How do cashback credit cards work? A guide for businesses

The basic concept of business is simple: You spend money to make money. But when you spend money in business, it usually takes time for you to earn money as a result. Wouldn’t it be great if your business could get some kind of return as soon as you spend money?

Thanks to cashback, you can.

Cashback credit cards vary in complexity, but all offer rewards. With every eligible purchase, you earn a percentage of the amount spent. For example, how much is 1.5% cash back on $1,000? In this scenario, you'll receive $15 in rewards.

But how do you get cash back on a credit card? And how does cash back work more generally? Read on to learn what cashback is, how cashback credit cards work, the different types of rewards available to you, and how you can maximize your business' earnings as you spend.

How does cash back work on credit cards?

The typical cashback business credit card works like this:

1. You use the credit card to make purchases for your business or pay your business’s bills
2. The credit card lender rewards you for using its credit card by giving you a small percentage of your purchase total back as cashback rewards
3. The cashback rewards accumulate in your account until you decide to redeem them
4. You redeem your cashback rewards to pay for just about anything you’d like

Your cashback percentage determines how much money you get back on purchases. For example, when a credit card gives you 5% cashback, you’ll earn 5 cents in rewards for every dollar you spend on qualifying purchases.

It’s a common misconception that cashback is free money—it isn’t. Because you need to make a purchase to earn cashback, you’ll still be paying for the majority of the purchase out of pocket.

Keep in mind that credit card lenders are their own companies and create their own rewards programs. That means different cashback credit cards offer different rewards programs.

Types of cashback cards

Business credit cards offer different cashback structures, allowing your company to earn rewards based on its spending habits. Understanding how these different structures work can help you select the best cashback card for your needs.

Here’s a breakdown of the most common ways to earn cashback.

Fixed or flat-rate rewards

Some business credit cards simplify cashback by offering a fixed rewards percentage. With a flat-rate cashback rewards card, you earn the same cashback percentage on every qualified purchase you make, usually around 1.5%.

Tiered rewards

With tiered cashback rewards cards, you earn a higher cashback percentage on certain types of purchases. For example, you may earn 3% cashback on gas purchases and 1% back on everything else. The rewards categories in tiered programs tend not to change.

Rotating category rewards

This type of program is similar to tiered rewards, but the qualifying categories change several times a year—usually every quarter. What it lacks in convenience it makes up for in greater cashback potential: These cards typically offer up to 5% cashback on the qualifying categories, which rotate between anything from dining to airfare to rideshares, and 1% cashback on any other purchases.

Choose-your-own-category rewards

Lastly, some cards let you pick your own bonus cashback category. These cards tend to work just like tiered rewards cards, except you get to choose one of several bonus rewards categories, like gas, internet and phone service, or travel. Different cards offer different rewards, but you can usually expect to get around 3% cashback on bonus categories and 1% back on everything else.

How do I receive my cashback?

Now that you know how cash rewards credit cards work, it's time to understand how to actually redeem and/or use your cashback.

Once you earn a meaningful amount of cash, you’ll want to redeem your credit card rewards—after all, that’s the whole point. You can typically do this online or by calling your lender.

Depending on the card, you’ll have a few different options to redeem your cashback rewards:

• Statement credit: Use your cashback rewards to reduce the overall balance you owe on your credit card
• Bank deposit: Certain cards let you deposit your cashback rewards directly into a connected bank account
• Gift cards: Many cashback credit card providers offer more bang for your buck when you redeem your cash for gift cards to popular stores and restaurants. For example, $20 in cashback rewards can translate into a $25 gift card.
• Other purchases: Some cards may have an online shopping portal where you can redeem your cashback for travel or other purchases. You may even be able to connect your card to online retailers like Amazon and use your cashback rewards to cover some or all of your purchase.

What is cashback on a credit card?

Unlike, say, travel credit cards that offer points or miles with varying redemption values, cashback rewards have a consistent cash value, making them straightforward and easy to use.

Credit card issuers typically use cashback as an incentive to attract new customers to their lending products. If you use a cashback rewards credit card when you make business purchases, your credit card lender essentially refunds a small portion of your total purchase each time you swipe your card.

The percentage of cashback you earn may be fixed or variable, and there may be limitations on which purchases qualify for cashback. That creates some confusion about which cashback business credit card to apply for and how to earn the most money possible when you use it.

Example business cashback credit cards

The best business cashback credit cards offer companies flexible ways to earn rewards on everyday expenses while managing cash flow efficiently. Here are some top business credit cards with cashback rewards.

Card comparison

Ramp Business Credit Card

The fastest, easiest way to manage expenses.

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Best overall

Card details

• Save an average of 5% by spending less time and money across your entire business
• Automatically prompt, collect, and match receipts after each transaction through SMS, mobile app, and integrations
• Set granular controls down to the merchant, category, and transaction level for every card to prevent out-of-policy spend
• Requires no personal guarantee and bases credit limits on the company's financial health indicators
• Integrate directly with accounting software like QuickBooks, Xero, NetSuite, and Sage Intacct to automate bookkeeping

Annual Fee

$0

APR

N/A

Chase Ink Business Unlimited Credit Card

Best for straightforward cashback

Card details

• 1.5% cashback on every business purchase
• Welcome bonus if you spend a certain amount in the first 3 months from account opening
• Rewards can be redeemed for cashback, gift cards, travel and other options through Chase Ultimate Rewards
• Free employee cards

Annual Fee

$0

APR

18.49% (variable)

Capital One Spark Cash Plus

Best for high spenders

Card details

• Business charge card that requires full monthly balance payments
• Designed for larger, higher-spending businesses; spend $150,000 and the annual fee is waived
• Carrying a balance incurs a 2.99% fee
• 2% cashback rewards on purchases

Annual Fee

$150

APR

N/A

At Ramp, transparency and integrity are core values guiding our content. We believe in the exceptional value of our products, which may shape our perspective. Our methodical approach involves competitor analysis, comparison of credit cards, and frequent reviews to maintain reliability. Review our full methodology for choosing the best business credit cards.

Are cashback cards worth it?

Yes, cashback cards are worth it; however, they’re most effective when you use them wisely.

If you’re going to use a cashback credit card for your business, take advantage of opportunities to optimize your earnings. How you maximize your cashback rewards will depend on the rewards program your business credit card offers—whether it’s fixed, tiered, or one of the more complicated options.

Some of the best ways to maximize your cashback rewards include:

• Pay off your balance in full every month to avoid interest and other fees. This improves the likelihood that you’ll earn rather than spend extra money.
• Get rid of employee reimbursement programs: Use an option like Ramp to provide each team member with a corporate business credit card. Each card comes with spending limits and restrictions you control, and you’ll get cashback when your employees use them.
• Avoid complex programs: It may seem enticing to earn more on specific categories, but the extra earnings are often limited. The complexity of these programs means you’ll have to dedicate more time to managing your credit card. Instead, stick with fixed-rate cashback rewards.
• Remember to redeem: Even if your rewards never expire, if you never redeem your cashback, your rewards have no value. Make sure to redeem your rewards regularly to get the most out of your cashback card.

What are the cons of cashback?

While cashback credit cards offer valuable rewards, they come with some drawbacks. One of the biggest cons is high interest rates—if you carry a balance, the interest can quickly outweigh any cashback earned.

Additionally, these cards can tempt users to overspend just to earn rewards, leading to unnecessary debt. Some cashback cards also have limited rewards categories, meaning you might not earn as much if your spending doesn’t align with those categories.

Annual fees can also be a downside since they reduce the value of your rewards unless you spend enough to offset the cost. Lastly, redemption restrictions, such as minimum redemption thresholds or limited ways to redeem cashback, can make it harder to access your rewards.

Choosing a cashback business credit card

Here’s what you should look for as you compare cashback offers:

• Low interest and fees: You don’t earn anything if the fees you pay cost more than the cashback you redeem. Pay close attention to interest and fees.
• Rewards structure: It’s best to steer clear of complex rewards programs and focus your efforts on fixed-rate programs that are easy to understand.
• Reward expiration: Look for credit card offers with cashback rewards that never expire.
• Compare cashback bonus offers from different credit cards.
• Other features: Some cards, like Ramp, are much more than spending accounts. They offer other features like accounting integrations, automated receipt tracking, and more to help your business thrive.

Does cash back actually work?

Do cash back cards actually give you money?

Yes, cashback does work, but how much you benefit depends on how you use your credit card. The key is to use the card strategically—pay your balance in full each month to avoid interest, choose a card that maximizes rewards for your spending habits, and take advantage of sign-up bonuses.

If you carry a balance and pay interest, the cost of paying that interest can outweigh the cashback rewards, making it less beneficial.

Get Ramp to simplify cashback for your business

Ramp is an all-in-one corporate business credit card and spend management platform that offers a lot more than just cashback rewards. Ramp is designed to simplify your company’s financial operations, providing easy-to-use cards, spend limits, approval flows, vendor payments, and more, ultimately saving businesses an average of 5% a year.

Ramp's platform integrates with your existing accounting software, making it easier to track business expenses, categorize spending, and automate reports, reducing administrative workload and the risk of human error. And you’ll still earn cashback every time you or one of your employees uses your card to make a purchase.

See if you're eligible for Ramp’s modern corporate business credit card.