Ways to Redeem Cash Back

Learn how to get the most for your (cash-back) buck with cash-back credit cards

A person is taking both a $100 bill and a credit card out of a wallet
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 Sirijit Jongcharoenkulchai / EyeEm

Who doesn’t love the idea of earning cash back each time you use your credit card? But to take advantage of your card’s cash-back rewards, you’ll need to familiarize yourself with the different ways you can redeem those rewards. 

Redemption offers include statement credits, gift cards, and even redeeming your rewards for merchandise. Here’s how to take advantage of your card’s cash-back options, from the how-to basics on cash-back redemption to potential problems to watch out for. 

Statement Credit

One of the most straightforward redemption approaches? A statement credit, which decreases your card balance by the amount of your reward. 

To claim a statement credit: Simply log into your credit card account via the online portal, select the cash-back reward you’d like to redeem, and apply it to your statement. 

Make the minimum card payment, since statement credits aren’t always immediately applied to your balance due.

Check or Bank Deposit

You can claim your cash-back rewards in the form of a check. Usually, your cash-back amount will need to reach a certain threshold, such as $25, $50 or $100 before you can redeem. 

You can also transfer cash from your card’s account to your bank account. However, there may be restrictions, such as using an account at the card issuer’s associated bank, or only an already-linked account you’ve used to pay your card before.

Keep in mind that with a check-based cash-back reward, you’ll need to allow for extra time for the check to be processed and sent to you via snail mail. 

Travel Purchases

With some cards, you can use your cash-back rewards to reserve airplane seats, a hotel room, and more, via the card’s online travel-booking portal. Some portals offer more competitive rates or limited-time bonus point exclusives with particular airlines, so your cash reward goes a little further. Before reserving a seat, compare the portal’s prices with prices on the airline’s website or another travel site. 

Pay With Points

This option allows you to take your accrued points or cash-back balance and apply them to a certain purchase via an online retailer, or use your points for a statement credit after shopping at an online store. 

This option may only apply to certain retailers (Amazon and Apple are popular ones), so be sure to check the fine print on your card’s agreement before you make a purchase. As well, ensure that you’re still getting at least 1 cent per point, or the maximum you’d get if exchanging your points for cash. 

You may also be able to use points for online bill pay or for paying down your student loan or mortgage.

Gift Cards

While this cash-back option might seem more restrictive (you’ll have to spend your funds at a specific retailer), hear us out. Redeeming your cash-back funds for gift cards can actually increase your rewards. 

Certain cards offer bonuses of around $5 for redeeming cash back for gift cards. Carefully weigh a small bonus against a specific gift card’s usefulness; if the math works, your card’s online portal will be where you exchange your cash for the card. It’s all about getting the most out of your cash back. 

Merchandise

You can also redeem your cash-back reward for merchandise, from iPads to TVs to other gadgets. However, it may require a bit more time and effort, since you’ll have to select this redemption offer via your card’s online portal, then choose the merchandise you’d like to purchase, then wait for it to be processed and shipped.

While it may be tempting to spend those hard-earned rewards on a shiny new handbag or watch, redeeming cash-back rewards for merchandise is generally not the wisest use of cash-back rewards. Here’s why: The value of the merchandise offered is often lower than the value of your points. For example, if you have to use 80,000 points to buy a $400 speaker, your points are only worth 0.5 cents each.

Compare the value of your points with the cost of the object elsewhere—a simple Amazon search will do. In most cases, you’ll be better off with a statement credit, or by paying for a major purchase with points. 

Other Redemption Offers

Some cash-back cards also reward you for paying off your balance by matching your cash back whenever you pay. Others allow you to redeem cash-back to give a charitable contribution.

Worth noting: It’s a good idea to make it a habit to regularly redeem your cash-back rewards. If your card offers an automatic threshold that will deposit your cash back into your account once you earn a minimum amount, take advantage of that. It’s a great way to earn a little extra cash without even thinking about it. If not, put a bi-monthly reminder on your calendar to check in on your account cash back. It will help protect you from losing your rewards due to expiration. 

Smart Use of Cash-Back Cards

Cash-back cards can earn you some extra cash from your regular spending, but are really only beneficial if you pay off your card’s balance monthly. Otherwise, you’ll probably pay more in interest than you earn in rewards. 

To earn rewards, it’s wise to charge things to your card that you once paid for with cash (as long as the merchant doesn't charge a fee for using a credit card). Don’t be tempted to run up extra charges just to earn more cash back. Only use the card for things you’d buy anyway. 

When redeeming your cash-back rewards, it’s also important to keep in mind that your cash back earned may be worth less with certain redemption options, like gift cards or flights, since cash-back credit card points are usually worth only up to 1 cent/point.

Buyer beware: Your cash-back reward isn’t as good as cash in your pocket. Many cash-back cards have an expiration date on rewards earned, and if you don’t redeem them before they expire, you lose the cash (and the primary advantage for this card). 

Another thing to keep in mind is your cash-back card’s fees. While few cash-back cards require annual fees, there are a few exceptions. We found fees as high $95/annually.

However, it’s worth noting that in most cases, these fees correlate to extra features, like earning a higher percentage back on grocery spends or availability to those with average credit. Do the legwork and make sure the annual fee is worth it. 

Key Takeaways

  • Cash-back cards can be a great way to earn extra cash when using your credit card, something you’re probably doing already.
  • If you’re considering a cash-back card with an annual fee, be sure you’ll actually benefit from the extra features or rewards-categories offered.
  • Be mindful of expiration dates on cash back earned. 

Article Sources

  1. Discover. "Discover Redeem Cash Back," Accessed Date Sept. 27, 2019.

     


  2. Citi ThankYou Rewards. "Shop With Points," Accessed Date Sept. 27, 2019. 


  3. Citi ThankYou Rewards. "Online Bill Pay with Points," Accessed Date Sept. 27, 2019. 


  4. Citi ThankYou Rewards. "More Ways to Redeem," Accessed Date Sept. 27, 2019.


  5. Discover. "How Can I Redeem Cashback Bonus?" Accessed Date Sept. 27, 2019.


  6. Citigroup Inc. "Citi Double Cash Benefit Terms and Conditions," Accessed Date Sept. 27, 2019


  7. American Express. "Terms, Conditions & Disclosures," Accessed Date Sept. 27, 2019.


  8. American Express. "Blue Cash Preferred," Accessed Date Sept. 27, 2019.


  9. Capital One. "Cash Rewards Credit Cards," Accessed Date Sept. 27, 2019.