Cashback credit cards are among the most popular because they offer significant cash rewards over time. They come in many varieties, but they all basically work in the same way: when you make purchases with your card, you get cash rewards at a set rate. For people who want to maximize their return on everyday spending with flexible repayment options, cashback credit cards can be the best tool.
Here we look at some of the more common types of cashback and the limitations you may face when redeeming your rewards.
How cashback works
Depending on your card and issuer, you may have several options for using cashback. Some issuers even allow you to set up automatic redemption, meaning your redemption will automatically trigger after a set number of days or after you earn a certain amount in rewards.
The most common ways to get cashback:
- Loan Application
- Direct transfer to a bank account
- Examination
- Gift cards
- Product
One of the most common ways to get cash back is a credit statement. A credit statement is money credited to your account that reduces your credit card balance.
For example, if you were to spend $1,000 with a card that offers 1.5% cashback on every purchase, you would earn $15 in cashback rewards; and if you were to use that cash back as a statement credit, your balance would decrease by $15 to $985.
While many cards make a credit statement redemption painless, allowing you to decide when and how much you want to redeem, others require you to earn a minimum amount of cash back before you can claim your rewards.
For example, the American Express Blue Cash Preferred® card requires you to earn $25 in cash before you can use it as a credit statement.
And the Chase Freedom Unlimited® card allows you to use credit rewards for any amount at any time.
Once you have completed your card’s repayment requirements, you can simply select a credit statement as your preferred cash repayment.
Cash payout by check or direct deposit
A slightly smaller number of credit card rewards programs allow you to exchange your rewards for a “real” refund in the form of a check or direct deposit into your bank account.
Claiming cash back in this way gives you a bit more leeway as you can keep or spend your rewards however you like, rather than having them “locked” in a specific card account.
As with credit statements, the requirements for requesting a check vary from card to card: some issuers require you to earn a minimum amount of cash before you can request a check, while others impose relatively few restrictions.
Direct deposits tend to be a little trickier, especially if you don’t already have a banking relationship with your credit card issuer.
For example, the Bank of America® Customized Cash Rewards credit card only allows you to redeem cash as a direct deposit if you have a checking or savings account with Bank of America.
Automatic refund
Along with manually requesting a credit statement, check or direct deposit, a number of cards allow you to set up automatic cash repayment. If your card allows automatic redemption, your cashback is usually distributed at a set time or after you earn a certain amount.
The Capital One Quicksilver Cash Rewards credit card, for example, allows you to schedule automatic cash repayments via a credit statement or check at a set time once a year, or upon reaching a cash back threshold ($25, $50, $100, $200, $500, or $1,500). ).
Even some cards designed for credit institutions, such as the Credit One Bank American Express® card, allow automatic redemption as a credit statement, offering set-and-forget cash savings for those looking to improve their financial habits. a tool that will periodically charge off part of their credit card balance.
Travel, gift cards and goods on the issuer’s Internet portal
Most credit card issuers also give you the option to cash out your cash through an online shopping rewards portal or as gift cards to select department stores, restaurants, video streaming services and more.
The Discover it® Cash Back card, for example, allows you to redeem cash for gift cards from merchant partners once you earn $5 in cash (gift cards range from $5 to $200 in $5 increments).
The Amazon Prime Rewards Visa Signature Card* allows you to redeem points for purchases on Amazon.com, as a statement on a loan or deposit, as well as for gift cards and trips, all at a rate of 1 cent per point.
The ability to use your travel rewards is common with cashback cards that use points or allow you to choose between cashback and points.
Chase Freedom Unlimited is a great example. You can get unlimited cash back at a rate of 1.5% on every purchase, which is 1.5 points per dollar, when used to travel on the Chase Ultimate Rewards Portal.
Similarly, the Citi Double Cash Card allows you to transfer cash back to Citi ThankYou Rewards and use it for rewards as well as gift cards, merchandise and other purchases through the Pay with Points program.
bottom line
Repayment options are just one of the considerations when choosing a cashback credit card. The key thing to consider is whether your rewards lose any value when you use them in a certain way. You want to make sure you get the most bang for your buck because you want to find the card that works the best for you, not the other way around.
Each cashback card, from redemption options to bonus categories, caters to different types of consumers. If you haven’t found your perfect match yet, try our CardMatch™ tool, which can provide personalized credit card suggestions in seconds without impacting your credit score.
*All Amazon Prime Rewards Visa subscription card information has been independently collected by CreditCards.com. The issuers have not provided the content and are not responsible for its accuracy.
Editorial disclaimer
The editorial content on this page is based solely on the objective judgment of our contributors and is not based on advertising. It was not provided or ordered by credit card issuers. However, we may receive compensation when you click on links to our partners’ products.
