In a cash back program card holders receive cash back depending on the amount they had spend on the credit cards. Cash back credit card holders typically receive a cash back of 0.5% – 2% of their net expenditure as an annual rebate. This cash back is either credited to the credit card account or paid to the card holder separately.

How do cashback credit cards work?

Every time cash back credit card holder uses the card, they earn a percentage of the amount in the form of cash back depending on the amount they’ve spent. For example: If a user’s credit card offers 2% cash back then on spending $100, that user will earn a cash back of $2.

It’s better to use a cashback credit card for everyday purchases rather than using cash or a debit card. Debit cards typically offer little-to-zero rewards so choose the best cash back credit cards to get cash back as a perk. Cash back credit cards are great for improving your credit or establishing credit if you don’t have any. You will need good credit in order to buy a house, get a job and improve your lifestyle.

Things to know about cashback credit cards

  • Normally cash back is generally paid annually. There are some cards that give cashback on a monthly basis.
  • Cash back credit cards are more beneficial to consumers who pay their bill every month.
  • Cashback credit cards usually have higher annual percentage rate. If you don’t pay out the full balance every month, extra interest will be reflected in your statement.
  • Most of the consumers do not know that their cashback credit cards charge higher fees to the vendors who accept them.
  • Credit cards come with a limit or cap i.e., how much cash back you can earn on purchases through quarterly reward programs or promotions. For example, most of the credit cards offer 5% cash back at gas stations up to $1,500 for the quarter and 1% cash back on all other purchases. So make sure to read the terms and conditions to take full advantage of your card’s cash back rewards program.
  • Different credit cards have different redemption rules. Some cards guarantee your cash back rewards will never expire and in other cards cashback rewards expire within a year or two.