Using a cash-back credit card can be a great way to earn cash on your everyday spending, but to take full advantage of your card’s cash-back rewards, you need to become familiar with the different ways to redeem them.
Redemption offers for the best cash-back credit cards include statement credits, gift cards, and even the ability to redeem 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.
One of the most straightforward redemption approaches is a statement credit. This reward appears as a credit on your statement and decreases your card balance by the amount of your reward.
To claim a statement credit, 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.
Even if you’ve redeemed a cash-back reward in the form of a statement credit, you’ll still need to make your minimum card payment by the due date 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 by requesting it through your card’s online account management system. Usually, your cash-back amount will need to reach a certain threshold, such as $25, $50, or $100, before you can redeem it.
In some cases, you can also transfer a cash-back bonus from your card’s account to your bank account. You may be required to have an account at the card issuer’s associated bank or transfer to an already-linked account you’ve used to pay your card before.
When you choose to receive your cash-back reward via check, it will be sent through the mail, so you’ll want to allow extra time for it to reach you if you’ve got plans for the money.
With some cards, you can use your cash-back rewards to book airplane seats, hotel rooms, and other travel reservations via the card’s online travel-booking portal. Some travel credit cards offer more competitive rates or limited-time bonus 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
Paying with points allows you to take your accrued points or cash-back balance and apply them to specific purchases via participating online retailers. You can also use your points for a statement credit after shopping at an online store.
This option typically applies to certain retailers such as Amazon and Best Buy, so be sure to check the fine print on your card’s agreement before you make a purchase. You’ll also want to ensure that you’re still getting the same amount of money to spend as you would be if you were 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.
Some credit cards offer rewards for making payments, while others allow you to redeem cash-back to give to a charitable organization or transfer or share points with others.
Gift Cards or e-Certificates
While this cash-back option might seem more restrictive because you’re required to spend your funds at a specific retailer, there is an upside. Redeeming your cash-back funds for gift cards or e-certificates can actually increase your rewards.
Certain credit cards offer bonuses of about $5 for redeeming cash back for gift cards. For example, if you redeem your points for a $50 gift card, you would end up with the original amount of the gift card plus the bonus amount rolled into the gift card, for a total of $55. Use your credit card company’s online portal to purchase gift cards and learn more about gift card bonuses.
You can also redeem your cash-back rewards for merchandise, including iPads, TVs, and other gadgets. This may require a bit more time and effort, since you’ll have to select this redemption offer via your card’s online portal, choose the merchandise, and wait for your order 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 $0.005 each—one half of one cent. Those 80,000 points could go further if you redeem them for cash and buy that speaker on your own.
Compare the value of your points with the cost of the object. In most cases, you’ll be better off with a statement credit or by paying for major purchases with points.
Smart Use of Cash-Back Cards
Cash-back cards are usually 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 faster, you can charge goods and services to your card that you once paid for with cash. However, don’t be tempted to run up extra charges just to earn more cash back. Use the card for things you’d buy anyway.
Many cash-back cards have an expiration date on rewards earned. If you don’t redeem them before they expire, you lose the cash and the primary advantage of using the card in the first place.
Keep in mind your cash-back card’s fees. While most cash-back cards don’t charge annual fees, some may charge up to $95 annually. In most cases, these fees correlate to extra features, like earning a higher percentage back on grocery purchases or availability to those with fair credit.89 Do the legwork and make sure the annual fee is worth it to you.
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. If not, set a reminder in your calendar to check your account’s cash back balance. Following this simple rule of thumb for cash-back cards will help protect you from losing your rewards due to expiration.