentially cash gifted to you after you’ve made certain purchases. When you take out cash advances it often entails higher risk, but there’s virtually no risk in earning cash back. Credit cards aren’t replacing debit cards as a definitive means for withdrawing cash at ATMs or cash registers because of the high fees associated with cash advances. What cash back credit cards do best is accumulate cash for use at a later time.
How to Get Cash Back From a Credit Card
The first step to get cash back from a credit card is to see if you can get credit card pre-approval. This establishes that your credit score and financial information matches your initial eligibility criteria needed for someone to issue you a card. Once the card issuer approves your application and sends you your card, you can start to earn cash back by using the card on qualifying purchases detailed in your agreement. When you’re ready to redeem cash-back rewards, make a request to the issuer and choose between various redemption options.
How to Redeem Cash Back Rewards
First you should make sure you understand how credit card payment works. Then, to redeem cash back rewards from your credit card issuer, you choose from various redemption options. The card issuer might allot cash deposits into your bank account. Other forms of cash redemption can include retrieving the rewards as a statement credit, checks, ATM withdrawals, gift cards, donations to charities, and travel bookings. Study your credit card statement to see what you might be eligible for.
The Takeaway
With all of the points, miles, loyalty programs, and other reward programs offered by credit card companies, it’s refreshing to see that many feature cash back as a solid alternative as well. Using cash back cards might be the best way to sit back and earn cash on transactions that you may already be making on a regular basis. What makes cash rewards even better is it allows you to pay off the card’s annual fee using the cash rewards. Some cash-back cards don’t require an annual fee at all, which means even more money in your pocket.You can compare credit cards and their various offers through Lantern at SoFi.
Frequently Asked Questions
How do cash back credit cards work?
How much cash back can you earn with a credit card?
What other credit card rewards exist other than cash back?
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About the Author
Jason Steele
Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
