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How to get cash back from a credit card?
Cashback credit cards offer a simple way to get rewards from your everyday purchases and spending. Unlike traditional rewards programs that rely on points, cashback cards typically give you back a percentage of your eligible spending—either as cash, a statement credit, or a reduction in your outstanding balance.
You can find several credit cards with cashback offers on the market, but different cards may have different rules and criteria for how the cashback reward is earned. For instance, some cards may offer cash back as an introductory offer, while others may offer ongoing cashback rewards on all purchases or restrict it to a few categories, such as groceries, fuel, or dining.
To get the most value from your cashback credit card, you may need to meet the card’s spending criteria—such as a minimum monthly spend or purchasing within promotional categories.
Reading important documentation supplied by the credit card provider, such as the Target Market Determination (TMD) and the Key Facts Sheet (KFS), can help you to work out if that card is suitable for your personal needs. It’s also good to keep in mind that these types of cards may have annual fees and interest rates that are higher than some types of ‘no frills’ credit cards.
How do cashback credit cards work?
Cashback rewards will work differently depending on the card. Some rewards cards offer cashback based on a percentage of card spending, while others provide cashback as an introductory offer. With a number of credit cards, you may have the option to select a cashback as part of the card issuer’s broader rewards program.
To illustrate how cashback cards typically work and their conditions, we’ve taken a look at a selection of different types of cashback credit cards:
- introductory/bonus cashback credit cards
- cards with ongoing cashback rewards
- credit cards with cashback as part of a broader reward program
1. Introductory/bonus cashback credit cards
Introductory or bonus cashback credit cards are typically only available to new customers. These types of offers usually require the customer to meet spending conditions to qualify for cashback and are also usually only available for a limited time. For instance, a customer may qualify for a $200 cashback when they spend $1,000 on purchases within the first three months of having the card.
2. Ongoing cashback rewards
These types of credit cards typically offer ongoing cashback rewards without a time limit. You earn cashback on eligible purchases, and the amount you earn is based on how much you spend.
That said, not all transactions may qualify. For example, you may only be able to earn cashback from purchases in certain categories (such as buying goods at retail stores or dining in at certain restaurants) and not from other transactions (such as direct debits used for paying bills).
Some cards may also cap the amount of cashback you can earn in a given month or year. Others might require a minimum spend threshold before cashback applies.
3. Credit card cashbacks as part of a broader reward program
These cards let you convert rewards points into cashback or similar benefits, like gift vouchers. To use this feature, you usually need to be enrolled in the card issuer’s rewards program.
There may be specific conditions on how the cashback works. For instance, the cashback might only be applied as a credit to reduce your card balance, rather than being paid out in cash. If you’re converting points to a gift voucher, you may need to select from a limited list of participating retailers or service providers.
Understanding how the rewards program works is important to make sure the cashback option suits your needs.
Cash advance vs cashback credit cards
Most credit cards allow you to withdraw cash from an ATM or transfer money into your bank account—this is known as a cash advance. Cash advances should be approached with caution, however, as they can end up costing you more than you might expect. Since the money comes from your credit limit (not your savings), it’s treated as a loan. As a result, cash advances often attract high interest rates and there’s usually no interest-free period on such loans.
When you use your credit card to withdraw cash, you may also be charged a cash advance fee, either as a flat fee or a percentage of the amount withdrawn. These costs can add up quickly, so it’s important to understand the potential expense of using your credit card in this way.
In contrast, a cashback credit card is designed to reward spending. These cards give you a percentage of your eligible purchases back as cashback, either credited to your statement or converted from rewards points. Some cards offer ongoing cashback across everyday spending, while others limit cashback to specific categories or require a minimum spend.
While cashback credit cards may come with annual fees or higher interest rates than basic cards, they can offer good value if they match your spending habits and you pay off the balance in full each month.
What to consider if you’re thinking of a cashback credit card
1. How will you use the card?
Cashback credit cards offer different reward structures and finding one that matches your spending pattern can help you get more out of your card. For example, if you tend to make larger purchases and always pay your balance in full, a card offering a fixed cashback rate may provide good value. On the other hand, if your spending is moderate, you may want to consider a card where you can still earn a cashback with a low level of spending.
2. What are the rules of the cashback?
The terms and conditions of a card will explain the rules around cashbacks that you need to be aware of. For instance, some cards only apply cashback to certain spending categories, while others may have minimum spend requirements, caps, or expiry dates. Always read the terms and conditions to understand exactly how and when you’ll earn cashback. Also, you need to be cautious and avoid overspending just to earn rewards, especially if you won’t be able to pay off the balance in full.
3. What is the cost of the card?
Another factor to consider is the card’s fees and purchase interest rate. Annual fees, purchase interest rates, and other charges can quickly eat into any cashback benefits.
When you consider how you will use the card, and the cashback you may receive, will the benefits outweigh the costs? Also, check for extra costs like late payment fees, which can add up over time.
Is cashback on a credit card worth it?
Whether or not a cashback credit card is worth it depends on your personal circumstances and how you use the card. To decide this, it could be worth weighing up the pros and cons of having a credit card in the first place. Then, consider some of the potential pros and cons of a cashback credit card:
Some potential advantages of a cashback credit card
- ‘Cash’ back: Of course, the most obvious potential advantage of a cashback credit card is the ability to earn cash or cash-like rewards—by using a credit card.
- Simplified rewards: Because the reward is cash (or something like it), it’s possible that working out the monetary value of your rewards could be easier than trying to work out the equivalent value of earning other types of rewards, such as redeeming points for flights or products. This could be particularly the case if the card is the ‘percent per dollar spent’ type of cashback.
Some potential disadvantages of a cashback credit card
- Higher annual fees and interest rates: A review of rewards credit cards on Canstar’s database found that rewards credit cards (including cashback cards), in general, have a higher annual fee than other types of cards. Their purchase rate tends to be higher, too.
- Complex terms and conditions: There are typically a lot of terms and conditions that apply to cashback rewards, including how you can access the cashback rewards you have earned. For example, the cashback you receive typically isn’t paid as cash-in-hand or deposited to your everyday account.
In most cases, the cashback is paid into your credit card account. So the only way to access the cashback is to put more purchases on the card. And, having cashback rewards paid directly to your card account can bring its own set of conditions. Additionally, cashbacks don’t typically count towards the minimum payment due on a card. It can also take time for the card issuer to process your cashback.
Relying on cashback rewards to pay off a part of your credit card bill is unlikely to be a reliable strategy, as the amount of cashback is often capped to a small percentage of the total spend, and the time taken for the cashback in your account may also vary.
