Tuesday, March 28

How Do Cash Back Credit Cards Work?

Cash back

Credit card companies often promote perks as a way to entice worthy applicants. Cash back programs seem popular, as they deliver a roundabout discount on the card. After all, if someone receives a cash payment or credit, some expenses are offset. Those curious about these credit cards might wish to learn more about how they work. Here’s a short overview.

Available Cash Back Cards

First, it is essential to understand that not all credit cards come with cash back perks. Anyone assuming every card provides this deal would be mistaken. Disappointment might set in when a standard card delivers no cash rewards. So, anyone interested in a cash back deal must apply for a card that specifically offers this perk. Don’t ignore APR rates and annual fees when looking at a card’s costs and features.

How the Cards Work

A cash back credit card returns a percentage of any qualifying purchase someone makes. If the percentage is 2%, a $100 purchase would lead to a $2 credit on the account. Again, the purchases must be qualifying ones. Someone who makes a money transfer using a credit card might not receive any cash back credits because the transaction might not count. Credit card customers should check the terms and conditions on their cards to determine what purchases qualify.

Special Deals and Incentives

Credit card companies could work in cooperative agreements with specific stores or companies. They might increase the cash back rewards for purchases at a particular retail store or restaurant. Or, the credit card company may promote short-term incentives or benefits, such as increasing the cash back amount for any gasoline or grocery purchases for three months. That’s one example of how such a deal could work. They may be others.

Redeeming the Cash Back Bonuses

As the experts at SoFi Invest reveal, cardholders may “elect to redeem points as cash deposited into your SoFi Checking and Savings account.” That is a common way to redeem any cash back points accrued by the card, although customers may apply their cash back credits towards their credit card balance. Other ways to redeem the cash back rewards might be possible, depending on the terms associated with the card.

Cash Back Cards to Gift Cards

One way to redeem money on cash back credit cards involves requesting gift cards. Gift cards allow someone to use a de facto debit account to make purchases at a preferred store.

Using the Card More

Those who strategically increase their cash back credit card use could maximize their rebates. Making all purchases with a cash back card means those cash figures will increase, offsetting costs elsewhere. Shoppers might need to employ additional fiscal prudence, though. The card’s interest rate may wipe out cash back rewards when the customer carries a balance from month to month. Paying the card balance off each month in full could maximize the plan and card’s value.


Cash back credit cards offer a monetary rebate on purchases based on a set percentage. There are different ways to redeem and use these cards.