There are plenty of cash-back credit cards on the market. Some are marketed toward travelers, foodies, or just people who purchase a lot of groceries and gas. You'll find cards offering unique rewards like flight points, free hotel stays, and discounts on certain types of purchases in addition to the coveted cash-back rewards.
Whether you're earning one percent or five percent cashback bonus, you'll want to make the most of it. After all, the cashback perks are probably one of the reasons you got the credit card in the first place! This article seeks to help you maximize the benefits of your cash-back credit card and lay out all the different ways to use them.
How Do You Earn Cash Back Rewards?
Earning bonus cash and other rewards varies between credit card issuers. In basic terms, you make a purchase and earn cash or points as a result. Some cards, like Capital One's SavorOne card, offer 3% cash back on entertainment purchases. Citi's Premier One card rewards users with ThankYou Points. All cash-back credit cards (or at least their card issuers) have their own systems, but they all ultimately reward you for making purchases on the card.
Cash or points are attached to your account and stay there until you're ready to redeem them. Some cards may require you to reach a certain threshold before redeeming them, while others allow you to do it at any time. Keep reading to discover different ways to use all those rewards.
There are a few ways to get actual cash when you redeem cash-back rewards. Depending on the card, you may be able to link your bank account, savings account, or another eligible bank account, and utilize direct deposit. In that case, you'll likely wait three to five business days for the credit card rewards to process and show up in your bank account. It could take up to a week.
Alternatively, your card issuer might mail a check and you'll see your cash in a couple of weeks. Redeeming your rewards for actual cash can help build a nice little savings fund, especially if you regularly earn rewards.
Most rewards credit cards have the option to redeem rewards or points through a statement credit. Your credit card issuer might allow you to select a certain purchase to apply cash rewards toward, or it might simply apply to your remaining balance as a whole.
For example, if you have $40 in rewards and have a $38 gas visit, you could apply $38 from your rewards to cover that purchase. You could also simply apply the full $40 to your account, reducing your overall balance by $40.
This way of redeeming rewards tends to be fast and simple, but of course, you don't actually get any of the cash yourself. You're just cutting down on your bill. That's plenty of reason to keep it one of the most popular redemption options, though.
Gift cards are one of the many bonus categories typically available. Instead of redeeming cash, you can trade your points or reward money for gift cards to your favorite store. There are several reasons to choose this option. It's a great way to get some easy gifts around the holidays. Just redeem your cash-back rewards for a handful of gift cards and voila! Your shopping is finished without leaving your home.
For anyone who takes out cash intending to spend it on one thing but never makes it to the finish line, gift cards are a good way to make sure the money goes where you intend it to go. If you need a new pair of shoes and your credit card rewards programs allow you to trade in points for a Nike gift card, you'll get those shoes without worry!
If you do a lot of traveling, you probably have a credit card that rewards your frequent trips through the sky. There are several travel-friendly cards out there that allow you to accumulate points and exchange them for flights or other travel expenses (like hotel rooms). It's hard to say no to a free flight, especially if you're going to be in the air anyway.
It's important to keep in mind that redeeming your rewards for a flight isn't always the best deal, though. Sometimes you can find flights cheaper than what you spent to earn the rewards points. In that case, it might be wisest to hang onto them for a later date unless you need to use them quickly.
Gift cards were mentioned earlier, but some credit card companies allow you to exchange cash back points for things like PayPal credit or apply your rewards directly to purchases on Amazon. If you do a lot of shopping online, even for standard household items, it's a convenient redemption option. Sometimes it's quicker than waiting on a check in the mail, too, so you can use it faster!
When Is the Best Time to Redeem?
The best time to use your rewards is when you feel like using them. That's the simple answer. Realistically, though, the question is tied to the way you plan to use your points.
If you're putting them toward a flight, for instance, you should do what you can to hang onto them. Let them sit and accumulate while you continue visiting grocery stores, making eligible purchases, and otherwise carrying on with life. However, if you intend to redeem them as actual cash, there's no reason to wait. Drop that extra money into a savings account and let it collect interest. Doing so is like paying yourself twice!
When you apply for your cash-back credit card, ask yourself what you plan to do with it. Have a game plan going in, and you'll know how to allocate your points and strategize around getting more of them and out of them.
Cash-back rewards are like little presents to yourself just for buying things. The more you buy, the more you earn. You don't even have to redeem them the same way twice. Treat yourself to a free hotel night then use the rest of your points to grab your best friend a gift card for their birthday. The possibilities are endless.
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