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What is Cash Back and How Does Cash Back Work?
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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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Chrome Disclosure: You earn a full 2% Cashback Bonus® on your first $1000 in combined purchases at Gas Stations (stand-alone), and Restaurants each calendar quarter. Calendar quarters begin January 1, April 1, July 1, and October 1. Purchases at Gas Stations and Restaurants over the quarterly cap, and all other purchases, earn 1% cash back. Gas Station purchases include those made at merchants classified as places that sell automotive gasoline that can be bought at the pump or inside the station. Gas Stations affiliated with supermarkets, supercenters, and wholesale clubs may not be eligible. Restaurant purchases include those made at merchants classified as full-service restaurants, cafes, cafeterias, fast-food locations, and restaurant delivery services. Purchases must be made with merchants in the U.S. To qualify for 2%, the purchase transaction date must be before or on the last day of the offer or promotion. For online purchases, the transaction date from the merchant may be the date when the item ships. Rewards are added to your account within two billing periods. Even if a purchase appears to fit in a 2% category, the merchant may not have a merchant category code (MCC) in that category. Merchants and payment processors are assigned an MCC based on their typical products and services. Discover Card does not assign MCCs to merchants. Certain third-party payment accounts and digital wallet transactions may not earn 2% if the technology does not provide sufficient transaction details or a qualifying MCC. Learn more at Discover.com/digitalwallets. See Cashback Bonus Program Terms and Conditions for further detail.

Rewards Redemption: Your rewards never expire. We will credit your account or send you a check with your rewards balance if your account is closed or if it has not been used within 18 months.

Redeem Miles: Starting at 1 Mile, you can redeem your Miles as a credit to your account to pay for all or part of your bill, for cash as an electronic deposit to your bank account, or for a credit for Travel Purchases made on your statement within the last 180 days. Travel Purchases include airline tickets, hotel rooms, car rentals, travel agents, online travel sites, commuter transportation, restaurants and gas stations. Restaurant purchases include those made at merchants classified as full-service restaurants, cafes, cafeterias, fast-food locations, and restaurant delivery services. Gas Station purchases include those made at merchants classified as places that sell automotive gasoline that can be bought at the pump or inside the station. Gas Stations affiliated with supermarkets, supercenters, and wholesale clubs may not be eligible.

Even if a travel purchase on your statement appears to fit in a Travel Purchase category, the merchant may not have a merchant category code (MCC) in a Travel Purchase category. Merchants and payment processors are assigned an MCC based on their typical products and services. Discover Card does not assign MCCs to merchants. Certain third-party payment accounts and digital wallet transactions may not be eligible for credit redemption if the technology does not provide sufficient transaction details or a qualifying MCC. See Terms and Conditions for more information.

Cashback Match: We’ll match all the cash back rewards you’ve earned on your credit card from the day your new account is approved through your first 12 consecutive billing periods or 365 days, whichever is longer, and add it to your rewards account within two billing periods. You’ve earned cash back rewards only when they’re processed, which may be after the transaction date. We will not match: rewards that are processed after your match period ends; statement credits; rewards transfers from Discover checking or other deposit accounts; or rewards for accounts that are closed. This promotional offer may not be available in the future and is exclusively for new cardmembers. No purchase minimums.

Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

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