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What is Cash Back and How Does Cash Back Work?

Last Updated: May 4, 2022
4 min read

Let’s Learn About: What Cash Back Means on Credit Cards

  1. Cash back credit cards give you a percentage of your credit card spending back in cash back rewards

  2. Some cash back credit cards give a flat rate of cash back, and others give more cash back on spending in select categories.

Cash back, sometimes called cashback, is a type of credit card reward that lets you earn cash back from the money you spend on your credit card. Some credit cards offer a standard percentage of cash back on all purchases, while others offer a higher level of cash back in select categories.

What does cash back mean?

Cash back refers to receiving a percentage of your credit card purchases as cash. For example, The Discover it Chrome card lets you earn 2% Cashback Bonus® at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically.1

How does cash back work on credit cards?

Earning cash back

Each cash back credit card has its own rules, but most offer a standard percentage of cash back on all purchases, and some may offer a higher level of cash back in specified categories. There may be standard bonus cash back categories, or there may be rotating categories that earn a higher percentage of cash back at certain times of the year. There may also be a cap on how much cash back you can earn.

Redeeming cash back

Each cash back credit card may have different rules for cash back redemption, but options may include:

  1. Bank Deposit: Cash back may be deposited directly into your bank account. With Discover, you can redeem your cash back rewards balance in any amount when you redeem for cash, while other credit card issuers may require a minimum rewards balance before you can cash out.
  2. Statement Credit: You may be able to apply your cash back to your credit card balance.
  3. Gift Cards: Some credit card companies allow you to redeem your cash back in the form of gift cards.
  4. Charitable Donations: Some credit card companies allow you to donate some or all of your cash back to a charity of your choosing.

Does cash back expire?

Discover cash back rewards do not expire, but other credit card issuers may have expiration dates for their cash back rewards.2 If your cash back has an expiration date, it’s best to redeem your rewards as soon as you can.

What is Cashback Bonus®?

Cashback Bonus refers to the cash back rewards you earn on your Discover card. Every Discover card earns Cashback Bonus or Miles, but the cash back details are different for each card. You can redeem  Miles for cash or for travel purchases as a statement credit.3 Examples of ways to earn Cashback Bonus rewards include:

The Discover it® Cash Back card allows cardmembers to earn 5% cash back on everyday purchases at different places each quarter like grocery stores, restaurants, gas stations and online retailers, up to the quarterly maximum ($1,500 in purchases) when they activate. Cardmembers also get unlimited 1% cash back on all other purchases.

With the Discover it® Chrome card, cardmembers earn 2% Cashback Bonus® at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter.1 Plus, cardmembers earn unlimited 1% cash back on all other purchases – automatically.

How does Cashback Match® work?

Discover Cashback Match means that we’ll automatically match all the cash back you’ve earned at the end of your first year.4 There is no limit to how much we’ll match.

Cash back shouldn’t mean overspending

Cash back should not be an incentive to spend too much. Instead, you should look at cash back as a bonus for the money you would spend anyway.  The last thing you should do is charge more than you can afford just to get more cash back. If you overspend and fall into debt, you risk running up interest charges that could cancel out the value of your cash back.

Choosing a cash back credit card

The best way to choose a cash back card is to compare rewards categories and see which card gives the most cash back for the categories you spend the most money in.

  • Choose cash back categories that match your spending. Check whether the cash back applies to all purchases, select categories or a combination of both? For example, some cards may return a higher percentage back for groceries than they do for gas. Also, be sure you understand the maximum amounts of cash back you can earn and when and where you can redeem your bonuses.
  • Look beyond the cash back. While the cash back perks are enticing, don’t forget to compare the non-cash back features of the card. If you want to get the maximum benefit from a cash back rewards card, it can be a good idea to pay off your balance each month to avoid paying interest. If you expect to carry a balance, compare the APR’s of the cards you’re considering to see if interest costs will be higher than the cash back you can expect to earn.

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