Cashback is the most common form of rewards program offered by credit cards today. The concept is simple: a percentage of your spending is returned to you in the form of a statement credit, check, or direct deposit. For example, if your card offers 2% cashback, spending $1,000 will earn you $20 back. Cashback programs appeal to a wide audience because they provide immediate, tangible value without requiring the user to learn complicated redemption systems. Historically, cashback was a natural evolution from earlier loyalty programs, replacing punch cards and merchandise stamps with direct monetary rewards. These programs grew in popularity as banks and retailers recognized that consumers preferred straightforward value.

While many cards offer flat-rate cashback on all purchases, others feature bonus categories that earn higher percentages in specific areas like groceries, gas, or dining. Some premium cards even allow you to transfer cashback into points or miles. The key is that cashback is flexible and easy to understand. Unlike travel rewards, there’s no need to search for flight availability or calculate point values—you simply get money back. However, the value of cashback is reduced if cardholders carry a balance and pay interest, since interest charges often outweigh rewards. For that reason, financial experts recommend using cashback cards only if you can pay your balance in full every month, ensuring the rewards are truly “free money.”