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Cash Back

What is Cash Back?

Cash back, sometimes called “cashback,” is when you receive a small portion of the money you spend back to you. Cash back is commonly received from credit cards and cash back apps. On credit cards, you might receive cash back in the form of a check sent to you, a direct deposit to your checking account, or a statement credit on the card you used to make the purchase.

Detailed Look at Cash Back in Personal Finance

Credit cards and cash back apps offer the opportunity for you to earn back some of the money you're already spending. For example, many cash back credit cards and apps offer 1% to 5% cash back from what you spend. So, if you have a credit card that offers 2% cash back on groceries, and you spend $100 on groceries the next you go grocery shopping, you would receive $2 cash back for your purchase.

Likewise, cash back apps offer similar incentives when you shop at popular online stores through the app, or in some cases, scan your receipt when you go shopping at retail stores.

Some cash back credit cards offer a different amount of cash back based on the type of transaction made. For example, some credit cards offer cash back in specific categories like groceries, gas, and travel. Others offer cash back for all of your purchases. You might earn a higher percentage for specific categories than others, or some categories might undergo special promotions where for a certain period, you'll earn extra cash back.

Example of Cash Back

Assume you spend $500 one month on general merchandise, $200 per month on fuel, and you book a trip where you spend $2,000. Assume you earn 5% cash back on travel, 3% cash back on transportation, and 1% cash back on general merchandise. In this month, you would earn $100 from your trip, $6 from the fuel, and $5 from the general merchandise, or a total of $111 cash back.

Cash Back Credit Cards

Here are some examples of cash back credit cards that have different offers.

  • Chase Freedom Unlimited: Chase offers a credit card where you earn 5% cash back on grocery store purchases, 3% on drugstore purchases, 3% on restaurants, and 1.5% on all other purchases. The card also offers a $200 cash back bonus after you spend $500 in the first 3 months.
  • American Express Blue Cash Preferred Card: American Express has a credit card where you'll earn 6% cash back on groceries, 6% cash back on streaming, and 3% cash back on transit expenses, including taxis, rideshare, trains, buses, and similar. You'll also earn $300 when you spend $3,000 in the first 6 months of having the card.
  • Citi Custom Cash Card: Citi's custom cash card offers an interesting way to earn cash back as it gives 5% cash back on your top eligible spending category, which includes things like restaurants, gas stations, grocery stores, travel, transit, and more.

Cash Back Apps

Here are some examples of cash back apps that allow you to earn money through everyday shopping.

  • Swagbucks: What started as an app where you could fill out surveys for money now is a full rewards platform that includes a cash back section. You can earn money from shopping online through this app or scanning your receipt at participating retailers. Swagbucks generally offers 1-5% cash back on many products, and you can cash out via gift cards or through PayPal.
  • Ibotta: Ibotta offers cash back when you shop online or in person. You search the app for products you're interested in buying and then either shop online through the app or scan your receipt from a participating store. Hundreds of grocery stores and retailers are supported, making Ibotta a great free cash back app to check out.
  • Rakuten: Rakuten is another cash back platform that pays you back a portion of your spending when you shop at over 2,500 retailers. Rakuten reports that it has paid over $1 billion cash back since 1998.

FAQs about Cash Back

You may have questions about what cash back actually means. 

Is Cash Back Free Money?

Cash back isn't exactly free money as you need to spend money in order to earn it. That said, earning cash back due to spending money is nice on things you normally would have purchased. 

What are Easy Ways to Earn Cash Back?

Possibly the two easiest ways to earn money with cash back is to:

  • Have a credit card that automatically applies cash back with each purchase.
  • Use a cash back app where you can shop online through the app and automatically receive cash back as a result.

Is Cash Back a Form of Passive Income

Cash back is sometimes thought of as a form of passive income in that you are saving a percentage of money based on your spending habits. Saving money in order to make money is sometimes referred to as reverse passive income. In this case, if you earn 3% cash back on $1,000 worth of purchases, then you earned $30 passively.