Can You Do Cash Back With a Credit Card?

Accessing Physical Cash with a Credit Card

Using a credit card to obtain physical money is done through a cash advance. A cash advance allows you to borrow cash directly from your credit card’s credit limit. This transaction is treated differently than standard purchases and comes with immediate financial implications.

You can obtain a cash advance in several ways. These include withdrawing money at an automated teller machine (ATM) using your credit card and a personal identification number (PIN). Another method involves visiting a bank branch and requesting a cash advance from a teller, presenting your credit card and identification. Some credit card issuers also provide convenience checks, which function like personal checks but draw funds from your credit card’s available cash advance limit.

Cash advances are costly due to associated fees and interest rates. Most credit card issuers charge a cash advance fee, often a percentage of the amount advanced, ranging from 3% to 5%, with a minimum flat fee between $10 and $20, whichever is greater. Unlike regular purchases, interest begins accruing immediately on a cash advance from the transaction date, as there is no grace period. The annual percentage rate (APR) for cash advances is also higher than the APR for standard purchases, often several percentage points above the purchase rate.

Understanding Cash Back Rewards Programs

“Cash back” also refers to a popular credit card rewards program, where cardholders receive a percentage of their spending back. This form of cash back is an incentive offered by credit card companies to encourage card usage. It functions as a financial benefit on qualifying purchases rather than a way to access physical currency.

Cardholders earn cash back rewards in one of two primary ways: a flat rate on all eligible purchases or higher rates in specific bonus categories that may rotate quarterly or be fixed for certain spending types, such as groceries or gas. For example, a card might offer 1% cash back on all purchases, or 5% cash back on spending in rotating categories up to a certain quarterly limit. The earned rewards accumulate in a rewards balance.

Once accumulated, cash back rewards can be redeemed through various methods:
Receiving a statement credit, which reduces your outstanding balance.
A direct deposit into a linked bank account.
Receiving a check mailed to your address.
Converting the rewards into gift cards for various merchants.

This process does not involve receiving physical cash directly from a merchant at the point of sale, as one might with a debit card transaction.

Distinguishing Cash Access and Rewards

The term “cash back” can cause confusion because it refers to two distinct financial concepts with credit cards: accessing physical money through a cash advance and earning rewards through a cash back program. The fundamental difference lies in their nature: one is a form of borrowing, while the other is an earned benefit. A cash advance provides immediate physical currency, drawing directly from your credit limit as a loan.

Conversely, cash back rewards are a rebate on your spending, accrued over time through eligible purchases. The financial implications of each also vary significantly. Cash advances are expensive, incurring upfront fees and immediate, higher, interest charges, making them a costly way to obtain funds.

Cash back rewards, however, represent a financial gain, effectively reducing the net cost of your purchases. While a cash advance increases your debt and incurs additional costs, cash back rewards reduce your expenses or provide a direct financial return. Understanding this distinction helps manage your credit card effectively and avoid unnecessary fees.