How Does Credit Card Cash Back Work?
How you earn it
Cash back returns a percentage of each purchase. Three structures exist: flat-rate cards pay the same on everything (commonly 1.5 to 2 percent); category cards pay more in fixed areas like groceries or dining; and rotating cards pay a high rate (often 5 percent) in categories that change each quarter, usually with an activation step and a spending cap.
How you redeem it
Most issuers let you take cash back as a statement credit, a direct deposit, or a check, and sometimes as gift cards or to cover purchases. A statement credit reduces your balance but is not a payment, so you still owe at least the minimum. Some cash back is technically points worth 1 cent each; see cash back, points, and statement credits.
Making it worth it
Cash back is the simplest reward and never loses value, but two rules keep it positive: pay in full every month, since no cash back rate beats credit card interest, and match the card to your spending (a flat card for simplicity, category cards if your spending concentrates). Compare options in best cash back cards.
Frequently asked questions
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