What Is Cash Back?

What Is Cash Back?

Let me explain cash back to you directly: it's a rewards program tied to credit and debit cards that gives you back a percentage of what you spend on purchases. You've probably heard it called 'cashback' too, and it's become hugely popular over the last couple of decades. Most often, it's a perk on credit cards where you get refunded a small slice of your spending once you hit a certain amount.

There's also the debit card side, where you can pull extra cash from your account right at the point of sale, usually a bit more than the item's cost. That's cash back in a literal sense, handed to you on the spot.

Key Takeaways

Cash back is essentially a credit card feature that pays you back a percentage of your purchases in actual cash, which you can apply to your bill, deposit in your bank, or get as a check. You can also use apps and websites to earn cash back on everyday buys. Not all programs charge annual fees or high interest rates, but some do. And remember, cash back can mean getting extra cash during a debit card transaction at checkout.

How Cash Back Works

Cash back started back in 1986 with the national launch of the Discover card, which kicked off this whole concept. Now, almost every major card issuer has it on at least one card—it's their way to keep you using it and maybe steal you from competitors. Unlike points that you can only redeem for stuff from the issuer, cash back is straight cash, showing up on your monthly statement.

You might get it deposited directly into your bank, as a credit on your bill, a gift card, or even a check in the mail. That 1986 debut was a game-changer, pioneering these rewards.

Cash Back Amounts

The rewards typically range from 1% to 5% per transaction, and sometimes more through merchant deals where specific stores give you extra. You'll see flat-rate cards that give a fixed percentage on everything—simple, no tracking needed. Then there are tiered ones, like 3% on gas, 2% on groceries, and 1% elsewhere, or short-term promos boosting categories like restaurants.

You usually need to spend a minimum, say $25, to qualify, and some let you use rewards for things like travel or electronics. Essentially, the card company shares part of the merchant fee with you. If you're deciding between flat or tiered, think about your spending: flat if it's varied, tiered if you focus on categories like gas and food.

Cash Back Sites and Apps

You can also earn through cash back apps and sites that partner with retailers like Amazon or Target for deals on items. Sign up for free, log in, click through to the store, and shop—the app tracks it and credits you a percentage, often to PayPal or your bank. These cover categories like restaurants and delivery too.

Rakuten

Rakuten, formerly Ebates, works by earning commissions from over 2,500 stores like Lowe’s or Walmart and sharing them with you—up to 40% back. Payouts go to PayPal or by check. It has a B rating from the BBB with mixed reviews, averaging 2.65 stars from 191 users, some complaining about missing rewards.

Ibotta

Ibotta focuses on groceries but works in stores like Walmart or Costco, and online too, covering over 1,500 brands in health, travel, and more. It includes subscriptions and food delivery. They've paid out over $1.8 billion since 2012 to 200 million users, with redemptions in 24 hours. BBB gives it a B, with 3.57 stars from 361 reviews—some delays noted, but others earn quickly.

Shopkick

Shopkick gives 'kicks' points for scanning products or just entering stores, redeemable for gift cards from places like Starbucks or Amazon—not cash, but close. It uses Bluetooth for walk-in rewards and offers deals. BBB rates it A+, but only 44 reviews average 1.32 stars, mostly complaints.

Cash Back on a Debit Card

With debit cards, you can add extra to your purchase and get cash back at checkout, like for tipping. It's not a rebate— you're just charging more and getting the difference in cash.

Advantages and Disadvantages of Cash Back

The upside is clear: you earn back on spending, whether cards or online, with possible discounts, sign-up bonuses, and easy rewards. But downsides include high APRs, fees, earning caps, and losing rewards if you miss payments. Apps might delay payouts too.

What Does Cash Back Mean?

It means a program refunding a percentage of purchases, or withdrawing cash at point of sale with debit cards.

Is Cash Back Free Money?

Not really—card companies expect your spending to cover the rewards via fees and interest.

What Stores Give Free Cash Back?

Stores like Kohl’s, Home Depot, and CVS offer it through their programs.

Can I Get a Cash Back Signing Bonus?

Yes, bonuses can be $200 to $1,500 if you meet spending requirements.

What Are the Best Cash Back Credit Cards?

Deals change, so research current ones or check reviews for top picks.

The Bottom Line

Using cash back cards or apps lets you earn on purchases, but watch for high rates, wait times, and caps. More use means more earnings, though travel rewards might sometimes be better value.