A cash-back credit card allows cardholders to earn a percentage back on eligible credit card spending. Typically, a cardholder can redeem any money earned from cash back as a statement credit, a check sent via mail or deposited directly into a qualifying bank account.
Many types of cards offer cash back, including those earning the same flat rate on everything you buy, those offering tiered cash back where certain areas of spending earn at a higher rate than other categories and cards offering elevated cash back in specific categories that change quarterly.
Due to the wide array of options, it’s imperative to consider what categories you spend the most in month-to-month so you can choose the best cash-back credit card for your spending habits.
How Do Cash-Back Credit Cards Work?
The process for earning and redeeming cash back works similarly across credit card issuers.
- Make an eligible purchase with your cash-back card. Certain credit card transactions, such as balance transfers, cash advances and annual fees, do not earn cash back. Make sure to consult your card’s terms and conditions to see what eligible purchases earn cash back.
- Earn a percentage of cash back on your spending. The exact amount depends on your card’s terms, and your earnings typically accumulate in your card’s rewards account.
- Redeem your cash back according to your issuer’s requirements. Depending on your card, you may have different options for redeeming your cash back, including but not limited to a statement credit against your balance, a direct deposit or a check. Some cards allow you to redeem your cash earnings in any amount at any time, while others require a minimum balance to cash out.
How Much Cash Back Can You Get?
For the most part, the amount of cash back you can earn depends on how much you spend on your card and the rewards rate offered by the card. If you spend $5,000 per year on a card that earns 2% cash back on every purchase, you’ll earn $100 in cash back. Someone spending $25,000 on the same card would earn $500.
You can earn more cash back by using credit cards that offer higher earning rates on select categories. For example, if you spend $5,000 on groceries on a card that offers 6% on that category, you’ll earn $300 in cash back—a much larger reward for the same spending.
Keep an eye on the terms of your card to help determine how much cash back you can earn. Many credit cards offer unlimited cash back. Others may cap the amount you can earn in certain categories and lower the return rate once you max out that type of purchase.