What is a cash-back credit card?
A cash-back credit card earns you a percentage of money back from your spending with the card. You can earn anywhere from 1% to 5% back from every purchase.
To get your cash, you may have to reach a certain threshold, such as when you have a balance of at least $20 in reward money.
You may take the cash as a check, or have it deducted from your credit card bill, or receive it in the form of a gift card.
Kiss Your Credit Card Debt Goodbye
Having a single loan to pay off makes it easier to manage your payments, and you can often get a better interest rate than what you might be paying on credit cards and car loans.
Fiona is an online marketplace offering personalized loan options based on your unique financial situation.
When you consolidate your debt with a personal loan, you can roll your payments into one monthly installment. Find a lower interest rate and pay down your debt faster today.
Get StartedWhy do credit card companies give cash back?
Why are credit card companies so eager to give away money? When they give you rewards, card companies aren’t taking a loss so much as they’re sharing a profit.
Credit card issuers charge merchants fees for every transaction. With rewards credit cards, the issuers simply pass some of those earnings on to you.
For example, a card company may take 3% from merchants for each transaction. Rather than keeping all that money, the issuer may offer to give cardholders two-thirds of each fee (2%), to incentivize people to sign up for the card.
More: Find the best cash-back credit card
Types of cash-back credit cards
Cash-back credit cards can be separated into three main categories:
- Flat percentage
- Tiered rewards
- Bonus category
Flat percentage cash-back cards are just as they sound — they pay cash back at the same rate for all purchases.
These cards are best for people who want decent returns without having to overthink it. The trade-off for this convenience is that you typically only earn 1% or 2% for each transaction.
Tiered rewards cards are great for people who tend to spend more on certain things.
If you do all of the grocery shopping for your household and a lot of the driving, a tiered rewards card that pays out a higher percentage for groceries and gasoline may be an excellent option. You’ll get a smaller return on other purchases.
Bonus category cards are for dedicated rewards earners. They offer high rebates of up to 5% in specific spending categories, such as at restaurants or at gas stations.
The bonus categories can change every quarter, and you may have to register, or "opt in," for the bonus category each quarter.
Your spending that earns the bonus may be capped at a certain amount, like $1,500 during the quarter, and purchases in other categories will likely earn you just 1% cash back.
Start earning today: Check out today's best cash back credit cards.
Stop overpaying for home insurance
Home insurance is an essential expense – one that can often be pricey. You can lower your monthly recurring expenses by finding a more economical alternative for home insurance.
SmartFinancial can help you do just that. SmartFinancial’s online marketplace of vetted home insurance providers allows you to quickly shop around for rates from the country’s top insurance companies, and ensure you’re paying the lowest price possible for your home insurance.
Explore better ratesHow do you master cash-back rewards?
You want to choose a credit card that best suits your spending habits, and that won't lure you into spending more than you should, just to chase after rewards.
Never buy what you don’t need. Track your spending for a month, and pick a card that's tailored to what you already spend.
If a card has an annual fee, weigh whether your rewards will more than make up for that cost. And, always make sure you pay off your balance each month.
Credit card interest rates can reach more than 17%. So, carrying over a balance for a couple of months will quickly eat away at your returns. In other words, don't earn cash back — and then give it right back to the credit card company!
Sponsored
Follow These Steps if you Want to Retire Early
Secure your financial future with a tailored plan to maximize investments, navigate taxes, and retire comfortably.
Zoe Financial is an online platform that can match you with a network of vetted fiduciary advisors who are evaluated based on their credentials, education, experience, and pricing. The best part? - there is no fee to find an advisor.