Most Common Questions About Cashback (aka cash back)
1. What Does Cashback Mean?
Cashback refers to a perk that credit card companies, and some debit card companies, offer to their cardholders. With cashback, you earn back a percentage of the money you spend on your card.
2. How Does Cashback Work?
When you make a purchase with a cashback card, you earn a percentage of that purchase as a reward. This cashback is typically credited to your account and can be used to offset future purchases, redeemed for gift cards, or even cashed out.
Types of Cashback Cards
3. Are There Different Types of Cashback Credit Cards?
Yes, there are several types of cashback cards, including flat-rate cards, which offer the same cashback rate on all purchases, and tiered or bonus category cards, which offer higher rates for certain categories of spending.
4. Do Debit Cards Offer Cashback?
While less common than credit cards, some debit cards do offer cashback rewards. These are typically linked to specific retail purchases. Read more info about debit cards and cash back rewards from our same kind of article as this that specifically focuses on Debit cards.
Maximizing Cashback Rewards
5. How Can I Maximize My Cashback Rewards?
Maximizing cashback rewards involves using your card regularly and strategically. This could mean using a card with high grocery cashback for all your supermarket purchases or linking your card to cashback apps like Benjamin for extra rewards.
6. Can Cashback Exceed the Amount I Spent?
No, cashback is a percentage of your spending, so it cannot exceed the amount you spent. However, some cards offer introductory bonuses that might make it seem like you're earning more than you spent initially.
Redeeming Cashback
7. How Do I Redeem My Cashback Rewards?
Redemption methods vary by card issuer. Common methods include statement credits, checks, gift cards, or deposit into a bank account. Check your card's reward program details for specific information.
8. Do Cashback Rewards Expire?
Some cashback rewards may expire if not redeemed within a certain time frame, while others don't. It's important to read your card's terms and conditions to understand its policy.
Cashback vs. Other Rewards
9. How Does Cashback Compare to Points or Miles?
Cashback is typically more straightforward and flexible than points or miles. You earn money back on your purchases, which can be used however you like, while points or miles are often tied to specific redemption options.
10. Which is Better: Cashback or Travel Rewards
This depends on your spending habits and preferences. If you travel frequently, a travel rewards card could offer better value. However, if you prefer simplicity and flexibility, a cashback card might be a better choice.
Cashback Apps
11. What are Cashback Apps?
Cashback apps like Benjamin allow you to earn additional cashback on top of what you earn with your credit card. By linking your card to the app, you can earn extra cashback at participating stores.
12. How Do Cashback Apps Work?
When you make a purchase at a participating store using a card linked to a cashback app, you earn additional cashback. This cashback is typically credited to your account within the app and can be cashed out.
13. Do Cashback Apps Cost Anything?
Many cashback apps like Benjamin, Rakuten and Dosh are free to use, but some may have premium features available for a fee. For example some apps require you to sign up for the paid program if you want to cash out your money quicker or with smaller treshold.
Potential Pitfalls of Cashback
14. Are There Any Downsides to Cashback Cards?
While cashback cards can be rewarding, they can also encourage unnecessary spending. Always remember that the goal is to save money, not spend more. Additionally, some cashback cards have annual fees or high interest rates that can negate the benefits if you're not careful.
15. Do Cashback Rewards Affect My Taxes?
In most cases, cashback rewards are considered rebates, not income, so they are not taxable. However, in some situations, such as when a cashback reward requires a certain level of spending, it may be taxable. It's always best to consult with a tax professional if you're unsure.
16. Can I Lose My Cashback Rewards?
Yes, in certain situations you can lose your cashback rewards. For example, if your account becomes delinquent, if you return a purchase, or if you close your account before redeeming your rewards.
Secured Credit Cards and Cashback
Secured credit cards have become more and more popular because they give people a way to start building their credit. We have written two comprehensive articles about secured credit cards, where you find everything you need to know about them.
Everything You Need To Know About Secured Credit Cards
25 Most Common Questions About Secured Credit Cards Answered
17. Do Secured Credit Cards Offer Cashback?
While not as common as with regular credit cards, some secured credit cards do offer cashback rewards. This can be a good way to build credit while earning rewards.
18. How Do Cashback Rewards on Secured Credit Cards Work?
Cashback rewards on secured credit cards work the same way as they do on regular credit cards. You earn a percentage of your purchases back as cashback, which can be redeemed according to your card's rewards program.
Advanced Cashback Strategies - Make The Most Of Your Earnings
We have created comprehensive article how you can maximize your cash back-rewards. You should check out the article if you want to know all the tricks and tips about it.
19. What is Cashback Stacking?
Cashback stacking involves using multiple cashback offers to maximize rewards. This might mean using a cashback credit card in conjunction with a cashback app like Benjamin, or using multiple cashback cards for different types of purchases.
20. What are Rotating Categories and How Can They Boost My Cashback?
Some cashback cards offer higher rewards rates for certain spending categories that change each quarter. By aligning your spending with these categories, you can earn more cashback.
21. What is a Cashback Match?
Some card issuers offer a cashback match as a promotional offer. This means they will match all the cashback you've earned at the end of your first year as a cardholder.
Cashback Cards and Credit Score
22. Can Using a Cashback Card Help My Credit Score?
Yes, if used responsibly. Regular on-time payments and maintaining a low credit utilization rate can help improve your credit score. You
23. Can Too Many Cashback Cards Hurt My Credit Score?
Applying for too many credit cards in a short period can negatively impact your credit score. It's important to space out your credit card applications and only apply for new credit when you need it.
24. Does Not Using My Cashback Card Hurt My Credit Score?
Not necessarily, but credit card issuers may close your account due to inactivity, which can affect your credit score by reducing your overall available credit.
25. Do I Need a Good Credit Score to Get a Cashback Card?
While some cashback cards require good to excellent credit, there are cashback cards available for people with fair or even bad credit. Some secured credit cards, for example, offer cashback rewards and are accessible to those with lower credit scores.
Wrapping it Up
In the ever-evolving landscape of personal finance, understanding cashback and its potential benefits can provide a significant edge. From comprehending the basics of how cashback works to knowing how to maximize your rewards, you're now equipped with the knowledge to make informed decisions about your financial journey.
Remember, while cashback is a fantastic perk, it's essential to use credit responsibly. Always aim to pay off your balance in full each month to avoid interest charges that could overshadow your earned rewards. And, if building credit is your primary goal, don't forget to consider secured credit cards, especially those offering cashback rewards. Happy spending, and even happier earning!