what is cashback on a credit card
Cashback on a credit card is a rewards feature where the card pays you back a small percentage of what you spend, usually as money you can use to reduce your bill or move to your bank account. In practice, it works like a built‑in discount on eligible purchases as long as you pay attention to the rules for how it’s earned and redeemed.
What cashback actually is
- Cashback is a rebate: the issuer returns a portion of each eligible purchase, often in the range of about 1%–3%, and sometimes up to 5% or more in special categories.
- It is a type of credit card rewards, similar to points, but denominated in cash value instead of miles or points.
How cashback works day to day
- Every time you make an eligible purchase, your card tracks the amount of cashback you’ve earned based on that transaction’s reward rate.
- The rewards usually post at the end of your billing cycle and accumulate in a rewards balance you can redeem later, rather than appearing instantly after each swipe.
Ways you can redeem cashback
- Common redemption options include: statement credit (reducing what you owe), direct deposit to a bank account, paper check, or sometimes gift cards.
- Many people treat cashback as an automatic discount: for example, spending 100 with a 2% cashback card effectively nets 2 back in rewards.
Main types of cashback cards
- Flat‑rate cards: the same rate (for example, 1.5% or 2%) on all purchases, which keeps things simple.
- Category or tiered cards: higher rates (like 3% or 5%) in select categories such as groceries or gas, and a lower base rate on everything else.
Limits, exclusions, and smart use
- Some cards cap how much spending can earn higher rates, change bonus categories quarterly, or offer higher “intro” rates for a limited time.
- Certain transactions (cash advances, balance transfers, gambling, and some “cash‑like” purchases) usually do not earn cashback, and carrying a balance with high interest can easily outweigh any rewards earned.
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