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Q&A: How Good Is Cash Back, Really?

June 21, 2013
Credit Cards
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I always thought rewards credit cards were some kind of scam that had fine print which would somehow screw you out of your rewards (kinda like frequent flier miles that expire or don’t transfer when airlines merge, etc.)  I’m considering getting an Amex Blue Cash Everyday (mainly for purchases Costco) and a Chase Freedom.  How easy is it to actually get your “cash back”? And how does cash back even work? Do they just issue you a check? The Amex Blue Cash Preferred says:

Cash back will be provided in the form of Reward Dollars, redeemable for statement credits, gift cards and merchandise.

Are these “reward dollars” something I can exchange for good ol’ U.S. minted regular American dollar$?  Can I actually get the money to hold in my hand?  Or will I need to call customer service and trade them for tokens then upgrade to coupons, apply to my statement or…? Thanks in advance for any info.

You’re right to be wary of “too good to be true” offers: Many point programs  have expiration dates, some after as little as a year of inactivity (such as Hilton HHonors points). However, cash back is actually pretty simple. With the American Express Blue Cash Everyday, you can redeem your cash back as a statement credit whenever you’ve accumulated 25 reward dollars or more. This means that if your balance is $500, you can redeem 100 reward dollars to reduce your balance to $400.

With the Chase Freedom, you have three options:

  • You can direct deposit your rewards in increments of $10, starting at 2,000 points for $20, into a Chase checking or savings account. There’s no fee for doing this, but keep in mind that some Chase accounts do have monthly maintenance fees.
  • You can have Chase deliver a check to you by mail, also in increments of $10 starting at 2,000 points for $20. The check might take 4-6 weeks to deliver, but there’s no additional fee for doing so.
  • You can choose any purchase you made over $20 and redeem your points as a statement credit at a value of 100 points per $1. For example, if you made a $99.50 purchase, you could redeem 9,950 points to have that purchase wiped off your bill.

So with the Freedom, you can actually hold the cash in your hand. But a statement credit’s as good as cash – it’s getting a refund for money you’ve already spent. Perhaps not as satisfying, but it’s got the same value.

Generally, cash back programs are pretty straightforward. It’s the points you want to watch out for. Some make it nigh impossible to redeem at full value (such as Citi ThankYou Points, which often require that you squirrel away 10,000 points to get anything worthwhile) or limit you to redeeming for gift cards instead of getting a check or statement credit. And don’t get me started on airline miles: can you say blackout dates? As they say, cash is king: it’s your best hedge against pesky point programs.