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Reply To: How do cash back credit cards work?


Cash back credit cards are just one type of rewards credit card, but do you know how they work? We’ll help you find answers to the important question: How can you get cash back on a credit card?

If you have a cash back credit card, you may be able to earn rewards each time you swipe, dip, tap or otherwise pay for a purchase with your card.
Cash back credit cards can be quite lucrative and offer substantial rewards over time. If you’re tired of just paying your credit card bill and want your credit card to pay you, read on to learn about how you might be able to get cash back from credit card purchases.

How does cash back work?
Even though they’re just one type of rewards credit card, cash back credit cards are among the most popular — because they pay you back in cash rewards. Here’s a basic rundown of how they work: Every time you use your card for an eligible purchase (as defined by the card’s issuer), the issuer pays you a percentage of your purchase price back at the end of the statement period or billing cycle.

For example, most cash back rewards cards pay somewhere around 1% to 2% of your purchase in cash back, with some paying as much as 5% cash back. If you have a flat-rate 1% cash back card and spend, say, $1,000 over the course of a statement period (about one month), at the end of the statement period you would have earned $10 cash back.

Miranda Marquit, a credit card expert and personal finance journalist based in Idaho Falls, Idaho, loves that cash back cards can help you save on every eligible transaction. According to Marquit, it’s as though your purchases are automatically discounted every time you make an eligible purchase with a cash back card, since you can earn a percentage back from that purchase.