Cash back cards are worth it if you do a lot of spending on your credit card.
However if you rarely use your credit card or don't spend a lot on your credit card then the cash back credit card is usually not worth it.
Cash back cards do actually give you money which can be on your credit card or you can transfer it to your bank account.
Every time you make a purchase with your cash back credit card you get a percentage of it such as 1 to 5 percent which are credited to your rewards account.
Then you can redeem those points or cash value as a statement credit or as a direct deposit to your bank.
The redemption value of each point may be higher than if you were to redeem in cash.
The money is made by the merchant and the bank and then is paid back to you by the bank.
The bank also charges merchants a fee for each transaction which helps to offset the cost of rewards.
The banks incentive is to get you as a credit card holder to spend more money and hopefully carry a balance that you pay interest on.
The merchant does not absorb the fee because they just increase their prices to compensate for it.
A cash back credit card is a type of credit card that offers rewards that you can use to earn cash on purchases.
The cash back credit card refunds the cardholder a small percentage of the amount that is spent on each purchase that is above a certain dollar threshold.
Cashback is the deal between a credit card company and retailers including online retailers.
For every purchase, the retailer has to pay a percentage of money back to the credit card company.
The bank then opts to share a portion of these earnings with the customer.
You can redeem the cash back rewards for statement credits, account deposits or purchases.
In some cases, you can convert the cash back rewards into points and use them for other types of redemption.
A downside of cash-back credit cards is that you can't strategize to get outsized value, like plotting to use airline miles for a first-class ticket that would otherwise cost thousands of dollars.
And they also come with fewer perks than you'll find on higher-end cards — no airport lounge access or free hotel nights.
The more that you use the cash-back rewards programs with your cash back credit card, the more money that you stand to earn.
There are a few drawbacks to a cash-back rewards credit card, including a higher-than-usual APR, having to wait to access your cash-back funds, and a cap on how much you can earn each year.
The best cashback credit card that I recommend is Robinhood's Gold Visa card, which gives 3% cashback on everything without limit.
Having a cash back card for everyday spending and a different rewards card for travel expenses may make the most sense for you.
It may help to consider a card's rewards, fees, and benefits before deciding if a cash back credit card is worth applying for.