A cash back credit card is a credit card that pays you back a certain percentage of the money you spend as a reward. Cash back credit cards generally give you at least 1% cash back on all purchases. That means you earn $1 in rewards for every $100 spent. And you can usually redeem your cash back as a statement credit, check or direct deposit to your bank account. Most cash back credit cards don’t charge annual fees, but there are exceptions.
A cash back credit card is not always the same in the way it lets you earn rewards. There are three major types of cash back credit cards. Some offer bonus cash back in categories that change each quarter (e.g. Chase Freedom®). Some have bonus categories that are always the same (e.g. Costco Anywhere Visa® Card by Citi). And others give you a steady cash back rate on all purchases (e.g. Citi® Double Cash Card – 18 month BT offer).
In addition to cash back from regular spending, many cash back credit cards offer an initial bonus. You typically earn it by spending a certain amount within the first few months after opening an account. You might also earn extra cash back by keeping your account open for a year, adding an authorized user or referring a friend.
A cash back credit card is different from miles and points cards in that cash back cannot be devalued once it’s earned. Cash is cash, after all. But credit card issuers can set the value of points and miles. And that’s one reason cash back credit cards are so popular.
Here are the main types of cash back credit cards:
A cash back credit card is the most versatile type of rewards card because you can use cash for anything. And redeeming cash back rewards is usually pretty easy. But some cards might have rules about how much cash back you need to earn before you can redeem it. Or, they might limit how much you can earn in general. Always read your cardholder agreement thoroughly.
Finally, it’s also important to note that cash back is not the same thing as a cash advance. A cash advance is when you use your credit card to get money from an ATM. But that comes with heavy fees and interest. So it’s best to not even consider doing it unless you’re in an emergency.