Cash Back

AAA

DEFINITION of 'Cash Back'

Cash back can refer to two different kinds of card transactions:

1) An option available to retail consumers when, during a debit card transaction, the customer can request to add an extra amount to the purchase price and receive the added amount in cash. Cash back using debit provides customers a convenient method of obtaining cash when purchasing goods and services without having to make a separate trip to an ATM or bank.

2) A cardholder benefit offered by some credit card companies that pays the cardholder a small percentage of their net expenditures (purchases less refunds). Cash back benefits often provide the cardholder with the opportunity to choose from taking the cash, or using the "points" for purchases, travel (as with miles awards for air travel) or gift cards. Typically, cardholders must reach a certain points level to redeem for cash or other benefits. Some credit cards offer varying levels of cash back depending on the purchase. For example, a cardholder might earn 5% back on gas purchases, 2% on groceries and 1%on all other purchases.

INVESTOPEDIA EXPLAINS 'Cash Back'

1) An example of debit cash back as a convenience: a customer has to purchase groceries and take cash out of their bank. Rather than make two trips to the store and to an ATM, they buy their groceries with a debit card (which totals to $45), and ask for $20 in cash back. The $20 is added to the transaction, making it total $65, and is given $20 in physical cash from the till.

2) Cash back and merchandise or travel bonuses are offered by credit card companies as a means of attracting new customers, and keeping old customers. Often, the APR for cards with this benefit is higher than for those cards that do not offer a cash back incentive. As a result, these cards are usually more beneficial to card members who are able to pay balances off in full each month; otherwise, the interest and fees could outweigh the cash back benefit. While some credit card companies allow the cardholder to "withdraw" the cash or redeem the points at any time as long as a certain threshold has been met, other cards will issue cash back award checks one a year.

RELATED TERMS
  1. Debit Card

    An electronic card issued by a bank which allows bank clients ...
  2. Cardholder Agreement

    A printed booklet a credit cardholder receives that contains ...
  3. Consumer Credit Protection Act ...

    Federal legislation that created disclosure requirements that ...
  4. Credit Card

    A card issued by a financial company giving the holder an option ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), ...
  6. Card-Not-Present Fraud

    A type of credit card scam in which the customer does not physically ...
Related Articles
  1. Insurance

    Credit Card Perks You Never Knew You Had

    From car insurance to concert tickets, be sure to take advantage of whatever your card has to offer.
  2. Credit & Loans

    Credit, Debit And Charge: Sizing Up The Cards In Your Wallet

    Not all plastic is equal! Learn the difference between the three kinds, and how each can affect your finances.
  3. Credit & Loans

    Capital One Cards: VentureOne Vs. Venture Rewards

    Which Capital One rewards credit card offers the best deal for you?
  4. Credit & Loans

    Credit Card Review: The Amazon.com Rewards Visa

    The rewards from
  5. Credit & Loans

    Credit Card Review: Southwest Rapid Rewards Cards

    Do Southwest Airlines' free checked bags make one of their credit cards a good choice for you?
  6. Credit & Loans

    Do lenders offer floating APRs?

    Learn about credit cards with floating, variable and fixed APRs. Explore introductory rates offered by two leading credit card issuers.
  7. Credit & Loans

    Why do some credit cards offer introductory APRs?

    Understand how introductory APRs from credit card companies can help or hurt your personal finances. Learn how to use these offers to your advantage.
  8. Credit & Loans

    Are APRs different in different countries?

    Learn about the term APR and how it is used in the United States and other countries. Explore why different lenders charge different APRs.
  9. Credit & Loans

    What loans do and don't have an APR?

    Learn about what annual percentage rates (APR) are and what they mean. Explore different fixed and variable APRs charge by different lenders.
  10. Stock Analysis

    How American Express Counts on Your Profligacy

    Consumers like novelty, reliability, variety, and other subjective qualities. But what really keeps them coming back to American Express is convenience.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center