How Does Cashback Rewards Work?

Cashback is one of the most sought-after perks for credit and debit cards. Many banks and lenders offer cashback rewards in some form. It's becoming so popular that many use these rewards to gain a competitive edge. As a result, you can easily shop around and find the best program for you.

But how does cashback work?

Cashback 101

The best way to look at cashback rewards is to think of them as a more modern version of old-school rebate programs. You pay full price for your items using your cashback debit card or credit card as you normally would. But for every qualifying purchase, you receive a small percentage of the purchase price as a refund.

It's a simple concept, and you can usually earn cashback quickly. Banks and card providers reward them at the end of every statement cycle. Some even provide cashback on qualified purchases weekly or daily!

Qualified Purchases and Spending Categories

So, what purchases are eligible for cashback rewards? Well, that depends on your bank. Here's where cashback programs can vary.

Generally, your provider will restrict what types of purchases count towards the rewards program. For example, some banks limit cashback to dining or entertainment expenses. Others provide it for fuel or groceries. Some provide cashback for multiple spending categories, but how much you can earn varies.

You may also see rewards programs that offer extra cashback for purchases with specific partners. Many providers have rolling spending categories and extra-earning opportunities, giving you new ways to earn every few weeks.

How Much Cashback Can You Earn?

There are many different types of cashback debit card and credit card options. More exclusive cards typically provide higher cashback rates. Some of the best offer up to 5 percent on qualifying purchases!

You can also find cards that offer cashback on every purchase. However, the rate is often lower when there are no specific spending categories to worry about.

Providers can reward cashback in a couple of different ways. They may come as points that you can redeem for travel or prizes. Others treat cashback as refunds that go back into your account.

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