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What Is Cash Back?

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

The term “cash back” likely brings to mind credit card rewards, but there’s also a second definition in reference to receiving cash back during a credit card transaction at a retail store, as well. Each of these can have an impact on your financial life if used correctly and at the right time, but you must know how each works before that can happen.

What Is Cash Back?

The most commonly recognized style of cash back is what you have likely seen advertised as cash back credit cards. This specifically refers to earning a certain percentage of your credit card purchases back as cash rewards. However, cash back rates vary widely, as do the categories that they apply to.

You usually won’t see credit card cash back rates higher than 5%, while 1% is the typically minimum you will earn. Cash back categorization is significantly more complex though, with a merchant category code (MCC) system being the main organizing force.

MCCs run the entire cash back industry, as they ultimately decide how each purchase you make is classified. These designations coincide with cash back rates set by the issuer of your card. For example, you could use your card for a $50 dinner at a steakhouse, which has a “restaurant” code. If your card offers a 2% cash back rate on all spending at restaurants, you’d earn $1 cash back.

Familiar alternatives to cash back include point- and mile-based programs, though many cardholders are partial to cash back. Cash back affords cardholders an independence that is ideal, since you can redeem it for nearly anything.

Popular Cash Back Credit Cards

What Is Cash Back?

Discover, American Express, Mastercard and Visa all have cash back rewards credit cards available for prospective cardholders. Each abide by their own set of regulations, though card issuers decide on cash back rates, promotions and bonuses. Chase, Wells Fargo, Citi and Capital One represent some of the most active card issuers on the market today.

Below are a few examples of what you can expect to earn when looking for a cash back credit card:

Cash Back Credit Cards
Card Name Cash Back Rates Cash Back Bonus
Costco Anywhere Visa® Card by Citi 4% cash back on eligible gas up to $7,000 per year, 3% cash back on eligible travel and restaurants, 2% cash back in-store and online with Costco and 1% cash back elsewhere None
Bank of America® Cash Rewards Credit Card 3% cash back on gas, 2% cash back at grocery stores and wholesale clubs and 1% cash back on all other purchases – up to a quarterly cap of $2,500 in combined grocery/wholesale club/gas purchases $150 bonus cash back for spending $500 over your first 90 days
Capital One® Quicksilver® Cash Rewards Credit Card Unlimited 1.5% cash back everywhere $150 bonus cash back when you spend $500 during your first three months
Citi® Double Cash Card 1% cash back on your purchases and another 1% cash back when you pay your bill None
Capital One® Savor℠ Cash Rewards Credit Card Unlimited 3% cash back on dining, 2% cash back on groceries and 1% cash back elsewhere $150 cash back bonus for $500 spent over your first three months
TD Cash Visa® Credit Card 3% cash back on dining, 2% cash back at the supermarket and 1% cash back on everything else $150 cash back bonus for spending $500 over first 90 days (offer expires July 2, 2018)
USAA Preferred Cash Rewards Visa Signature® Unlimited 1.5% cash back on everything None
Blue Cash Everyday® Card from American Express 3% cash back on up to $6,000/year at U.S. supermarkets (then 1%), 2% cash back at U.S. gas stations and select U.S. department stores and 1% cash back on other purchases $150 bonus cash back for spending $1,000 over your first three months

Getting Cash Back at Retailers 

What Is Cash Back?

Picture this: you’re buying some groceries on a Sunday morning, but know you’ll need $40 cash to fill up your car with some gas later. You could swipe your debit card at the supermarket and then head over to the ATM. Or you could ask for cash back right from the cashier, eliminating the extra errand.

The above situation represents the alternative definition of cash back. It’s ultimately the use of a cash register as if you were swiping your debit card at the ATM. When you request cash back from a cashier, your bank account will be charged the amount you asked for. This enables the funds to be pulled from your account so the cash can be placed in your hand.

Although this generally only applies to debit cards, there are a few exceptions that allow credit cards to see similar usage. Discover® allows cardholders to ask for cash back at more than 50 large retail stores without a transaction fee.

Tips to Help You Decide If Cash Back Is Right for You

  • If you’re someone who wants freedom when spending their credit card rewards, you may prefer cash back to a points-based reward system. However keep in mind that cash back rates are sometimes less than those in point-based programs.
  • Many credit cards offer redemption bonuses if you redeem right to your bank account. So anyone who does most or all of their banking with one specific bank could see major cash back perks. Just be sure to check whether your bank offers this benefit.

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Advertiser Disclosure: The card offers that appear on this site are from companies from which SmartAsset.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). SmartAsset.com does not include all card companies or all card offers available in the marketplace.

Photo credit: ©iStock.com/SIphotography, ©iStock.com/MJ_Prototype, ©iStock.com/Juanmonino

Chris Thompson, CEPF® Chris Thompson is a credit card expert at SmartAsset. He has reviewed hundreds of credit cards and loves helping people find the one that best matches their financial needs. Chris is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society of American Business Editors and Writers. He graduated from Montclair State University where he received the Journalism Achievement Award. Chris’ articles have been featured in places like MSN and Bleacher Report. He lives in New Jersey and is a Mets, Jets and Nets fan.
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