What is cash back on a credit card?

Summary

• Cash back credit cards let you earn a percentage of your eligible purchases back as rewards — typically between 1% and 5%.
• You can usually redeem rewards as statement credits, direct deposits or gift cards, depending on your card’s terms.
• Some cards offer flat-rate rewards on all purchases, while others feature tiered, rotating, or customizable categories.
• Selecting the right cash back card depends on your spending habits and preferences.

Cash back on a credit card is a type of rewards program that gives you a percentage of your eligible purchases back in cash. Every time you use your card for qualifying purchases, you earn a small amount that’s credited to your rewards balance, which you can later redeem as a statement credit, direct deposit, or another cash-equivalent option.

Over time, those rewards can add up, especially if you use your card for everyday expenses. Let’s take a look at how cash back cards work and how much you can earn so you can choose one that best supports your financial goals.

How do cash back credit cards work?

A cash back credit card works much like any credit card. You use it to make purchases, like filling up the car or picking up lunch, and your card provider later sends you a statement for what you owe.

The difference is that with a cash back card, you earn a percentage of your eligible purchases back as rewards. Depending on your card, you might earn a flat rate on all purchases or higher rates in specific spending categories, such as dining, travel or online shopping, while earning a smaller base rate on everything else.

You should know, however, that not all credit card transactions qualify for rewards. Many rewards programs exclude:

• Cash advances.
• Balance transfers.
• Interest charges.
• Fees.
• Foreign currency purchases.

Lottery tickets and gambling-related purchases are also often ineligible for rewards.¹

Most cash back rewards become redeemable after your billing statement closes, and your purchases have been posted. You can typically redeem them in one of the following ways:

• Statement credit. Applying your cash reward toward your credit card bill is a simple way to lower your balance.
• Direct deposit. You can often move your cash back to a savings, checking or money market account.
• Gift cards or merchandise. Some rewards programs let you turn your cash back into a gift card or use it to buy goods from partner retailers.

Cash back rewards are an easy way to get more value from your everyday spending. Whether you prefer to save your rewards or redeem them as you go, a cash back card can make your purchases work harder for you. Just remember to pay your balance in full and on time to avoid interest charges that could offset your rewards.

How much cash back can you earn?

How much you can earn depends largely on how the rewards program is configured. That includes what percentage of your purchases go toward rewards – usually between 1% and 5%² – and what types of purchases trigger those rewards.

Most rewards programs fit into one of the following three structures:

• Flat-rate cash back. With a flat-rate card, you earn the same percentage back on all eligible purchases, no matter where you shop.
• Tiered cash back. A tiered card, such as the U.S. Bank Smartly™ Visa Signature Card, offers different reward rates based on spending categories and, in some cases, transaction levels or balances.² For example, a card might offer its highest rate for travel, a slightly lower rate for restaurants and a base rate for all other purchases.
• Rotating cash back. Similar to a tiered card, a rotating cash back card varies its rates by spending category. However, the highest-earning category either changes each quarter or can be selected by the cardmember. The U.S. Bank Shopper Cash Rewards® Visa Signature Card is a good example of a customizable rotating cash back program.

Additionally, card providers sometimes create bonus cash back offers. A bonus offer gives you an opportunity to increase your rewards temporarily, perhaps by activating a targeted offer or shopping at a specific store.

What cash back credit card is right for you?

The right cash back credit card for you is the one that makes it easiest to maximize your rewards. But what that looks like depends on your spending habits and personal preferences.

When you’re choosing a cash back card, ask yourself:

• How do I typically spend money? Do you spend fairly evenly across all categories? A flat-rate card might be the best option for you. But if one category stands out – perhaps your long commute means you spend a lot on gas – or your spending changes throughout the year, then a tiered or rotating category card may help you earn more.
• What are the fees? Some cash back reward cards charge annual fees, and that cost may exceed the value you get in cash back.²
• How do I want to redeem my rewards? Cards that offer multiple redemption options, like statement credits, direct deposits or gift cards, give you the flexibility to choose what’s most valuable to you. Just be sure to check for limitations. For example, some card providers may only allow deposits into accounts with them.
• How much effort do I want to put into managing my card? Some people enjoy tracking categories and activating offers, while others prefer a straightforward, automatic system. Knowing your comfort level can help you choose the card that fits your lifestyle best.

Keep in mind that cash back rewards only help if you’re not losing their value to interest. If you tend to carry a balance, focus on paying down what you owe before prioritizing rewards.

Make the most of every purchase with a cash back card.

Every qualifying purchase can put a little extra money in your pocket when you use the right cash back card. Find one that matches how you spend and how you like to manage your money, and you’ll turn everyday purchases into steady financial progress.

Sources

¹ NerdWallet, “How Do Cash-Back Credit Cards Work?” https://www.nerdwallet.com/credit-cards/learn/how-do-cash-back-credit-cards-work, September 29, 2025, accessed October 16, 2025.

² Investopedia, “You ask, Equifax answers: How often do credit card companies report to the credit Bureaus?” https://www.equifax.com/personal/education/credit-cards/articles/-/learn/credit-card-reporting-credit-bureaus/, accessed October 10, 2025.