What Is A Cash back Credit Card And How It Works


Have you ever asked yourself, what is a cash back credit card? Well, cash back credit cards operate by giving cardholders a rebate whenever a purchase is made with the card. Besides, these rewards can appear as miles or points gathered, however, several credit card users enjoy cashback rewards.

There is nothing as easy as getting a little cash back on every spending that is put on your credit card and this is what makes them appealing to millions of customers. A cash back credit card comes in a variety of categories – tiered rewards, bonus category, and the flat percentage cash back cards. They all pay you back.

The tiered rewards and bonus category cards give more rewards but are ready to do more work to maximize cash back in selected spending categories. The flat percentage cards on the other hand are good for the ‘set it and forget it’ customers. With these, you can attempt the question, what is a cash back credit card whenever asked.

What Is A Cash back Credit Card
What Is A Cash back Credit Card

What Is A Cash Back Credit Card ?

A cash back credit card is a card that gives cash rewards after a purchase is made. Each time you purchase with a cash back credit card, you get cash credit for a percentage of whatever is purchased.

For instance, it’s possible to earn 1 percent to 2 percent on all your purchases. Some cards that give cash back rewards might also give a bigger payback whenever a purchase is made on certain categories – earning up to about 3 percent cash back at gas stations and grocery stores.

However, certain credit cards give cash back whenever you spend on particular categories, usually; these changes from one quarter to another quarter. For example, you could earn a 5 percent return on groceries this quarter and in the coming quarter there is a reversal to the standard 1 percent rate and another category like restaurant get 5 percent.

How Do I Get Cash Back Rewards From My Credit Card?

Immediately after a purchase using your cash back credit card, it easy to claim the cashback accrued to you.

Several operators will give the option of getting your reward via a direct deposit into your bank account, for a statement credit, or through a check directly sent to your mail. Also, other reward credit cards offer points that you can claim for cash back or other options like travel reservations, merchandise, gift cards, or even donate the rewards.

Besides, these cash rewards could assist you to remain on top of the repayment of your credit card bills because your cashback will be instantly applied to your credit card balance. Also, it could assist in boosting your credit score.

How Cash Back Credit Card works

How does the cashback credit work? Cash back is majorly a rebate of a percentage of what is purchased through the card.

Operators of these cash back credit cards can pay cash back because the merchants offer an interchange fee on every transaction. Daniel Mahoney, a certified financial planner in Atlanta said when you pay $100 to a merchant through the credit card; the merchant gets $97 only.

For instance, a TV that is sold for $700 would offer 2% cashback ($14). However, the merchant would offer a transaction fee of about $21 when the credit card is used to make payment. Mahoney also said that rebates or rewards might be funded through deals between specific merchants and credit card operators. A good example of this is cashback gotten by using card-linked offers.

On the flat-rate cash back credit cards, all purchases get the same percentage of cashback while on the tiered bonus cards and category bonus cards, the more you spend the more cash that would be earned.

In providing answers to the question, what is a cash back credit card? There is a need to know how card issuers identify the type of spending that would qualify for a certain percentage of cashback. They make use of Merchant category codes – which are four-digit numbers that denote business categories like the grocery store, gas station, and others. Merchant category codes are tools used by credit card issuers to track and classify purchases.

Choosing A Cash Back Credit Card

Your choice of the card should be dependent on which card you want to use at a particular time. Some certain cards offer more bonuses on specific spending or rotating bonus categories, so you must always have it in mind to make use of the right card at the right place and time.

Besides, there is a need to know how your purchases are categorized or better still enroll manually in a particular bonus category every quarter to earn the benefits of some cards.

Also, several category bonus cards and tiered cards offer only 1% cashback on general purchases. Therefore, except you spend more on the card bonus categories you might not harness the maximum reward on most of your spending.

Giving answers to what is a cashback credit card would be incomplete without examples of a cash back credit card. So, the following are cash back cards operating in the marketplace;

Citi Double Cash Card with 18 months BT offer

It gives one of the highest cash backs of all purchases. Customers get 1% when you make a purchase and an additional 1% when payment is made totaling 2% cashback. New users get an APR of 0% for 18 months on all balance transfers with a $5 or 3% balance transfer fee.

Blue Cash Preferred Card from American Express

The Blue Cash Card offers top levels cashback on most common household purchases. Users get 6% cashback on US streaming subscription and also $6,000 yearly in purchases from supermarkets in the US (1% bonus inclusive). 3% cash back is also earned at US gas stations and selected transit like trains, buses, parking, tolls, rideshares, and taxis.

Also, spending $1,000 within 3 months of account opening qualifies you for a $250 statement credit; however, there is a yearly fee of $95 for making use of this card.

In conclusion, when next you see the question, what is a cash back credit card? The first thing that should come to your mind is having more cash in your pocket when purchases are made. So, understand how they work and the available best cards that would suit your needs. Are you still asking what is a cash back credit card?  


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