A family carrying shopping bags walks down a sidewalk together.

How do Cash Back Credit Cards Work?

7 min read

Last Updated: January 29, 2026

Table of contents

Key Takeaways

Cash back credit cards offer a percentage of each eligible purchase back as cash.
You may be able to use your credit card to withdraw cash, but it’s often expensive.
Some credit cards earn cash back at the same rate across all purchases, while others earn additional cash back in some categories.

If you’re looking for a credit card that offers straightforward rewards at the movies, brunch, and beyond, you might consider a cash back credit card. Cash back credit cards allow you to earn a percentage of each eligible purchase you make, back as a reward with cash value.

When you use a cash back card wisely, the rewards you receive may help your budget. In addition to offering rewards, some cash back cards may also allow you to borrow cash with a cash advance.

Understanding how cash back cards work may help you find the right credit card and use it strategically to maximize your rewards.

How do you get cash back from a credit card?

Typically, “getting cash back” means receiving rewards when you spend money with your credit card. However, you might also be curious about using your credit card to borrow cash through a cash advance.

Some credit cards may allow you to earn cash back rewards and take out cash advances, but it’s important to understand that these are two totally separate credit card functions. Let’s break them down.

Earn rewards on credit card purchases

When you pay for something with your cash back credit card, you typically earn a percentage of that purchase as cash back. The specific percentage depends on your credit card’s rewards structure. Some purchases may earn a higher rate of cash back than others. You may transfer the cash back you earn to your checking account, or redeem it in another way, such as a statement credit.

Use your credit card for a cash advance

A cash advance isn’t a type of reward, but rather a loan from your credit card company that you take out against your credit limit. You may use your credit card at a bank or ATM to withdraw cash up to your cash advance limit, which is usually a small percentage of your credit limit. You may also be able to transfer a cash advance from your credit card to your checking account online.

Like a regular credit card purchase, a cash advance comes out of your available credit, increasing your balance. However, a cash advance often has a higher interest rate than purchases and begins accruing interest right away. Card issuers also often charge a cash advance fee on top of interest.

High interest charges and other fees usually make a cash advance an expensive way to get quick cash. And cash advances usually don’t offer rewards.

With Discover^®, you may have another option.

When you shop at participating retailers with your Discover^® Card, you may be able to request cash at checkout just like you could with a debit card. Just ask the merchant for the amount you need or enter it on the terminal, up to $120 every 24 hours. You don’t have to pay an additional fee. Plus, the cash amount accrues interest at your standard purchase annual percentage rate (APR).

Not all rewards credit cards offer cash back

Some rewards cards don’t offer cash back. For example, co-branded hotel and airline credit cards might allow you to earn points or miles in the companies’ loyalty programs instead. Points and miles may have more limited redemption options than cash back. You might only be able to use them to book flights or hotel rooms with partner companies.

How do you earn cash back from credit card spending?

Cash back credit cards generally have one of three earning styles:

Fixed-rate rewards: When you use a fixed-rate cash back card, you get the same rewards rate no matter where you shop. For example, you might earn 1.5% cash back on all your eligible purchases, like a cup of coffee or a new sweater. A fixed-rate card may not have a rewards limit, so you might earn the most cash back by making it your everyday card.
Tiered rewards: Tiered cash back cards typically have higher cash back rates for certain types of purchases or specific merchants, and a fixed lower rate for everything else. For example, with the Discover it^® Chrome Gas and Restaurant Credit Card, you earn 2% Cashback Bonus^® at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically. Plus earn unlimited 1% cash back on all other purchases.²
Rotating category rewards: Rotating cash back cards are tiered rewards cards with higher cash back rewards categories that rotate periodically throughout the year. You may have to activate the rewards offers to take advantage of them. The Discover it^® Cash Back Credit Card is a rotating rewards card that lets you earn 5% cash back on everyday purchases at different places each quarter like grocery stores, restaurants, and gas stations, up to the quarterly maximum when you activate.

Some credit card issuers may give new cardmembers the opportunity to earn additional cash back as a welcome bonus. To receive the bonus cash back from certain credit card companies, you may have to reach a specific spending minimum by a set date.

However, it’s important to avoid overspending. A high credit card balance may hurt your credit score, and interest charges may offset the bonus rewards you earn.

Did you know?

With Discover, you may be eligible to receive extra cash back in the year after account opening with no spending minimum. Discover automatically matches the cash back you’ve earned on your credit card at the end of your first year.³

Learn More

How are cash back rewards calculated?

If you’re curious about the cash back you might earn for a specific purchase, you may calculate your rewards by applying the rewards rate to the amount you spend.

For example, if you use your 1.5% fixed-rate card to buy a $20 bracelet, you may earn 1.5% of $20 in cash back, which comes out to $0.30.

Check your credit card statement, online banking portal, or mobile banking app to see your current cash back balance.

How do you redeem cash back rewards?

Before you open a cash back credit card account, make sure the credit card company offers redemption methods that you’ll want to use. Otherwise, your cash back may go to waste.

Some common cash back redemption options include:

A statement credit that’s applied to your credit card balance
A deposit into a checking account
Gift cards to select merchants
A donation to a charity of your choice
Direct purchases with specific retailers

Cash back rewards programs may have some restrictions. With some credit card issuers, you must earn a specific amount of cash back, like $25 or more, before you may redeem the rewards you’ve earned. Or you might lose your cash back if you don’t use it by a set date. Check your credit card issuer’s rules to avoid leaving any cash back on the table.

With Discover, you may use your cash back whenever you’re ready, not when you’ve reached a minimum. Redeem cash back for any amount.⁴ Your cash back doesn’t expire for the life of the account.⁴ So, there’s no need to rush.

Learn More

The bottom line

Understanding how to earn and redeem cash back, including any rules and restrictions, may help you choose the best cash rewards card for your spending habits and preferences.

When you find the right card, practice responsible habits. Keep your credit card balance to a minimum and pay your bill on time each month to prevent interest and penalties from eating into your cash back. With a little extra cash in your pocket, you might increase your savings, pay down your credit card balance, or treat yourself to something special.

Important Information >