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Getting extra money is one of the best feelings in the world — and earning cash back rewards from your credit cards is no exception.
When you use your credit cards responsibly — which means paying your balance in full and on-time each month — cash back can be a great tool to earn rewards on your everyday purchases. Americans spend an average of $4,874 on their credit cards each month, according to data from Personal Capital. If you earned an average of 2% cash back on all purchases, that would add up to about $1,170 in cash back rewards in a year.
And what can those rewards be redeemed for? Everything from gift cards to your favorite retailer, free money in your bank account, to even a discounted vacation — simply for purchasing the everyday goods and services you were going to buy anyway.
You don’t want to miss out on the opportunity to earn cash back on your credit card spending. Here’s everything you need to know about how cash back credit card rewards work, how you can maximize them, and the best cash back credit cards that give you the most bang for your buck.
What Are Cash Back Credit Card Rewards?
“Cash back rewards come in the form of either dollars or points from credit card companies or banks for using their products,” says Grant Sabatier, author of the international bestselling book “Financial Freedom” and co-founder of BankBonus.com.
“You can think of [cash back as] essentially like a bonus that’s paid back to customers when they make purchases using their credit card,” says Maya Nijhawan, credit card expert and co-founder and CMO of financial app Finch. “That cash back reward is usually a percentage of the amount that’s spent.”
While some cards may reward their users with direct cash back deposited into the user’s account, others may offer point rewards with multiple redemption options. Points work just like cash back and are usually redeemable for an exchange rate around 1 cent per point, though the exact redemption options may vary by issuer. So, 100 points is often equal to about a dollar.
Points can generally be redeemed for cash back, but also for other options like gift cards or free travel. Typically, cardmembers can book travel directly through the credit card issuer’s online portal or transfer their points to airline or hotel partners. “One of the …….