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Many rewards credit cards offer cash back, and you may even find some debit cards that offer cash back on certain purchases. Cash back is not free money, but rather a reward for making purchases on expenses like gas, groceries, restaurant meals or even streaming services.
Understanding how cash back works and what to look for in your next card can help you maximize rewards and earn more money back on everyday purchases.
Featured Partner Offer
TD Double Up Credit Card
On TD Bank's Website
On TD Bank's Website
2% Reward Rate
Earn 2% cash back on all eligible purchases.
Welcome Bonus
Earn $150 Cash Back in the form of a statement credit
Annual Fee
$0
Regular APR
20.24%, 25.24% or 30.24% variable APR based on your creditworthiness.
Credit Score
Good/Excellent(700 - 749)
Card Details
- Bonus Cash Back: Earn $150 Cash Back in the form of a statement credit when you spend $1,000 within the first 90 days after account opening
- Earn unlimited 2% Cash Back on all eligible purchases
- No reward categories, no caps, no worries.
- Get Visa benefits like cell phone protection when you pay your monthly mobile bill with your card
- No annual fee
- Contactless Payments/Digital Wallet
- Instant credit card replacement
- Must be a resident of CT, DC, DE, FL, MA, MD, ME, NC, NH, NJ, NY, PA, RI, SC, VA or VT.
Bonus Cash Back: Earn $150 Cash Back in the form of a statement credit when you spend $1,000 within the first 90 days after account opening
Credit Score ranges are based on FICO® credit scoring. This is just one scoring method and a credit card issuer may use another method when considering your application. These are provided as guidelines only and approval is not guaranteed.
What Is Cash Back?
Cash back is earned when a percentage of a cardholder’s eligible purchase gets refunded to them. In the early 19th century, retailers introduced rebate discounts that allowed consumers to pay full price for an item and then receive a credit at a later time.
Consumers often had to submit a rebate request and wait for weeks or months to receive the credit. Today, cash-back cards allow you to earn money back on various purchases at the end of each statement cycle.
Your cash rewards can then be used as a statement credit, deposited to your bank account or redeemed a few other ways.
How Does Cash Back Work?
Depending on the cash-back card, you may earn a flat rate or tiered cash-back rate on your eligible purchases. A flat-rate cash-back card will typically give you one rate on all your purchases.
For example, the Capital One Quicksilver Cash Rewards Credit Card offers 1.5% cash back on every purchase and 5% cash back on hotels and rental cars booked through Capital One Travel. This means for every dollar you spend, you’ll earn at least 1.5% or $0.015. This adds up to $15 in cash back for every $1,000 spent.
The Chase Freedom Unlimited®, on the other hand, uses tiered cash-back rewards including 5% cash back on travel purchased through Chase Travel℠, 3% cash back on eligible dining and drugstores and 1.5% on all other purchases, plus an additional 1.5% cash back on the first $20,000 in purchases the first year.
Another type of cash-back program involves rotating categories and Discover is well known for this. The Discover it® Cash Back offers 5% cash back on everyday purchases at different places each quarter up to a quarterly maximum of $1,500 in spending when activated. Plus, earn unlimited 1% cash back on all other purchases – automatically. During one quarter, you may earn 5% cash back on all your restaurant purchases. Then, the next quarter you could earn 5% on gas.
With Discover it® Cash Back, you must activate the rotating cash-back offer each quarter to start earning rewards. While 5% cash back may sound enticing, Discover caps your eligible spend to $1,500 per quarter. Discover it® Cash Back cardholders earn 1% cash back on all other purchases automatically.
How Cash Back Is Awarded
Cash back is usually awarded in dollars or as rewards points. Rewards points may stretch further than cash especially if you’re applying your points to travel, but each program is different. Cash is still convenient if you’re looking for a statement credit, a check or funds deposited directly to your bank account.
Some cards allow you to redeem gift cards to popular restaurants and retailers with your cash-back rewards.
Your monthly credit card statement will typically show how much cash back you earned and what was awarded to you in the last 30 days.
Be sure to read the card issuer’s terms thoroughly to understand how and when cash back is awarded. The Citi Double Cash® Card is an example of a card that may not pay your cash back all at one time. The card allows you to earn 2% cash back on all purchases—1% when purchases are made and another 1% when they’re paid off. So if you carry a balance, you may not earn the other 1% cash back right away.
Why Do Credit Cards Give Cash Back?
Credit cards with cash-back programs incentivize cardholders to spend money on certain things. Card issuers make money from fees and interest payments and it’s in their best interest that cardholders spend regularly on their card each month.
As a consumer looking to get rewarded for your spending, you may be more willing to use a credit card for your groceries (instead of a debit card) knowing that you’ll earn cash back on the purchase.
The opportunity to earn cash back may also tempt cardholders to spend more than they normally would. It’s important to manage your spending with a cash-back card so you don’t accumulate a large balance that you can’t pay off by the end of your statement cycle.
Interest charges and even late payment fees can easily cancel out any cash-back rewards you receive.
How To Maximize Credit Card Cash Back
How much you earn with cash-back cards depends heavily on the amount you spend and your strategy to maximize rewards. Here are a few practical strategies to help you earn more cash back from spending.
Consider the Categories You Typically Spend In
Review your spending to get a better idea of where your money is going. If you tend to spend a lot on groceries each month, a cash-back card that offers a higher rewards rate for grocery purchases may be your best option.
Look for a Card With a Welcome Bonus
A welcome bonus, or sign-up bonus, gives you the opportunity to earn cash back by meeting a certain spending threshold during the first few months of activating your card. Not all credit cards offer a sign-up bonus, so consider the ones that do to maximize your cash back early on.
Both the Chase Freedom Unlimited® and Chase Freedom Flex℠ credit cards come with the following offers:
- Freedom Unlimited: an additional 1.5% cash back on up to $20,000 spent in the first year, worth up to $300 cash back
- Freedom Flex: $200 bonus after spending $500 on purchases in the first 3 months from account opening
Try a Choice Category Cash-Back Card
A few credit cards allow you to choose the category that will earn a higher fixed rate of cash back.
The Bank of America® Customized Cash Rewards credit card offers a $200 online cash rewards bonus after spending $1,000 in purchases in the first 90 days of account opening and earns 3% cash back in the eligible category of your choice, 2% at grocery stores and wholesale clubs (up to $2,500 in combined choice category/grocery store/wholesale club quarterly purchases) and unlimited 1% on all other purchases.
This option can help you avoid feeling pressured to spend in areas that don’t make sense for your financial needs and lifestyle.
Watch Out for Fees
In some cases, it’s best to choose a cash-back card that doesn’t have an annual fee. If the fee for a card is $95, this means you’ll net fewer cash-back rewards annually due to this added cost. However, you should also consider how many rewards you would earn with different cards. Cards with annual fees typically offer higher rewards rates.
If the card has foreign transaction fees, this will also cost extra if you use it to make purchases out of the country.
Even if you’re earning 5% or 6% cash back on your purchases, having too many credit card fees can cancel out your rewards.
Don’t Carry a Balance Each Month
We recommend no one ever carry a credit card balance if possible. Carrying a balance subjects the cardholder to interest charges which can add up to more than the cash-back rewards amount you earn, and quickly.
We recommend only spending an amount you feel comfortable with paying back in full at the end of the month.
Find the Best Cash Back Credit Cards Of 2024
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Bottom Line
Earning cash back can be easy and makes sense if you’re using a credit card to make regular purchases anyway. If you’re looking to reward yourself with some extra cash, it’s worth considering at least one quality cash-back card to keep in your wallet.
It’s important to consider some of the drawbacks to cash-back cards, as well, like the cap on how much you can earn or even limited redemption options. Also, if you’re looking for travel rewards like airline miles and hotel points, these rewards can be worth much more than cash when redeemed strategically.
Frequently Asked Questions (FAQs)
Is earning cash back basically like getting free money?
No, cash back is not free money. You need to make a purchase with your card to earn cash back. Cash-back rates typically range from 1% to 5%, so you will still be paying for the majority of your purchase out of pocket.
For example, if your card pays a flat cash-back rate of 1.5% and you spend $100, you’ll earn just $1.50 in cash back, meaning your total out of pocket expense for the purchase will be $98.50.
What credit score do you need for a cash-back credit card?
Cash-back cards typically require that you have good to excellent credit. This means your credit score should be at least 670 or higher. To improve your credit score, focus on paying down existing debts, making on-time payments and monitoring your score online to watch out for any errors.
Do I have to opt in to start earning cash back?
It depends on the type of card you have. Some automatically give you cash back whenever you make a purchase. Other cards that use a tiered rewards system may require you to activate a specific cash-back offer before you can start earning.
Always check the terms and conditions of your credit card agreement to ensure you understand how to start earning cash back with the specific card.
