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Cash back is a form of credit card rewards you earn when you make purchases with your credit card. Credit cards generally offer one of three reward structures: cash back, points and miles. You might earn a flat rewards rate on all purchases, or a higher rate for particular types of purchases. For example, bonus categories may include travel, dining, groceries and more.
Cashback is the most flexible type of credit card rewards because they give you a percentage back for every purchase you make with the card. The percentage you earn depends on the card.
Other rewards cards either offer points or miles to cardholders. With these cards, you earn a certain number of points or miles for each dollar you spend. That number can vary greatly depending on the card you use and what you spend your money on. However, even if you are technically earning points or miles, you may be able to redeem them for cash back.
Once you've earned rewards, you can redeem them in a variety of ways. The most common redemption options for cash back cards include:
- Statement credits
- Deposit to a linked bank account
- Checks
- Gift cards
- Payments for a student loan or mortgage
- Charitable donations
However, you may get a better redemption rate when choosing particular options.
In fact, what the rewards are called isn't the most important. Ultimately, the best rewards program, whether it's cash back or not, is the one that best aligns with your spending habits and preferences. Understanding how the rewards programs work and their value is what matters most.
