Yes, you can earn cashback with a credit card, and it comes as a statement credit, deposit to your bank account, or a check
Cashback is a reward your credit card issuer pays you based on what you spend. When you use the card to buy something, the merchant pays the card network a fee (usually 2 to 3 percent of the purchase). The issuer shares a portion of that fee with you as cashback. The amount you earn depends on the card's cashback rate and the category of purchase.
How you receive the cashback varies by card. Most cards deposit it directly into your linked bank account or apply it as a statement credit that reduces your balance. Some cards let you redeem cashback for gift cards, merchandise, or travel bookings, though the value is often lower than taking it as cash. A few cards still mail checks, though this is less common now.
Cashback is not automatic. You have to either request the redemption through your card's app or website, or in some cases it posts automatically once you reach a minimum amount (often $25 or $50). Check your card's terms to see how redemption works for yours.
Key Takeaways
- Cashback rates typically range from 1 to 5 percent depending on the card and purchase category, with higher rates on groceries, gas, or dining and lower rates on everything else.
- You only earn cashback on purchases you make with the card; balance transfers, cash advances, and fees do not earn rewards.
- Most cards require you to manually redeem your cashback through the app or website, though some deposit it automatically once you hit a threshold.
- If you carry a balance and pay interest, the interest charges will almost always exceed the cashback you earn, so cashback works best if you pay your full statement balance each month.
How cashback rates work across different purchase categories
Most cashback cards offer different rates for different types of spending. A common structure is 5 percent on one category (groceries, gas, or dining), 3 percent on a second category, 1 percent on everything else, and 0 percent on cash advances or balance transfers. Some cards rotate which categories earn the higher rate each quarter, which means you have to activate the category in the app to earn the bonus.
A few cards offer a flat rate—usually 1.5 to 2 percent—on all purchases with no categories to track. These are simpler but typically pay less overall if you spend heavily in bonus categories. Cards with rotating categories require you to remember to activate them, or you will earn only the base rate.
The issuer sets these rates and can change them with notice. Read your card's terms to see whether rates are fixed or subject to change, and whether there are spending caps (for example, 5 percent cashback only on the first $1,500 in groceries per quarter).
What purchases earn cashback and what do not
Cashback is earned only on purchases made with the card. This includes everyday spending at stores, restaurants, gas stations, and online retailers. It does not include balance transfers (moving debt from another card), cash advances (withdrawing cash from an ATM), fees (annual fees, late fees, foreign transaction fees), or payments to the card itself.
Some cards exclude certain merchants from earning cashback. For example, a card might not earn rewards at casinos, on cryptocurrency purchases, or at certain government agencies. Check your card's terms or contact the issuer if you are unsure whether a specific merchant or transaction type earns cashback.
If you return an item, the cashback you earned on that purchase is reversed. The issuer subtracts it from your next cashback payout or statement credit.
When cashback makes financial sense
Cashback is only a net gain if you pay your full statement balance each month. If you carry a balance, the interest you pay will exceed the cashback you earn. For example, if you earn 2 percent cashback but pay 18 percent annual interest on a carried balance, you are losing money overall.
Cashback also makes sense only if you would make the same purchases whether or not the card existed. If a cashback card tempts you to spend more than you otherwise would, the extra spending erases the reward value. Use cashback as a bonus on spending you were already planning, not as a reason to buy.
Some cards charge annual fees ($95 to $550 or more). Calculate whether your expected annual cashback exceeds the fee. If you spend $10,000 per year and earn 1.5 percent cashback, that is $150 in rewards—enough to justify a $95 fee but not a $200 one.
How to redeem your cashback
Log into your card's app or website and look for a "Rewards" or "Cashback" section. Most cards show your current cashback balance and let you choose how to redeem it. The most common options are a statement credit (which reduces your next bill), a direct deposit to your bank account, or a check mailed to your address.
Some cards require a minimum balance before you can redeem—often $25 or $50. If your balance is below that, you have to wait until you earn more. A few cards automatically deposit cashback once you hit the threshold, so you do not have to do anything.
If you redeem for a gift card or merchandise instead of cash, the value is often lower. For example, $100 in cashback might be worth only $90 in Amazon credit. Stick with cash or statement credit unless you were already planning to buy that item.
Comparing cashback cards to other reward types
Credit cards also offer rewards in the form of points or miles instead of cashback. Points are usually redeemed for merchandise, travel bookings, or statement credits at a rate set by the issuer (for example, 100 points = $1). Miles are points earned specifically for travel and are redeemed for flights, hotels, or car rentals.
Cashback is simpler because its value is fixed and immediate—1 percent cashback is always worth 1 percent of your purchase. Points and miles can be harder to value because redemption rates vary and the issuer can change them. However, if you travel frequently and redeem miles strategically, you may get more value from a travel card than from a cashback card.
The best choice depends on your spending habits. If you spend most of your money on everyday purchases and want straightforward rewards, cashback is usually the best fit. If you travel often and want to maximize the value of your rewards, a travel card may be better.
Cashback and your credit score
Using a cashback card does not hurt your credit score as long as you pay on time and keep your balance low relative to your credit limit. In fact, using a card responsibly and paying it off each month can help your score by showing lenders you manage credit well.
Your credit score is based on payment history (35 percent), amounts owed (30 percent), length of credit history (15 percent), credit mix (10 percent), and new credit inquiries (10 percent). Opening a new cashback card triggers a hard inquiry, which temporarily lowers your score by a few points. But if you use the card and pay it off, the positive payment history will outweigh that dip over time.
Avoid the temptation to carry a balance to earn cashback. The interest charges and damage to your credit from a high balance far outweigh any reward.
Frequently Asked Questions
Do I have to spend a certain amount to earn cashback?
No. You earn cashback on every purchase you make with the card, no matter how small. However, you may have to reach a minimum balance (usually $25 to $50) before you can redeem it. Some cards also have spending caps on bonus categories—for example, 5 percent cashback only on the first $1,500 in groceries per quarter.
Can I earn cashback on online purchases?
Yes, as long as the online retailer is not excluded from earning rewards. Some cards earn cashback on all online purchases, while others earn higher rates only through their shopping portal. Check your card's app or website to see whether the retailer you want to use earns rewards and at what rate.
What happens to my cashback if I close the card?
You can still redeem any cashback balance you have earned, even after closing the card. However, you have a limited window to do so—usually 30 to 90 days after closure. After that, the issuer may forfeit the balance. Redeem before you close the card to avoid losing it.
Can I transfer cashback to another card or account?
No. Cashback is tied to the card that earned it and can only be redeemed through that card's redemption options. You cannot transfer it to another card, another person's account, or a different financial institution.
Is cashback taxable income?
The IRS generally does not treat cashback as taxable income because it is considered a rebate or discount on your purchase, not a payment for services. However, if you earn a very large amount of cashback (which is rare), the issuer may send you a tax form. Consult a tax professional if you have questions about your specific situation.