Cashback is a type of discount or rebate that customers get when purchasing using a credit card or other form of payment. After the transaction, the customer gets some of the value back in cash. Generally, cashback is offered as a percentage of the purchase price.

There are multiple ways to redeem cashback offers, such as receiving a check or direct deposit. Alternatively, customers can apply the amount to their account balance. Some credit cards and other financial products even offer cashback as an incentive and reward for using the product.

Retailers are also known for this promotional offer. The idea is to increase sales and encourage customer loyalty. Both sides profit from the deal though!

Key Takeaways

  • Credit card holders can receive a percentage of their purchases back in cash through a money-back benefit. This is called “cashback.”
  • Cashback can be applied to your credit card bill, received as a check, deposited into a bank account, or used as store credit.
  • The amount received back typically varies from 1% – 5% depending on the type of purchase made.
  • If you spend more than the cost of the items you’re buying using a debit card, you can get the extra amount back in cash during checkout. This is an easy and fast method of getting some cash.
  • Some cashback programs may come with annual fees or high annual percentage rates. Consider this before signing up.
  • Many popular US stores have cashback programs, including Walmart, Amazon, Target, Best Buy, and others.
StoreCashback Details
CVS2% back via ExtraBucks Rewards. Every 1 prescription filled gives 1 credit. At 10 credits, customers get $5 in ExtraBucks Rewards.
KrogerEarn points via Kroger Rewards World Mastercard. Up to 5% cashback on Kroger Pay transactions, plus the opportunity to earn points. Every $1 spent in the Kroger Family of Companies awards 2 points. 1,000 points = $5 in free groceries.
Walmart1%, 2%, or 5% back, according to the terms of the Walmart Rewards Card
Target5% cashback on all purchases with Target RedCard, plus a $50 credit for opening a RedCard
Amazon5% back on all Amazon purchases with a Prime Visa Card, plus a $100 gift card upon card approval
Best Buy5% back and free eligible shipping with no minimum purchase for eligible purchases via My Best Buy Visa
AppleApple Card holders get 3% cashback on Apple Store, Apple Music, and other Apple services purchases. 2% back whenever using Apple Pay.
Home DepotNo direct cashback program, but Home Depot offers special financing through its Credit Center program. For example, 6 months financing on purchases over $299.
Lowe’s5% off eligible purchases via MyLowe’s Rewards Credit Card. Customers also get 20% off their first purchase (up to $100).

How Does Cashback Work?

Cashback offers help customers get back a percentage of their purchase through cash or rewards points. After completing a purchase at a participating retailer, you’ll receive the benefits via the cashback app or website that tracks the purchase.

You’re then able to redeem your cash or use it as a credit to offset future purchases. Here’s an example:

  • Step 1: A customer signs up for a cashback app or website.
  • Step 2: They link their credit or debit card to their app/website account.
  • Step 3: The customer shops at a participating retailer and pays with their linked bank card.
  • Step 4: The cashback app or website tracks the purchase and applies a percentage of the purchase amount to the customer’s account.
  • Step 5: The customer can then exchange the cashback for actual money or use it as a credit to reduce the cost of subsequent purchases.

Note: Some cashback apps and websites also offer discount coupons and deals. These help customers save money on purchases. These offers may be applied automatically at checkout or require the customer to add a promotional code.

Cashback offers may have restrictions, such as minimum purchase amounts or exclusions for specific products or categories. You should always read the terms and conditions of cashback deals before purchasing to ensure the transaction is eligible.

Cashback Websites and Apps Pros & Cons

The Pros 👍

  • Save money: cashback deals help you save money by providing a portion of the purchase as cash or rewards points.
  • Easy to use: these platforms are generally easy to use, with simple sign-up processes and automatic tracking of purchases
  • Wide variety of retailers: many cashback apps and websites have offers for a wide variety of retailers, whether they are online or brick-and-mortar stores. Big brands also tend to run their own cashback promotions.
  • Extra discounts: rebate apps and websites can also offer coupons and deals that’ll help you save even more money on purchases.

The Cons 👎

  • Minimum threshold for redemption: there might be a minimum threshold for cashback redemption. So, you’ll have to spend a certain amount before redeeming it for cash or using it to offset future purchases.
  • Exclusions and restrictions: certain products or categories might be excluded from rebate deals. It’s recommended that specific terms and conditions be checked.
  • Time lag: cashback can take time to be applied to your account and become available for redemption. Sometimes, you might have to wait even a few days to a few weeks for the cashback to become accessible.
  • Limited earning potential: most cashback offers are a percentage of the purchase price. Significant amounts might only be made on larger purchases.
  • Risk of identity theft: linking your credit or debit card to a cashback app or website carries an inherent identity theft risk. However, that is true for all the ways in which bank cards are used. To be as safe as possible, use a secure and reputable cashback service that explains how it protects your personal and financial information.

5 Types of Cashback Rewards

Flat-Rate Cashback

These cards give you the same cashback rate on all purchases, regardless of the category. For example, the Citi Double Cash Card offers 2% cashback. 1% when you buy and 1% as you pay off those purchases.

Tiered Cashback

These cards offer different cashback rates depending on the spending category.

For example, The Bank of America Customized Cash Rewards credit card works like this:

  • 3% cashback for a chosen product category (online shopping, dining, travel, gas and EV charging stations, drug stores, home improvement, cable, internet, phone plans or streaming )
  • 2% at grocery stores and wholesale clubs (up to $2,500 in combined quarterly purchases)
  • 1% on all other purchases

Rotating Category Cashback

These cards offer higher cashback rates on specific categories that change each quarter. Cardholders may need to activate these categories each quarter to earn the higher rate.

For example, The Discover it cashback card offers 5% on everyday purchases at different places each quarter, such as Amazon, grocery stores, restaurants, or gas stations. Customers also get unlimited 1% cash back on all other purchases.

Bonus Category Cashback

Some cards offer a high cashback rate on specific categories. For example, American Express’ Blue Cash Preferred provides 6% cashback at US supermarkets and select US streaming subscriptions. There’s also a 3% back offer for transit, including rideshare, parking, trains, buses, and more.

Redemption Bonus Cashback

Some rewards cards give you extra value when you redeem your cashback for certain options, such as a gift card or travel booking. Several credit card issuers provide redemption bonuses for choosing certain redemption options.

For example, some card issuers may offer higher redemption values if you choose to get gift cards for specific retailers. You might offers such as “redeem $20 in cashback for a gift card worth $25.”

3 Types of Cashback Credit Cards

Store Credit Cards

Some retailers offer store credit cards that offer cashback on purchases. The amount of cash earned may vary based on the type of purchase and the specific terms of the store’s credit card program. Store credit cards incentivize customer loyalty via discounts or rewards at affiliated stores.

Gas Credit Cards

These are for cashback on purchases made at gas stations. The amount earned may depend on the type of gas purchased and the specific terms of the credit card program.

Travel Credit Cards

Travel credit cards offer rewards when you buy flights, hotel stays, and car rentals. The amount of cashback you get could vary depending on the kind of purchase and the credit card program’s rules.

Cashback FAQs

Can You Get Cashback from a Credit Card?

A cashback credit card rewards the cardholder with a percentage of their purchases back in cash. The cash can be applied to the credit card bill, received as a check, or deposited into a bank account. The amount of cash back earned may vary based on the type of purchase and the specific terms of the credit card program.

Is It Possible to Receive Cashback When Using Apple Pay for Purchases?

Yes. Some merchants and payment apps may offer cashback rewards for purchases made with Apple Pay. However, the availability and terms of cashback rewards for Apple Pay purchases may vary. Check with the merchant or payment app to see if cashback is offered and see the specific terms and conditions.

Is It Possible to Receive Cashback When Using Google Pay for Purchases?

Yes, you can receive cashback for purchases made from your Android phone with Google Pay. The availability and terms of this offer differs from business to business.

Are Cashback Rewards Essentially Free Money?

Cashback rewards are not necessarily free money. They are typically earned through spending and may be subject to specific terms and conditions. Without spending, you’re not getting anything back; and without spending a lot, you might not get back that much.