Surveys consistently show that no credit card reward is more popular than cold, hard cash. Indeed, cash back cards came out well ahead of other types of rewards cards in a recent CreditCards.com survey, which found that close to half of U.S. adults own a cash back credit card.
And for good reason: Instead of having to decipher a complex redemption scheme, you can opt for a simple, straightforward reward and use it in the way that fits you best.
Here we take a look at some of the most common types of cash back redemption, along with some of the restrictions you may encounter when redeeming your rewards.
How cash back cards work
Cash back cards come in a variety of flavors, but they all fundamentally work the same way: As you make purchases with your card, you earn cash rewards at a set rate. There are three major types of cash back cards.
- Flat-rate cash back cards offer the same percentage of cash back for all purchases, usually between 1% and 2%.
- Bonus category cash back cards typically reward some purchases, like groceries or dining, at a higher rate, while rewarding general purchases at 1%.
- Rotating bonus category cash back cards have dynamic bonus categories that automatically change or allow you to select a different bonus category after a certain length of time.
See related:Â What is cash back?
Ways to redeem cash back
Depending on your card and issuer, you may have a variety of choices in how you redeem your cash back rewards. Some issuers even allow you to set up an automatic redemption, meaning your redemption would automatically initiate after a set number of days or after you earn a certain amount in rewards.
The most common ways to redeem cash back are:
- A statement credit
- A direct deposit to a bank account
- A check
- Gift cards
Redeeming cash back as a statement credit
One of the most common ways to redeem cash back is as aÂ statement credit. A statement credit is money credited to your account that reduces your card balance. For example, if you were to spend $1,000 with a card that offers 1.5% cash back on every purchase, youâd earn $15 in cash back rewards; and if you were to redeem this cash back as a statement credit, your balance would decrease by $15 to $985.
Blue Cash PreferredÂ® Card from American Express, for example, requires you to have earned $25 in cash back before you can redeem as a statement credit.
TheÂ Chase Freedom UnlimitedÂ®card lets you redeem rewards as a statement credit in any amount, anytime.
Once youâve met your cardâs redemption requirements, you can simply choose a statement credit as your preferred cash back redemption.
Redeeming cash back as a check or direct deposit
A slightly smaller number of credit card rewards programs let you redeem your rewards for âtrueâ cash back in the form of a check or direct deposit to your bank account. Claiming your cash back in this way gives you a bit more leeway since you can save or spend your rewards however you like instead of having them âlockedâ into a particular card account.
As with statement credits, the requirements for requesting a check vary from card to card, with some issuers requiring you to have earned a minimum amount of cash back before you can request a check and others imposing relatively few restrictions.
Direct deposits tend to be a bit trickier across the board, especially if you donât already have a banking relationship with your credit card issuer.
- TheÂ Bank of AmericaÂ® Cash Rewards credit card, for example, will only let you redeem cash back as direct deposit if you have a checking or savings account with Bank of America.
- TheÂ CitiÂ® Double Cash Card lets you redeem your cash back as a direct deposit only if you have a linked Citi account or a checking account from which youâve paid a Citi credit card bill at least twice. While the Double Cash card requires you to have earned at least $25 in cash back to redeem as a statement credit, thereâs no minimum to redeem as a direct deposit.
Wells Fargo Cash Wise VisaÂ® cardÂ lets you claim your cash back via an ATM (in $20 increments only) if you have a Wells Fargo Bank account.
Automatic cash back redemption
Along with manually requesting a statement credit, check or direct deposit, a number of cards allow you to set up automatic cash back redemption. If your card allows automatic redemption, your cash back is generally distributed at set times or after youâve earned a certain amount.
- TheÂ Capital One Quicksilver Cash Rewards Credit Card and, for example, allow you to schedule automatic cash back redemption via statement credit or check at a set time once per year or once youâve reached a cash back earnings threshold ($25, $50, $100, $200, $500 or $1,500).
- Even some cards designed for credit-builders, like theÂ Credit One Bank American ExpressÂ® Card, allow automatic redemption as a statement credit, offering those looking to improve their financial habits a âset-it-and-forget-itâ cash back savings tool that will periodically knock off a chunk of their credit card balance.
Travel, gift cards and merchandise on an issuerâs online portal
Most credit card issuers also give you the option of redeeming your cash back through a rewards portal for online shopping or as gift cards to select department stores, restaurants, video streaming services and more.
- TheÂ Discover itÂ® Cash Backcard, for example, lets you redeem your cash back for gift cards from shopping partners once youâve earned $5 in cash back (gift cards range from $5 to $200, in increments of $5).
- TheÂ Amazon Prime Rewards Visa Signature card*lets you redeem your points for purchases on Amazon.com, as a statement credit or deposit, or for gift cards and travel â all at a rate of 1 cent per point.
Having the option to use your rewards for travel allows you to enjoy the benefits of travel rewards with a cash back card and is especially common among cash back cards that use points or allow you toÂ choose between cash back and points.
- The Chase Freedom Unlimited is a great example. You can earn unlimited cash back at a rate of 5% cash back on every purchase, which translates to 1.5 points per dollar if redeemed for travel in theÂ Chase Ultimate Rewards portal.
- Similarly, the Citi Double Cash Card lets you transfer your cash back toÂ Citi ThankYou Rewards and redeem for travel rewards, as well as gift cards, merchandise and other purchases through the Pay with Points program.
Cash back redemption options on popular rewards cards
As you can see, cash back redemption options vary considerably from issuer to issuer and card to card. Hereâs a closer look at how cash back redemption breaks down with some of the most popular cash back credit cards.
||Redeem as a statement credit?
||Redeem as a check?
||Redeem as a direct deposit?
|Blue Cash PreferredÂ® Card from American Express
||Yes (once youâve earned $25 in cash back)
|Bank of AmericaÂ® Cash Rewards credit card
||Yes (once youâve earned $25 in cash back)
||Yes (once youâve earned $25 in cash back)
||Yes (into a Bank of America checking or savings account, once youâve earned $25 in cash back)
|Capital One Quicksilver Cash Rewards Credit Card
|Chase Freedom UnlimitedÂ®
|CitiÂ® Double Cash Card
||Yes (once youâve earned $25 in cash back)
||Yes (once youâve earned $25 in cash back)
||Yes (to a linked Citi savings or checking account or to a checking account from which youâve paid your Citi credit card bill at least twice)
|Discover itÂ® Cash Back
Best cash back redemption options
With all those options for redeeming for cash, which one is best?
The key point to consider is whether your rewards lose any value when redeemed in a certain way. You want to make sure you are getting the most value back, so be careful if you redeem for merchandise, which can be worth less than rewards redeemed for straight cash.
That said, unless your issuer offers a bonus for claiming your rewards as a statement credit instead of âtrueâ cash back, you should simply stick to whichever option is most convenient.
One drawback to cash rewards is they often donât feel like actual rewards because they get swept up into your ongoing finances. If that bothers you, you might consider taking note of how much you are receiving in cash rewards, then rewarding yourself by spending that amount on something you want, so that you feel like youâre getting a reward.
Either way, thatâs the best aspect of cash back rewards: Itâs your decision.
Choosing the best cash back credit card for you
Your redemption options are just one consideration when choosing a credit card. Consider these factors:
When shopping around for cash back cards, find the card that will work the hardest for you, not the other way around. In other words, a cash back rate of 5% at restaurants is great, but not if you rarely eat out. Bottom line: Find a credit card that matches the largest portions of your budget.
Also, be honest about how much thought you want to give to your credit card. If you prefer a âset and forgetâ approach, a flat-rate card is a better choice than a rotating bonus category card.
With so many great no annual fee cards, you might wonder why you would ever get a card with an annual fee. But often, the rewards rates are so much better that it actually makes sense to get the card with the annual fee. For example, comparing the Blue Cash EverydayÂ® Card from American Express and the Blue Cash PreferredÂ® Card from American Express, we found that consumers who spend more than $3,200 annually at U.S. supermarkets ($267 per month) were actually better off with Blue Cash Preferred, which has a $95 annual fee.
From redemption options to bonus categories, each cash back card is designed for a different type of consumer. If you havenât found your perfect match yet, try our CardMatchâ¢ tool, which can deliver personalized credit card offers in seconds with no impact on your credit score.
All information about the Capital One Savor Cash Rewards Credit Card and the Amazon Prime Rewards Visa Signature Card has been collected independently by CreditCards.com. The issuers did not provide the content, nor are they responsible for its accuracy.
Sending cash to friends and family? Before you reach for that credit card, grab a calculator. Itâs time to do a little math.
With most everything you purchase online or through apps, credit cards have the edge. With plastic, you have chargeback rights. If youâre overcharged or receive the wrong item, broken merchandise or nothing at all, your card issuer will make it right. And if you use a rewards card, you collect points or miles, too. Win-win.
But itâs different story when youâre sending money through peer-to-peer platforms. Many of them (like Google Pay, Popmoney and Zelle), donât allow consumers to use a credit card to send cash.
Others (like Cash App, PayPal and Venmo), allow credit cards but also charge a fee for the privilege â often about 3%.
See related: How to choose a P2P payment service
The hidden costs of using credit cards to send money
Choose a credit card to send money and you might also end up paying additional fees to your card issuer. Thatâs because the combination of some peer-to-peer apps with certain cards are coded as cash advances, rather than purchases.
For many cards, that cash advance code triggers a higher interest rate that kicks in the moment you make the transaction, as well as a separate cash advance fee thatâs often $10 or 5% of the transaction â whichever is higher. (Currently, the average interest rate for cash advances is 24.8%, while the average APR for purchases is 16.05%.)
So the combination of peer-to-peer service fees, credit card cash advance fees and that higher interest rate (with no grace period) could make sending a few hundred dollars a bit more costly than youâd planned.
No chargeback rights with credit cards
The real kicker: Unlike other venues, you donât have chargeback rights when you use credit cards to make peer-to-peer money transfers.
When you present your credit card in an online or brick-and-mortar store, thereâs a merchant involved â and the law provides chargeback rights for your protection in case you donât get what you were promised in the deal. But in a peer-to-peer money transfer, thereâs no merchant, so currently the laws donât give consumers any chargeback rights, says Christina Tetreault, manager of financial policy for Consumer Reports.
âThe chargeback right requires a merchant,â says Tetreault. âOne of the hoops a consumer has to jump through is to try and work it out with the merchant.â
If you use a peer-to-peer service and send the wrong amount or send the money to the wrong person, most platforms advise that the only way to get it back is to contact the recipient and ask them to return it. And thatâs often the same whether you use a credit card, debit card, bank account or funded account on the platform.
âBe doubly sure when youâre sending the money that youâre putting in the correct information,â says John Breyault, vice president of public policy, telecommunications and fraud for the National Consumers League. âItâs still a buyer beware world when it comes to peer-to-peer.â
If youâre sending money and want to use a credit card, it pays to do a little sleuthing first. Check out the peer-to-peer site. Does it allow users to send money with a credit card? If so what, if any, fees does it charge?
On some platforms (PayPal is one), you could see similar fees for using a debit card â while sending from a bank account or funded account on the platform is free.
The good news is that many peer-to-peer platforms clearly disclose it when thereâs an extra charge to use a credit card, says Tetreault. With Venmo, for example, youâll get a pop-up message.
Harder to decipher: Will credit card transactions on the platform be treated as a cash advance? If your preferred platform doesnât post this information, you might need to contact customer service. (And how quickly and easily you get an answer can tell you a lot, too.)
Ask your card issuer the same question: Are peer-to-peer money transfers on the platform youâve chosen treated as a cash advance? If they are, whatâs the interest rate, and whatâs the cash advance fee?
âWhat I would suggest is to ask that question, via email, of your financial institution,â says Tetreault. âIt may be in their FAQs. And you want to save that email. If you have it in writing, if thereâs an issue later, youâre better positioned to contest that fee.â
But âthe hard truth is you may not be able to find out ahead of time,â she says.
Another solution: Opt to use a credit card issued by a credit union.
âWith credit unions, the APR is usually the sameâ for purchases and cash advances, says John Bratsakis, president and CEO of the Maryland and District of Columbia Credit Union Association.
Likewise, with American Express cards you pay your regular interest rate and no cash advance fees on peer-to-peer transfers, says Elizabeth Crosta, vice president of public affairs for American Express.
And credit cards from U.S. Bank register peer-to-peer money transfers as regular purchases â with no cash advance fees or cash advance APRs, says Rick Rothacker, spokesperson for the bank.
See related: How do credit card APRs work?
Whatâs your reason for using a credit card?
Take a good look at the reason youâre using a credit card, too. If you want chargeback rights, thatâs not an option. If youâre doing it for the rewards, will the value of those points or miles be eaten up by extra fees or a higher interest rate you have to pay to use the card?
And if youâre using a card because you donât have the cash, that might be a good reason to rethink the idea of sending money in the first place.
Thatâs a huge red flag, says Bruce McClary, vice president of public relations at theÂ National Foundation for Credit Counseling.
âThe need to convert credit into cash is what really gets my attention â because that hints at a lack of savings,â he said. âItâs a reality a lot of people are facing, especially now.â
Cash advances arenât as expensive or risky as payday loans and car title loans, but they should be among your last resorts. If you’re looking for short-term relief, you could ask your credit card issuer for help, or find out if you qualify for a personal loan. You could also borrow from a family member or trusted friend, but be wary of the potential relationship toll if you can’t pay them back.
Getting cash from credit cards
Fifty-two percent of Americans report that the pandemic has damaged their finances, according to a recent survey by the NFCC. More than a fifth of those had to tap savings for everyday expenses, while 16% increased their credit card spending.
And thatâs a sign of financial stress, says McClary. âIt means that, in some situations, they have run out of savings.â
There are ways you can use your card to get cash, though.
Cashing in rewards
Some rewards cards from issuers such as Chase, Bank of America and US Bank let you deposit cash-back rewards directly to your bank account.
And Wells Fargo also will let you deposit its Go Far Rewards directly into another Wells Fargo customerâs account, says Sarah DuBois, spokesperson for the bank.
Many credit cards let you convert rewards into retail gift cards. So a pile of points can help a friend or family member buy much-needed groceries or a few holiday presents.
Or simply âbuy a gift card for someone,â says Bratsakis.
Retailer-specific gift cards and gift cards issued through local and regional retail associations and malls often come with no fees â meaning every dollar you spend goes toward your gift.
While you can get a cash advance or use convenience checks from your card issuer, both those options often come with fees and higher interest rates. Not a smart money move, especially in the current economy.
While some lenders may offer convenience checks with deferred interest, thatâs not the same as âno interest,â says Bratsakis. Also, if you donât pay the loan in full, will you owe the full interest retroactively?
âThatâs where consumers have to be careful,â he says. With a convenience check or even a cash advance, âthatâs usually where consumers can get themselves into trouble if they canât pay it off and get hit with deferred interest.â
See related: What is deferred interest?
When it comes to peer-to-peer payments, cash really is king. You can then put it into a funded account with the money transfer platform or your bank account. And most peer-to-peer platforms let you do this for free.
âThe safest way to use these services is to send money person-to-person and be diligent about getting all the details correct so it doesnât go to the wrong person,â says Tetreault.
Only send to people you trust and know in real life, she says. âAnd before sending money make sure you understand what, if any, fees you might incur.â