Credit card companies usually provide a wide range of reward options for their cardholders to benefit from. Cash back has always been a popular choice among many people because it offers the opportunity to earn actual money when making regular purchases. If you need help with cashback, continue reading for a complete explanation.
Cashback is a program that allows customers to receive a certain percentage of their purchase amount back as a refund. This refund is typically given in cash or a credit applied to the customer’s account. Cashback rates usually fall within the range of 1% to 5%, although it’s essential to be aware that there may be some exceptions. Credit card issuers typically provide clear labelling for the different types of purchases that qualify for varying levels of cash back.
However, as with anything in the credit card industry, it is essential to read the fine print carefully.
This is primarily because merchant category codes, or MCCs, govern all purchases and cashback rewards. The designations are ultimately determined by credit card companies, such as Mastercard, Visa, American Express, and Discover, who can make these decisions. There are several standard codes, such as “restaurant,” “department store,” “airline,” and “entertainment,” among others. If you earn a 5% bonus cash back at restaurants and visit Burger King, which falls under the restaurant merchant category code (MCC), you will receive that 5% cash back.
However, these limiting MCCs often need to consider businesses that may fall under multiple categories. This group includes various establishments such as superstores like Walmart, tourist attractions like museums, and other multi-faceted establishments. Confusion about the class to which a purchase belongs could result in a loss of cash back for you.
For instance, imagine your family ordering room service during your vacation in The Bahamas. You pay using your credit card, expecting to receive the advertised 3% cash back specifically for dining expenses. However, when you receive your credit card statement in the mail, you realize you have only received the base 1% earnings. This is because the merchant category code (MCC) assigned to your hotel transaction only indicates that it is a hotel purchase. As a result, your credit card issuer needs to have detailed information about the specific items or services you purchased.
Unfortunately, situations like these often provide minimal options for resolution. The issuer of your card does not have the authority to modify these codes. Only major credit companies can alter their code selections.
New cardholders frequently receive cashback promotions and bonuses. These offers can be recurring (monthly, quarterly, yearly, etc.) or for a single period, typically at the start of your account’s existence. In a hypothetical scenario, a recurring bonus could be structured as follows: “You can earn a 3% cash back on purchases made at supermarkets and wholesale clubs, with a maximum limit of $1,500 per quarter.” Alternatively, a one-time promotion may offer a 5% cash back on airfare purchases within three months of becoming a cardholder.
Cashback rewards may have specific limitations depending on your card type. These limitations could include a cap on the amount of cash back you can earn or an expiration date after a certain period of time. Some cards have earnings limits and expiration dates, while others have no restrictions. Each cashback card has its unique system. It is essential to consult your documentation whenever you have a specific question.
Using Your Cash Back Earnings
Most cashback credit cards provide similar options for redeeming rewards. The most common options are statement credits, checks, bank account deposits, gift cards, and charitable donations.
You can apply your cash back as a statement credit, which will be deducted from your upcoming monthly bill. This can help you save money.
• Cheques: One of the more direct ways to redeem cashback is through cheques. With cheques, you have the freedom to use the cash back value however you please.
Bank deposits typically consist of eligible accounts such as checking accounts, savings accounts, or investment accounts.
• Gift cards: This option allows you to convert your cash back into retail credit that can be used at a store or website of your choice for shopping.
• Charities: Many card issuers have established relationships with charities, allowing donations to be made. These partnerships will enable you to support your favorite causes with monetary contributions.
The easiest way to redeem cash back is through your card issuer’s website. Here, you will not only be able to view your rewards status, but you will also have access to all the possible redemptions you can make. If you prefer speaking to a live person, many companies still offer customer service phone lines dedicated to rewards inquiries.
Individuals who prefer to avoid being concerned about the status of their rewards will find a redemption threshold beneficial. Not all cards provide this feature. If your credit card offers cash back, you can set a point at which your cashback is automatically redeemed according to your preference. In addition, certain cards may require you to meet a specific cashback threshold before you can save your rewards.
Earn Cash Back with Every Major Credit Card Company
Numerous cashback cards are available, and your eligibility for specific cards may vary depending on your credit score. Although it is not possible to provide specific details for every credit card company, we have included summaries of some of the most popular cashback cards below.
The Citi Double Cash Card is a Mastercard.
The cashback rate is 1% when making a purchase and an additional 1% when the payment is made.
There is no limit or expiration date. The expiration date will be triggered unless eligible purchases are made within 12 months.
Three redemption options are available: a check, a statement credit, or a gift card.
The Citi Double Cash Card offers the unique benefit of effectively earning cash back twice. You earn money back when you make your initial purchase and then again when you pay your credit card bill.
The 12-month expiration period is quite common, and it is generous that there are no boundaries on the amount of cash back you can earn.
It is unsurprising to see statement credits, checks, and gift cards offered as three of the most common redemption choices.
The Bank of America® Cash Rewards credit card is a Mastercard.
The cashback rates are as follows:
3% in the category of your choice
2% on purchases made at grocery stores and wholesale clubs
1% on all other purchases
There is a limit or expiration on cash back for the choice category, grocery store, and wholesale club purchases. The limit is set at $2,500 in combined purchases each quarter. However, there are no expiration dates for this cashback.
Redemption Options: When you have accumulated $25 or more, you have the choice to redeem your funds as a statement credit, receive a check, or make a deposit into an eligible Bank of America® or Merrill Lynch® account.
Please be aware that there is a combined quarterly limit of $2,500 for earning 3% and 2% cash back in your chosen category and at grocery stores and wholesale clubs, respectively. Cardholders of the Bank of America® Cash Rewards credit card must have a minimum of $25 in earned cash back before being eligible to redeem it.
The Blue Cash Everyday American Express Card is a credit card offered by American Express.
The cashback rates for this card are as follows: 3% on purchases made at U.S. supermarkets, 2% on purchases made at U.S. gas stations and 1% on all other purchases.
The 3% rate offered at U.S. supermarkets has a limit of $6,000 in annual purchases. After reaching this limit, the rate decreases to 1%. There are no expiration dates.
Once you have earned a minimum of $25, then you can redeem it as a statement credit in increments of $25. Amex offers some of the most rewarding cards, including the Blue Cash Everyday American Express Card. It provides opportunities to redeem gift cards and merchandise on occasion.
There are certain limitations to consider. Specifically, the cashback rate of 3% on purchases made at U.S. grocery stores is capped at a maximum of $6,000 in purchases per year. Cardholders can receive a 1% cash back on their grocery purchases during that period.
The Discover it® Card, offered by Discover, is a credit card with various benefits and features.
The cashback rate is 5% on rotating categories such as gas stations, supermarkets, restaurants, Amazon.com, and wholesale club purchases. For all other purchases, the cashback rate is 1%. You will receive a full cashback match at the end of your first year.
There is a limit or expiration on the 5% rate for purchases each quarter, with a cap of $1,500. There are no expiration dates.
There are several options available for redeeming your rewards. These include statement credits, deposits to a bank account, gift cards and certificates, paying with cash back at select merchants, and making charitable donations.
Discover cards, such as first-year cashback matches and unique cashback categories, provide excellent benefits. The Discover it® Card effectively showcases these traits. This offer includes a 5% cash back on various purchases, including dining and Amazon.com.
However, there are limits to this rate, and to qualify, you must opt into specific categories each quarter. This card provides the highest number of redemption options compared to the others on this list, with five choices available.
Here are some helpful tips to maximize your cashback potential and minimize credit risk:
Cashback is a highly popular perk offered by the modern credit card market. It is crucial to avoid overspending beyond your financial capabilities solely for the purpose of earning rewards. Many cashback cards have higher annual percentage rates (APRs), which can result in significant and unsustainable interest payments.
Swipe your card for purchases in bonus categories whenever it is feasible. While not all cards offer these benefits, the majority do. Knowing the cards in your wallet that provide bonuses at gas stations and supermarkets is essential.
It is essential to understand which types of redemptions, such as statement credits, bank account deposits, or gift cards, are most beneficial for you. Narrowing down your card options will significantly simplify the decision-making process.
