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Cashback

What Is Cash Back?

Cashback, also known as “cashback,” refers to two types of financial transactions related to credit and debit cards that have grown increasingly popular in the last two decades. Most commonly, it's a credit card benefit that refunds the cardholder a small percentage of the amount spent on each purchase above a certain dollar threshold.

Cash back also describes a debit card transaction in which cardholders receive cash when they make a purchase generally, a small amount above the item cost.

KEY TAKEAWAYS

  • Cash back refers to a credit card benefit that refunds the cardholder’s account a small percentage of the sum spent on purchases.
  • Cash-back rewards are actual cash that can be applied to a credit card bill or received as a check or bank account deposit.
  • Cash-back apps and websites can offer consumers a way to earn money back on purchases.
  • Some cash-back rewards programs come with annual fees or a high annual percentage rate (APR), but not all.
  • Cash back also describes a debit card transaction in which cardholders receive cash when they make a purchase generally, a small amount above the item cost.

How Cash Back Works

An extension of credit card issuers’ general rewards programs, cash-back programs date to 1986, when the Discover card was launched nationally, introducing the concept. Since then, they have become universal, and nearly every major card issuer now offers the feature on at least one of its products. It’s an incentive for existing customers to use the card early and often and for acquiring new clients or poaching them from a competitor.

Unlike old rewards points, which can only be used to buy things or services, or gift cards offered by the card issuer, cash-back rewards are what their name implies: cash. They are usually presented to the cardholder on the monthly credit card statement. Customers may receive the cash-back reward through direct deposit to a linked bank account, as a declaration credit reducing that month’s bill, as a gift card, or through the mail by check.