Cash Back Credit Cards 101

"Cash back" credit cards can help you earn cash rewards as you use your credit card for purchases. How much you can earn and under what conditions depend on the credit card's terms and conditions, but for consumers who tend to pay their statement balances in full, cash back credit cards can provide significant financial benefits. Check out the answers to these commonly asked questions to help figure out if a cash back credit card is right for you.

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.

Cash back allows a cardholder to earn cash rewards when he or she uses the credit card for purchases. Some cash back credit cards offer cash back rewards for payments based on purchases made with the card. Other cash back credit cards offer accelerated cash back in certain or rotating categories with a base earn on other purchases. Depending on your credit card program, you may need to enroll to earn category cash back.

Keep in mind that not every purchase may earn cash back. Balance transfers, for example, may not be eligible. As with all credit cards, you need to make sure to read the terms and conditions and consider how you will use the card when determining if it's right for you.

That depends on the program. Some credit card issuers award cash back every month. Others may award them quarterly or annually. Others require you to accrue a certain amount of cash (i.e., $25 or $50) back before you can redeem it.

When redeeming cash rewards, you generally have a few options:

  • 1. You can redeem accumulated cash back for a statement credit. This way, you can apply earned cash back toward your credit card balance.
  • 2. You can request a bank deposit or paper check. Ask your credit card issuer to deposit your cash back into a linked bank account, or request a paper check.
  • 3. You can purchase a gift card. Ask your credit card issuer about redeeming your cash back rewards balance toward a store-specific gift card.

Some credit card issuers may allow you to set a threshold - for instance, $50 - that automatically issues you cash back. If you prefer to let cash rewards accumulate and opt for the on-demand approach, pay attention to your credit card's terms and conditions to ensure your rewards won't expire.

While most cards don't charge a fee to redeem cash back rewards, there may be an annual fee on the card. Consider the fee carefully to ensure it doesn't cost more than the cash back rewards you're likely to earn. Pay attention to the interest rate, especially if you carry a balance, as a card with a high interest rate could also mitigate the benefit of earned cash rewards.

You can earn cash rewards from your very first purchase - no matter how big or small that purchase is, and assuming the transaction is eligible to earn cash back (remember, balance transfers, interest charges, and late fees are not purchases and, thus, typically don't qualify for cash back). There also may be a minimum cash back balance you have to earn before you can redeem your rewards. For instance, you may need to earn $25 in cash back before you can request redemption.

That depends on the credit card, so be sure to carefully read the terms and conditions. Some offer unlimited cash back. Others may have a cap on total cash rewards or have maximum rewards in specific categories.

Check the terms and conditions of your card for the consequences of late payments. Terms on earning and redeeming points when bills are paid late or if an account is no longer open vary by card issuer.

Some cards offer a higher rate for specific types of purchases, such as groceries or restaurants. Depending on your card program, you may need to enroll to receive the accelerated earn. There may also be a quarterly maximum earn on those purchases.

Many credit card options allow you to redeem your cash rewards for a statement credit.

Your rewards may expire under certain conditions, so check the terms and conditions of your cash reward program. For instance, your rewards could expire if you don't make eligible purchases or payments for 12 months.

Some cash back cards require that you accrue a minimum level of rewards before you can begin to redeem your cash back, so make sure to check the terms and conditions of your cash reward program.

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