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How Does Cash Back Work on Credit Cards?

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When we make a purchase, our credit cards sometimes offer cash rewards back to us. This means you can receive a percentage of a qualifying purchase back. The specific amount depends on your purchase and can be anything from dollars to pennies. 

Although earning a few pennies may not seem like much, these points add up quite nicely. This is beneficial especially if you’re making purchases every day on your credit card. 

However, these cash reward cards differ in important ways depending on your rewards program and your specific credit card. Here’s what you need to know about how rewards works on credit cards. 

How Cash Back Works on Credit Cards

How cash back works on credit cards depends on the card and its precise details. However, there are general ways most reward credit cards work. 

Some cards have the same cash reward rate for every purchase. However, others offer higher percentages for specific purchases, such as traveling, dining out, groceries, or gas. There are certain reward cards that rotate their highest-earning reward categories every quarter or where you can change your bonus category.

Every card’s rewards system works differently. So if you want to learn how to earn back cash on your credit card, you can contact your bank and ask how your card’s rewards system works.

What Earnings Can You Receive?

Even though cards have different ways of offering rewards, there are some general categories to consider.

Flat-Rate Cash Back Cards

Flat-rate cash back credit cards offer the same cash percentage for every purchase that qualifies. It doesn’t matter how you’re making your everyday purchases. You can shop at the grocery store or shop online, and you’ll still earn the same percentage per dollar spent.

Flat-rate reward cards feature the simplest rewards system you can find. All you have to do is use your card wherever you go as you make your purchase. Many people prefer these types of cards and find them convenient.

Rotating Rewards Cards

A rotating cash back rewards card is a type of tiered rewards card with changing bonus categories. Generally speaking, these categories change every three months.

There are many people who prefer these cards because the limited-time bonus categories normally offer a high percentage of cash back. However, it’s important to remember that earning bonus rewards is restricted to a certain amount in purchases each quarter. Furthermore, the issuer picks the categories when it comes to specific cards.

A rotating rewards card could be an excellent financial addition if you don’t mind keeping track of the changing categories and the possibility of having to activate them in order to earn bonus rewards.

Bonus Category Cash Back Cards

Other credit cards offer higher percentages on certain types of purchases. These cards are known as  “bonus category cash back cards” because you receive a higher rate back on cash purchases in a certain category. These can be for things such as travel, groceries, or gas.

Some bonus cards have rotating rewards categories and others that offer the same high rate year-round. There are even cards that allow you to personally select your bonus spending categories or offer other bonuses on your most eligible spending category.

Typically, you should expect bonus categories to be capped, with the cash back rate to eventually drop. Furthermore, there are activation requirements for rotating cards to score a higher rate.

What Should You Look for In a Cash Back Card

When it comes to finding the best card for rewards, there are automatic variables to consider. Many reward cards require a fairly good credit score, while some of the best options require a very strong score. These types of cards can offer large intro bonuses, high reward rates, and further rewards for the cardholder.

For people with poor credit, there are secured cards that offer rewards. The downside about these cards, however, is that they can have higher fees, lower rewards rates, and very few cardholder benefits. The best cash reward cards can depend on which cards you qualify for and how you plan to use the card. It’s best to look for a card that covers as much as possible. 

UCCU 4-3-2-1 Credit Card

At UCCU, you can score a credit card with a low percentage and get cash back on everyday purchases you make the most. UCCU offers our 4-3-2-1 credit card that gives great cash rewards with no monthly or yearly fees associated. This card is specifically designed to help maximize the rewards you receive on purchases you make. 

A few rewards include: 

  • 4% Travel: This includes any expenses related to travel. Common expenses on this include car rentals, airline tickets, and hotels.
  • 3% Gas: Any gas purchases should be covered under this section. Often, expenses purchased at a gas station also may fall under the 3% as it comes from a gas-centered business.
  • 2% Groceries: This includes any major or minor grocery store chain including Costco and Sam’s Club.
  • 1% on everything else:

Furthermore, at UCCU, every visa credit card offers protection, with EMV chip technology and Visa’s ZERO Fraud Liability policy. This is our guarantee you won’t be held responsible for unauthorized charges if your card is lost or stolen. It also comes with no unexpected rate hikes, annual fees, or balance transfer fees.

Enjoy the Benefits of Cash Reward Cards

When it comes to figuring out how rewards work on credit cards, you always need to consider your overall situation. Details such as your credit score, financial needs, and what you frequently spend definitely impact which credit card works best. Also, knowing what benefits each credit card offers as a reward will help you make the best choice. 

However, despite knowing all of this, making a choice for your new credit card can still be hard. There can be multiple options that make the final decision determination difficult. In our following blog, we break the process down so you can decide which credit card is best for you and your lifestyle.

How to Choose the Best Credit Card

*APR = Annual percentage rate. Variable APR ranges from 12.75% to 18.00% APR.  Financing is subject to UCCU membership and underwriting criteria, not every applicant will qualify. 1% foreign transaction fee. Federally insured by NCUA.