Can I Get Cash Back With a Credit Card?

The term “cash back” in the context of credit cards can refer to two distinct financial concepts. One refers to a rewards program that provides a percentage of money back on purchases made with the card. The other involves obtaining physical currency, akin to a loan or withdrawal, directly from the credit card’s available line of credit. Understanding the differences between these two applications is important for consumers.

Credit Card Cash Back Rewards Programs

Credit card cash back rewards programs allow cardholders to earn a portion of their spending back as a benefit. This cash back is not a loan but rather a reward for using the credit card for qualifying purchases. Cardholders typically earn a percentage of the amount spent, which accumulates over time.

Earning mechanisms vary among programs. Some offer a flat percentage on all purchases, commonly 1.5% to 2%. Other cards provide higher percentages, often 2% to 5%, in specific spending categories such as groceries, gas, or dining.

Some programs feature rotating bonus categories that change quarterly, offering elevated rewards, frequently 5%, on purchases made within those designated categories. These rotating categories often have spending caps, after which the earning rate typically reverts to 1% for those purchases. Cardholders usually need to activate these categories to earn the higher rate.

Earned cash back can be redeemed in several ways. Common redemption options include receiving a statement credit, a direct deposit into a linked bank account, or a check by mail. Other options include gift cards, merchandise, or applying the cash back towards online shopping or travel bookings through the issuer’s portal.

Credit Card Cash Advances

A credit card cash advance involves borrowing cash against a credit card’s available credit limit. This transaction directly provides physical currency rather than facilitating a transaction for goods or services. It functions as a short-term loan from the credit card issuer to the cardholder.

Cash advances can be obtained through various methods. These include withdrawing cash at an ATM using the credit card and a personal identification number (PIN). A cardholder can also visit a bank branch and request a cash advance from a teller. Some credit card issuers provide convenience checks that function as cash advances. In some cases, money transfers initiated online may also be classified as cash advances.

Cash advances are an expensive form of borrowing. A cash advance fee is charged, often ranging from $10 or 3% to 6% of the advanced amount, whichever is greater. Interest rates applied to cash advances are generally much higher than those for standard purchases, commonly ranging from 24.99% to 29.99%. Interest begins accruing immediately from the transaction date, unlike regular purchases which often have a period before interest charges apply if the balance is paid in full.

Distinguishing Cash Back Rewards from Cash Advances

While both concepts involve the term “cash back,” their nature and financial implications are opposite. Cash back rewards are a benefit earned from spending on a credit card, essentially a rebate on purchases. The cardholder receives this benefit without incurring additional debt or interest charges, provided the overall balance is paid on time.

Conversely, a cash advance is a form of borrowing money. This transaction comes with upfront fees and a higher annual percentage rate (APR) compared to typical credit card purchases. Interest on a cash advance begins accruing immediately, without any grace period, making it a costly way to access funds. Therefore, while cash back rewards are a financial gain, cash advances represent a financial liability with substantial associated costs.