At a Glance
Getting cash back on a credit card is a huge perk of having a card. Not only can you earn cash back rewards, which gives you money back on each purchase you make, but there are also ways to access cash using your credit card if you need it.
In this article, learn more about:
How to use cash back credit cards
Cash back credit cards allow you to earn a small percentage back on all of your spending. When you make a purchase with a cash back credit card, you’ll receive a certain amount back depending on the type of card you have and the category of your spending.
Using a credit card to earn cash back rewards
When you have a cash back credit card, simply use the card on any purchase, especially those that align with bonus categories and higher rewards rates. As you spend, you’ll earn cash back.
Most of the time, rates range from 1% to 5%. So for example, if you have a card with a 2% cash back rate, and you spend $100, you’ll get $2 back. While this may not seem like much, rewards can add up over time.
Maximize your rewards and earn as much as you can by:
- Choosing a card that fits your spending habits
- Knowing the terms and conditions of the card
- Keeping track of bonus categories and rewards rates
- Timing your spending to align with the best rates
Using a balance transfer check to add cash to your checking account
Sometimes, you can use your credit card to do a balance transfer via a balance transfer check.
A balance transfer typically means moving debt from one creditor (typically a credit card) to another credit card. Ideally, your new card has a lower interest rate than the other debt, which will help save you money and you can pay off your debt faster.
In some cases, you’re able to “transfer” a balance into a qualifying checking account, which essentially means you’re using your credit card to get cash. Keep in mind that you could be charged a balance transfer fee, which is usually a percentage of the amount you transfer. Balance transfers also start accruing interest right away.
It can take a few days for the cash to appear in your checking account, so if you need funds quickly, this may not be a great option. However, if your balance transfer APR is lower than a cash advance APR, it may be worth it.
What is a credit card cash advance?
If you need funds quickly, you may consider getting a cash advance. A cash advance allows you to use your credit card to get a short term cash “loan,” typically at a bank or an ATM. You’ll borrow a certain amount of money against your credit card’s line of credit.
Getting a cash advance with a credit card
A cash advance gets you funds quickly, but there are some downsides:
- There are usually cash advance fees, which are a certain percentage (like 3% or 5%) of the amount you withdraw.
- Your card may have a higher cash advance APR than purchase APR, so you’ll accrue at a higher interest rate. Plus, the cash advance will likely start accumulating interest immediately.
- You must create a PIN to get a cash advance at an ATM. Otherwise, you won’t be able to complete the transaction.
Because of interest rates and fees, a cash advance should be avoided if possible. But, if you need cash now and don’t have access to other alternatives, it’s an option.
Difference between cash back and cash advance
- Cash back: These are “rewards” you earn when you use your credit card. For each purchase you make, you’ll earn a small percentage of the money back. The rate of the reward depends on the type of card you have, and the category of the purchase.
- Cash advance: A cash advance is basically a “loan” against the credit limit on your credit card. You can use your card to get cash back, but you’ll likely be charged a cash advance fee and will be subject to a higher interest rate on the withdrawal, which starts accruing immediately.
The biggest difference between cash back and cash advance is while they both give you cash, cash advances will actually cost you money while cash back is just additional dollars in your pocket.
How cash back rewards work
There are three types of cash back credit cards to choose from based on your needs and spending:
- Flat-rate: These cards have a flat, or fixed, rewards rate. The rate, which is usually 1-2%, is the same for any type of purchase. These programs are the simplest because you don’t have to keep track of anything, and can just earn as you spend.
- Fixed bonus category: These cards have additional bonus categories that earn a higher rewards rate. For example, they may offer 3-5% back in categories like gas, dining, or groceries. The categories do not change. Then, you’ll earn a smaller rate back on all other purchases outside of the categories.
- Rotating bonus category: These are similar to fixed bonus categories, except for the category that earns the higher rate changes throughout the year, typically every three months. For example, January through March may have 5% back on gas and dining, but April through June may be 5% back on home improvement stores and groceries.
These programs are the most complex because you have to keep track of which categories offer the highest rates through the year in order to maximize your cash back.
How can I redeem my cash back rewards?
Most cash back credit cards offer several ways you can redeem your earned cash. These include:
- A paper check mailed to you
- Direct deposit into your checking or savings account
- Statement credit, allowing you to put your earned cash toward paying off your credit card bill, lowering the final amount you have to pay
- Online or travel purchases via an online marketplace operated by the card issuer
- Gift cards for certain stores or brands
Cash back rewards vs. cash back at the register
Unless you need physical cash, using a rewards credit card to make purchases is likely your best option.
You earn cash back through the purchases you make with your credit card. You can redeem these rewards in a variety of ways, but they do not add to your outstanding credit card balance and you don’t need to repay them. They are essentially free money for using your card.
However, using your debit card to get cash back at the register is essentially making a withdrawal from your bank account. The total transaction amount includes your purchase, and the amount of cash back you select. For example, if your purchase is $50 and you want $25 cash back, your total is $75.
You’re paying for the cash during the transaction, but you’re getting some of it back in cash.
Keep in mind that most places charge fees when you get cash back at the register, which increases how much you owe.
Can you get cash back on gift cards?
It’s unlikely you’ll be able to get cash back on a gift card. Cash cannot be withdrawn from a gift card, and you can’t get cash back during a purchase transaction.
The only way to get cash for a gift card would be to sell it to a gift card reseller, but it can be tricky to ensure you’re not getting scammed.
On the other hand, if you have a prepaid card, you may be able to get cash back as if you were using a traditional debit card. Just make sure you have the PIN, which allows the card to be used as a debit transaction.
How to redeem credit card points?
There are multiple ways you can redeem credit card rewards, including getting a statement credit, being mailed a paper check, direct deposit into your bank account, online or travel purchases, or through gift cards.
Are cash back rewards right for me?
To decide whether cash back rewards are right for you, take a look at your spending habits and financial needs. If you are interested in earning cash back on your purchases, considering a cash back credit card that has better rewards rates in your highest spending categories may be a good idea. Keep in mind having an excellent credit score can help you get approved, and qualify for a lower interest rate.
Do I need a PIN to get cash back on a credit card?
Yes, you need to have a PIN to get cash back on a credit card if you want to use an ATM. This helps verify you’re the card owner. If you don’t have one, or can’t remember it, you won’t be able to get cash back. Some issuers let you request one online through your credit card account profile, but it could take several days to mail to you.
How to get cash from a credit card at an ATM?
Most issuers allow you to take out a cash advance using an ATM. Through this process you can withdraw cash from an ATM as if you were using a debit card, but instead of taking the money out of your bank account, it shows up as a charge on your credit card. In most cases you need a PIN to complete this transaction.
Can you get cash back at stores with a credit card?
No, you are not able to use your credit card to get cash back at stores. You can only do this at an ATM. To get cash back at a store, you’ll have to find an eligible store and use a debit card.
Are there limits to cash back rewards on credit cards?
Some cards set limits on rewards you can earn. For example, you can only earn $1,500 back in the “gas” category. These limits could be quarterly or annually. However, there are some cards that do not set limits, or only have limits on some categories. For example, there may be a limit on the “dining” category, but not on the 1% back on all non-category purchases.
What are credit card points and how do they work?
Cash back credit cards are only one type of credit card reward. Another type is credit card points. When you spend money using your credit card, you earn points. Then, you can redeem those points for things like travel, merchandise, cash back, gift cards, donations, or other things. This can be done through your online account. In most cases, points are worth at least $0.01 when redeemed.
Do you still get cash back rewards when you return the item you purchased?
If you return an item to a store, the cash back you earned from that purchase will be deducted from your total rewards earned. This will show on your next credit card statement.
What stores will give you cash back at the register with a debit card?
Not all stores will give you cash back at the register with a debit card, so you must find those that are eligible. There are also some limits to how much you can get back. Some examples include Costco, Kmart, Target, Walmart, Walgreens, CVS, and Rite Aid.