How do cash-back credit cards work?
Editor's Note
What is a cash-back credit card, and how does this kind of card work?
In short, cash-back credit cards are, as the name suggests, cards that provide a cash-back return on some or all purchases made with the card. The earning rates on these cards can be complex or incredibly simple.
Cash-back cards are generally compared against travel credit cards, which offer points or miles with a given card issuer, hotel or airline's loyalty program. Let's examine the ins and outs of cash-back cards to determine if they're right for you.
Related: Cash back vs. travel rewards: How to choose a credit card
What is a cash-back credit card?
Most cash-back cards offer a simple return rate on purchases made in a given set of categories. For example, if a credit card offers 2% cash back on every purchase, you'll earn 2 cents back per every dollar spent.
Some credit cards offer a flat return rate on all purchases, while others offer higher return rates on popular spending categories.
Unlike travel credit cards, cash-back cards offer rewards with a fixed cash value — a double-edged sword, depending on how you redeem your rewards.
Related: The pros and cons of cash-back credit cards
How do cash-back credit cards work?
Cash-back credit cards are typically more straightforward than their points and miles counterparts. Generally speaking, you'll earn cash back on all eligible purchases, excluding things like:
- Balance transfers
- Cash advances
- Gambling-related purchases (including lottery tickets)
- Money orders
- Purchases of foreign currency and/or cryptocurrency
Purchases made through a digital wallet or wireless card reader can also be difficult to categorize, meaning you may not always earn the full rewards rate for those transactions.
Cash-back is generally issued at the end of your card's statement period or billing cycle and can be redeemed for a bank account deposit, statement credit, check, gift card, travel or other option, depending on the card.
Related: How to choose a cash-back credit card
Bottom line
Cash-back credit cards offer simple rewards for those who don't want to deal with points and miles.
Some cash-back cards offer a flat return rate, while others offer higher returns for different categories of purchases. Cash-back rewards can generally be redeemed for statement credits, converted into online shopping credits, used for travel or deposited directly into bank accounts.
Related: Are cash-back credit cards worth it?
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| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 5X | New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App. |
| 3X | Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines. |
| 2X | Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Pros
- Valuable dining and food-related credits
- Flexible rewards with airline and hotel transfer partners
- Multiple travel and purchase protections
- No foreign transaction fees
- Access to Amex Offers for additional savings (enrollment required)
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $8,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App.
- Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines.
- Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- Pay It® lets you tap in the American Express® App to quickly pay for small purchase amounts throughout the month and still earn rewards the way you usually do. Plan It® gives you the option to split up big purchases into equal monthly payments with a fixed fee. You’ll know upfront exactly how much you’ll pay.
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- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.