What is Cash Back and How Does Cash Back Work?

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

Some cash back credit cards give a flat rate of cash back, and others give more cash back for any eligible purchase in select categories.

What does cash back mean?

Cash back is a type of credit card reward that lets you earn cash rewards for the money you spend on your credit card. So, you’ll receive a percentage of your credit card purchases as cash.

Some cash back credit cards offer a standard percentage of cash back on all purchases. Others provide different ranges of cash back for purchases like gas, restaurant, and travel.

How does cash back work on credit cards?

There are a few ways that users can earn cash back on credit card purchases and redeem the accumulated cash value.

Look at a few considerations for earning and redeeming cash back:

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. 

Aside from standard bonus cash back categories, there may be rotating categories or a bonus category that earns a higher percentage of cash back at certain times of the year, like grocery store purchases, drug store purchases or select streaming services.

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Remember, there may be a cap on how much cash back you can earn. Check the policies on your cash back credit cards, or verify with the credit card company at account opening or before making a purchase.

Redeeming cash back

Each cash back credit card may have different rules for cash back redemption. Some standard cash back redemption options include:

1. Bank Deposit. Cash back may be deposited directly into any bank account. With Discover, you can redeem your cash back rewards balance in any amount when you redeem for cash, though other credit card issuers often require a minimum cash back rewards balance before you can cash out on the cash rewards.
2. Statement Credit. You may be able to apply your cash back to pay off your credit card balance. Then you can pay any remaining balance with a debit card or other standard payment method. 
3. Gift Card. Some credit card companies allow you to redeem your cash back in the form of a gift card.
4. Charitable Donations. If your cash back credit card allows, you can donate some or all of your cash back to a charitable partner organization. 

Does cash back expire?

Your Discover rewards never expire¹ but other credit card issuers may have expiration dates for their cash back rewards. If your cash back rewards have an expiration date, it’s best to redeem those cash rewards as soon as you can; otherwise, you may lose the bonus cash accumulated through each eligible purchase. If you don’t want to forfeit your active cash rewards, consider applying them as a statement credit. 

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.

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. There is no limit to how much we’ll match. ⁴

Cash back shouldn’t mean overspending

Cash back shouldn’t be an incentive to spend too much. Instead, it would be best if you looked at cash back as a bonus reward or bonus cash for the money you’d spend anyway. The last thing you should do is charge more than you can afford 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 and negatively impact your credit score. You may also want to double-check the policy on your cash back cards to see if you still earn rewards if you request a balance transfer.

Choosing the best cash back credit card for you

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. This way, almost every purchase you make is an eligible purchase and helps you collect a cash reward.

• Choose cash back categories that match your spending. Check whether the cash back applies to all purchases, select categories, or a combination. For example, some cards may return a higher percentage for groceries than gas. Also, be sure you understand the maximum amounts of cash back you can earn, when and where you can redeem your bonuses, and if your cash back card rewards expire.
• 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 the maximum benefit from a cash back rewards card, it can be a good idea to pay off your monthly balance to avoid paying interest. If you expect to carry a balance, compare the APRs, or Annual Percentage Rates, of the cards you’re considering to see if interest costs will be higher than the cash back you can expect to earn. You should also check the annual fee for the credit card. If the annual fee is higher than the cash reward you expect to earn, you may want to opt for a different cash back credit card.