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After having “non-rev” privileges with Southwest Airlines, Christy dove into the world of points and miles so she could continue traveling for free. Her other passion is personal finance, and is a cer...
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You might be wondering if there’s a way to get cash-back from your credit card. Many credit card companies offer cards that allow you to earn a small percentage back on every purchase you make. These rewards build up over time, putting money back in your pocket via statement credits, checks, or money deposited directly into your bank account.
You can also use your credit card to get cash out in the form of cash advances. Beware though — this comes with additional fees and high APRs.
We’ll explain all the ins and outs of getting cash-back from your credit card, which companies offer cash-back credit cards, and tell you how to avoid getting hit with any surprise fees from cash advances.
How Do You Get Cash-back From a Credit Card?
Each time you make a purchase, wouldn’t it be great if you saw a small portion returned to you? Well, good news! That’s what a cash-back credit card does.
Each credit card offers different reward rates and may put limits on how these rewards can be earned and redeemed. Cash-back credit cards come in all shapes and sizes, but some are more hands-off than others. For example, some cards may offer a low flat percentage for spending across all categories. Other cards may offer higher rates of earning in a specific category of spend, such as groceries or restaurants.
It’s very common to see bonus categories rotated each month or quarter, which requires you to stay on top of these changes. You can adjust your spending according to these bonus categories to maximize your earnings.
There are a lot of ways that cash-back rewards can be structured, which we’ll dive into more below.
A cash-back credit card can be a great introduction to earning rewards from credit cards. You can earn rewards on your regular spending without having to dive too deep into loyalty programs, transfer partners, or worry about dreaded devaluations. You know precisely what you’ll get and can reap the benefits quickly.
There is a wide range of cash-back cards to fit your spending patterns, so you are certain to find a cash-back card for you. This differs from other rewards credit cards.
For example, if you’re not a frequent traveler, you might find it hard to get value or maximize your earning potential using an airline or hotel-specific credit card. In addition, these cards can take quite a bit longer to see benefits from since booking with rewards can take some serious planning!
If the quick turnaround and easy earning potential appeal to you, a cash-back credit card could be a great fit!
Earning Rewards on a Cash-back Credit Card
Let’s jump into earning rewards on a cash-back card. As we noted, you will get a portion of the money you spend using your credit card returned back to you. Some cards also offer a welcome bonus to entice you even further.
Some cards may feature a welcome offer with a minimum spend when you open a new card. For example:
Most cash-back credit cards offered rewards in one (or a combination) of the following areas:
Flat-rate Earnings: Some cards offer a flat percentage reward on all eligible purchases. These cards require the least amount of tracking as all eligible spending earns a standard reward such as 1% to 2% cash-back. You might not earn as much as you could with other cards though, especially if the bulk of your spending is geared towards a certain category, such as restaurants, grocery stores, or travel.
Spending Bonus by Category: Some cards offer set additional bonuses for specific categories of spending. For example, the Capital One Savor Cash Rewards Credit Cardoffers 10% cash-back on Uber and Uber Eats purchases, 4% cash-back on dining, entertainment, and popular streaming services, and 3% cash-back at grocery stores. The downside of these types of cards is that the base level of earning is lower (typically 1%) on all non-bonus category spending.
Rotating Bonus Categories: Some cards offer a higher percentage back on rotating bonus categories. These bonus categories can change monthly or quarterly. For example, Chase Freedom Unlimited® offers 5% cash-back on up to $1,500 spending in categories such as grocery stores, gas stations, wholesale clubs, home improvement stores, and more. Similar to tiered spending cards, the downside of these types of cards is that the base level of earning is lower on all non-bonus category spending. In addition, since these bonus categories usually require activation, you’ll need to stay current on all bonus categories to earn the most rewards.
What Is the Best Cash-back Credit Card?
The best cash-back card is one that best aligns with:
Your Spending: What do you plan to use your credit card to pay for? Make sure your card rewards you for your spending!
Your Time: How much time do you want to spend tracking reward categories? If you don’t mind tracking bonus categories, you can earn more rewards. If you prefer to be more hands-off, a flat rate card will be your best option.
How To Redeem a Cash-back Bonus
You’ll need to check the specifics for each card, but at a high level, here are the options for redeeming a cash-back award once you’ve earned the rewards.
First, start by logging on to your card issuer’s mobile banking site or app. With most cards, you’ll be able to select your preferred method of redeeming your rewards points. Here are some of the most-common redemption methods:
Statement Credit: A statement credit is usually the preferred option, as it is the quickest method of redeeming cash-back rewards. A statement credit works by subtracting the redemption rewards from the total balance due on your credit card bill.
Deposit to a Linked Bank Account: This can be a popular option to redeem cash-back rewards, especially if you conduct your online banking with the same company as your credit card issuer. The card issuer will deposit the rewards you’re redeeming in the form of cash to your linked bank account (checking, savings, or other cash accounts).
Physical Check: Some issuers will send a check to the address on file. Depending on the terms of the card, this can be done either periodically, once a certain threshold is reached, or upon request. This will be the slowest option, as it may take a while for the check to arrive via mail and then you’ll need to wait for your bank to process it.
Gift Cards: While not necessarily cash, many cards have retail partners where you can use your rewards points to get gift cards. The value of converting your rewards to gift cards is typically less than if you get cash, so we don’t usually recommend this option if you have other options available to you.
Bottom Line: There may be minimum thresholds for redeeming your rewards, and these thresholds could even vary depending on the card. For example, one card may allow you to get cash-back in increments of the equivalent of $25 but others may only have a $10 minimum.
Is a Cash-back Card Worth It?
There are a few things to take into consideration to make sure your cash-back credit card is worth it.
Usually higher reward rates mean a higher annual fee. To determine if a cash-back credit card is worth it, you’ll need to evaluate each year if the cash you get back exceeds any annual fees incurred, if applicable.
In many cases, you’ll need to stay on top of monthly or quarterly bonuses to activate rewards and organize your spending between your cards. If this is the case for you, determine if you’re willing to put in the work to do this.
Lastly, always pay off your balance to ensure you don’t get hit with interest or late fees. You don’t want the fact that you’re earning cash-back to be an incentive to spend beyond your ability to repay!
Hot Tip: Put a reminder on your calendar right before your annual fee is scheduled to post to check to see if you got enough value from your cash-back credit cards in the prior year.
Cash-back vs. Cash Advance
Taking out a cash advance is essentially borrowing cash against your card’s cash advance limit (typically lower than your card’s credit limit). This differs from getting cash-back from a card for your purchases. Cash-back cards generally have no downside if used responsibly and you take into consideration the points we mentioned above.
On the other hand, cash advances involve both paying a fee and incurring interest on amounts withdrawn. To make things worse, your card’s cash advance APR is generally higher than the regular APR. Because of these high costs, cash advances should only be used in emergencies.
Cash-back rewards can be a great option for people who don’t want to be limited to earning points or miles. Over time, cash-back rewards can really add up thanks to your daily spending. If you’re willing to put in some work, you can earn even more by taking advantage of bonus categories.
Always make sure that any cash rewards you earn offset any annual fees you’ll be paying. And don’t forget, earning cash-back rewards isn’t the same as getting a cash advance from your card!
The information regarding the Capital One Walmart Rewards® Mastercard® was independently collected by Upgraded Points and not provided nor reviewed by the issuer.
The information regarding the Capital One Spark Cash Plus Card was independently collected by Upgraded Points and not provided nor reviewed by the issuer. The information regarding the Capital One Savor Cash Rewards Credit Card was independently collected by Upgraded Points and not provided nor reviewed by the issuer. The information regarding the Indigo® Platinum Mastercard® was independently collected by Upgraded Points and not provided nor reviewed by the issuer.
For rates and fees of the Blue Cash Preferred® Card from American Express, click here.
Featured Image Credit: Alexander Mils via Pexels
Frequently Asked Questions
Can I get cash-back from my Indigo® Platinum Mastercard®?
The Indigo Platinum card allows you to get cash advances at the rate of 29.9%. There may also be an associated fee, depending on how long you’ve had the card. This is not the same as earning cash-back rewards but does allow you the flexibility to get cash out (at a cost).
Can I get cash-back from my Capital One Walmart Rewards® Mastercard®?
After having “non-rev” privileges with Southwest Airlines, Christy dove into the world of points and miles so she could continue traveling for free. Her other passion is personal finance, and is a certified CPA.