“Cashback” refers to benefits that credit cardholders may get while purchasing with their card. It differs from the cash back you can get when you use a debit card at the register. It is also separate from using a credit card to take some money from an ATM, a cash advance.
What Is Cashback?
Cashback is a credit card reward in which the cardholder receives a percentage of purchases made with their credit card. It became popular in 1986 when Discover Financial Services introduced a credit card with no annual fees, a high credit limit, and a cashback incentive on selected transactions.
Cashback is like a reward or incentive. It’s primarily used by credit card companies to encourage consumers to make future credit-card purchases. A cashback allows the cardholder to receive a percentage of qualified spending (usually 0.25%-5%).
How You Can Make Money Through Cashback Credit Programs
1. Flare Rate Cards
A flat-rate cashback card gives you the same amount of cash back on every purchase—usually 1.5% or 2%. A card with a higher reward rate will often deliver the most value. Check, however, to see whether the card includes an annual fee or other expenses that would affect the rewards you earn.
You can get a credit card application through Sofi or from your bank, to enjoy the benefits of redeeming cashback points.
2. Bonus Categories or Tiered Rewards Cards
These cards can be identified by their bonus categories. There are dining cards, for example, that provide bonus cash back on restaurant takeout and petrol cards that offer extra money back at gas stations.
Several cash return cards offer levels, such as 2% cash back on dining and 3% on petrol. There may also be a cap on how much extra money you receive every quarter or year. You may generally receive 1% cash back on all non-bonus category transactions.
Although the percentage of every cashback is low, it could still become more significant when the points accumulate. You can use the money you have redeemed to buy something you want or invest the money into investments with low risk and high returns.
3. Rotating Rewards Cards
Rotating category cash back cards, like bonus category cash back cards, offer higher cashback rates on specific types of transactions. These purchasing categories vary every quarter, and cardholders must first activate their rotating bonus categories to earn rewards.
Be aware that certain cards need you to activate a category each quarter or month before you may earn points on purchases in that category. Moreover, because reward categories fluctuate, cards with rotating reward structures may require more attention to the reward systems to maximize the possibility of prizes in each bonus period.
You must look for the best cashback card, depending on how you use your credit cards daily. By choosing the appropriate cashback card that fits your lifestyle, you can accumulate more points with your purchases which could mean more money to be redeemed.
Redeeming Your Cashback Rewards
Consumers should know that certain cashback credit cards have a minimum redemption requirement.
Once again, reading the small print on your credit card is essential. The cashback is often redeemed in the following ways, depending on the credit card terms:
Bank Deposit
Cashback is placed immediately into your bank or savings account.
Statement Credit
The reward is applied immediately to your credit card balance. For example, your credit card balance is $100, and you earn $2 in cashback. In that case, the corresponding payment amount on your statement will be $98.
Gift Cards
The cashback is refunded as a gift card redeemable at participating merchants.
The Bottom Line
Cash return credit cards give cardholders a portion of their purchases back in cash. Some cash return cards provide a flat percentage, but others offer more considerable cashback benefits for certain transactions.
Cash back incentives may be redeemed for bill credits, turned into online shopping credits, or transferred straight into bank accounts; the choice is yours. After all, you’ve earned it.