If you’ve ever wondered about getting cash back with your credit card, you’re not alone. Whether you’re hoping to earn rewards or just need cash in hand, knowing how it works can help you maximize your benefits or avoid unnecessary costs. Let’s explore two different ways to get cash back with a credit card: earning cashback rewards on purchases and using a cash advance.
Cashback rewards: Get paid for spending
One of the most appealing features of many credit cards is the ability to earn cashback rewards. This allows you to receive a percentage of your spending back in cash, typically with no strings attached. Here’s how it works:
- Earn while you shop: When you make purchases, you’ll earn a percentage back—usually between 1% and 5%, depending on the card and spending category.
- Special categories: Some cards offer higher cashback percentages for specific categories, like groceries or gas, while others rotate categories each quarter.
- Redeem your cash: You can usually redeem your cashback as a statement credit, direct deposit, or even gift cards. Some cards let you convert the rewards to points for travel or other perks.
This type of cash back doesn’t involve any fees, making it a popular way to save on everyday purchases.
Cash advances: Instant cash, but at a cost
If you need physical cash right away, most credit cards allow you to take out a cash advance at an ATM. But unlike cashback rewards, cash advances can get expensive:
- Higher costs: Cash advances often come with upfront fees, typically around 3-5% of the amount you withdraw.
- Instant interest: Interest on a cash advance starts immediately—there’s no grace period like with regular purchases, and the rates are usually higher.
- ATM fees: On top of the cash advance fee, you may also face fees from the ATM provider.
While it’s convenient, using your credit card for cash advances is generally not the best option due to the high costs involved.
Weighing the pros and cons
Getting cashback rewards on purchases is generally a win, allowing you to earn money on things you’re already buying. But if you need physical cash, it’s important to understand the significant costs of a cash advance. Always consider whether the convenience of immediate cash is worth the extra fees and interest.
So, can you get cash back with a credit card? Absolutely. Just remember that cashback rewards are a great way to earn money from your spending, while cash advances should be used sparingly due to their high fees and interest rates. Each option comes with different benefits and drawbacks, so choose wisely based on your financial needs.