Can You Use Cashback to Pay Your Credit Card?
Learn how to effectively apply credit card cashback rewards to reduce your outstanding balance and support your financial goals.
Credit card cashback rewards offer a straightforward way to receive a percentage of your spending back, effectively providing a discount on purchases. These rewards are accumulated based on eligible spending, and the amount earned can vary depending on the card’s terms and spending categories. Cardholders often ask about applying these rewards directly to their credit card balance.
Understanding Cashback Redemption Options
Credit card companies provide several common methods for cardholders to redeem their accumulated cashback rewards. One frequent option is a statement credit, where the reward amount is applied directly to your credit card account, reducing the outstanding balance. Another widely available method is a direct deposit, which transfers the cashback funds into a designated checking or savings account.
Cardholders may also have the choice to receive their rewards as a physical check mailed to their address. Some issuers also allow redemption for gift cards, merchandise, or direct use at checkout with specific online retailers. The availability and value of these options vary by card issuer.
Using Cashback to Cover Credit Card Payments
While credit card rewards portals typically do not offer a direct “pay my bill” function using cashback, these funds can be used to cover credit card payments. The most direct way is through a statement credit, which is applied to your account balance. This action reduces the total amount owed on the card, making your next payment smaller or effectively covering a portion of the balance. It is important to note that a statement credit lowers your balance but does not count as a payment toward your minimum due amount. Therefore, cardholders must still ensure they make at least the minimum payment by the due date to avoid late fees and interest charges.
Alternatively, if you choose to redeem your cashback as a direct deposit to a bank account or a physical check, you can then use those funds to manually pay your credit card bill. This method provides greater flexibility, as the cash is first returned to you, allowing you to allocate it as needed. For example, you could transfer the deposited funds from your bank account to your credit card company through an online payment or use the check to make a payment. This approach effectively uses your earned cashback to fulfill your payment obligation, contributing to better financial management.
Smart Strategies for Cashback Rewards
Integrating cashback rewards into personal financial management can be strategic for financial health. One effective approach involves setting up automatic redemptions, where available, to regularly apply your cashback as a statement credit or direct deposit. This ensures that earned rewards are consistently put to use, either reducing your credit card debt or bolstering your savings without requiring manual intervention. Some card issuers allow you to set a redemption threshold, triggering an automatic payout once a certain amount of cashback is accrued.
Another strategy is to time your redemptions to coincide with larger expenses or when you anticipate a higher credit card balance, maximizing the impact of the cashback. For example, redeeming a significant amount of cashback as a statement credit before a large bill is due can help manage cash flow. Incorporating cashback into your budgeting strategy can help offset everyday spending. By treating cashback as a rebate, you can view it as a reduction in the cost of purchases, freeing up funds for other financial goals or to pay down your credit card balance.