If you are looking for a new credit card, a cashback credit card is one of the many options you have. This kind of car provides cashback on your purchases. It is offered as an incentive for spending, so each time you make a purchase, you will get some money back. The cashback is often a small percentage of your spending. The money you earn from cashback is earned tax-free. However, you need to have good credit to be eligible for a cashback card.

How It Works

Every credit card company that offers cash-back credit cards have their own reward system. Some of them provide cashback as a flat percentage of spending while others might give cashback with tiered rewards. Some issuers give the cashback as a statement credit, check, or as a direct deposit into your bank account. The cashback can be used however you want like offsetting spending by applying it to your credit card balance or for goals such as paying down debt, funding a vacation, and others.

Should you Get a Cashback Card?

If you are considering getting a cashback credit card, keep the following things in mind:

  • Whether you see the cashback as a valuable reward or not.  In general, cashback is not the most lucrative rewards system. But, the most valuable rewards are those you use. Thus, if you will amass and redeem points and miles to travel, a cashback card can be suitable for you.
  • Annual fee. A lot of rewards credit cards have annual fees to offset the rewards; however, this is not common among cashback credit cards. But, if you end up with cashback credit card with an annual feel, ensure the rewards you get would be more than the fee.
  • Sign-up or welcome bonus. Look at any sign-up or welcome bonuses the provider is offering. But, these bonuses are less common among cashback cards.

Redeeming Cashback

Often, cash-back cards only offer a few redemption options. With some cards, you might be able to redeem cashback at any amount. However, other cards require you to reach a minimum amount. You can redeem cashback as a credit to your account balance to offset your bill’s cost. Also, you can transfer it to a linked bank account or request a paper check. Some cash-back cards may let you redeem cash for different gift cars.