Here’s How to Choose Between Cash Back or a Statement Credit

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These days, pretty much every credit card offers some type of rewards to incentivize cardmember loyalty. 

Two of the most common forms of rewards are cash back (money delivered to your bank account) and statement credits (money applied to your outstanding card balance). Both cash back and credit statements will put cash back in your pocket. However, one is more direct and the other requires a little forethought. 

It’s not always easy to discern which rewards are better. It comes down to knowing how you plan to use the money. If your goal is to maximize credit card rewards you should think about what costs you have coming up, and whether you want the money applied to your balance or in the form of cash.

Pro Tip

Cash back and statement credits are both good options. It really comes down to which one is the better value for your money.

Ahead, we’ll review some of the pros and cons of each redemption method and highlight some of the best rewards credit cards.

The Difference Between Cash Back and Statement Credit

When it comes to cash back vs. statement credit, there are upsides and downsides of both. At  NextAdvisor, we almost always recommend redeeming your points and miles for travel rewards (you’ll get the best value). If you’re comparing the two, here’s how to decide if you should take cash back or statement credit.

Cash Back 

“Cash back works like a rebate,” says Ian Sells, co-founder and CEO of RebateKey, a rebate platform for ecommerce sellers. “When you purchase an item, the credit card issuer gives you back a percentage of your purchase. You can withdraw the money and spend it, or you can save it.”

Cards that offer cash back use specific structures. For example, the  Blue Cash Preferred® Card from American Express gives you 1% cash back on purchases, plus 6% cash back at  U.S. supermarkets on up to $6,000 per year in purchases (then 1%) and 3% cash back at U.S. gas stations. Meanwhile, other cash-back cards have a flat-rate rewards rate of 1% to 2%. Other cards allow you to choose which categories you earn cash back in on a rotating basis, such as online shopping or subscriptions.

At the end of the month, you can log into your account to see your cash back balance. You can often choose to have the cash back sent electronically to your bank account, or sent as a paper check or gift card. Some cards let you cash out as soon as you accrue any money back. It’s common, however, to have to wait and cash out once you have reached a certain balance, like $25.

Statement Credit

“With cash back, you get money back from every purchase. But with statement credit, the points you earn go towards paying off your credit card balance,” says Nate Tsang, founder and CEO of Wall Street Zen, a stock research platform.

Statement credit is similar to cash back in that you earn a percentage from every purchase you make. However, statement credit doesn’t get sent to your bank account, like cash back can. The money you earn can only be applied to your existing balance, reducing the amount of money you owe.

A common example of statement credit is when you make a return. The initial purchase gets added to your balance, and when you return the item, your balance decreases by the same amount. The card company automatically deducts the value, rather than writing you a check for the returned item’s price. Cash back in the form of statement credits works similarly.

When to Take Cash Back

Timing is everything when it comes to redeeming rewards. Cash back rewards usually don’t expire, but that doesn’t necessarily mean you should keep the money locked away. 

Typically, you should redeem your cash back earnings when your account reaches a high balance, or when you want to put that money toward a purchase. For example, if you have $250 in cash back rewards, you might cash out and apply that money toward a plane ticket for an upcoming vacation.

If you’re planning on closing your credit card account, you should definitely redeem your cash back. Otherwise, you may lose out on those rewards. 

When to Apply Credit to Card Statement

Applying your statement credit to your credit card balance makes more sense in some situations. For example, if you recently made several big purchases and you’re facing a higher-than-usual balance, it could be a good time to use your statement credit.

However, experts agree that taking statement credit vs. cash back really comes down to the value it gives your money. For example, if you have a $100 statement credit and $60 in cash back, you’re probably better off taking the statement credit.

Other Cash Back Options

If you want a credit card with the best cash back rewards, make sure to explore your options. Some credit cards allow you to redeem your cash back for other perks, like gift cards, or as points towards travel rewards. 

Every card offers a different rewards structure, so it’s a good idea to compare several cash back cards to find the best one for you. Also pay attention to introductory offers that might offer great benefits for a limited time, like bonus points during the first few months. 

Cards That Earn More Cash Back 

Choosing a cash back credit card is often a good idea. If you’re going to spend money, you might as well earn rewards on your purchases. Here are some of the best cards that offer cash back incentives. 

Chase Freedom Flex℠

Chase Freedom Flex℠

Editor’s Score: (4.7/5)
  • Intro bonus:
    $200
  • Annual fee:
    $0
  • Regular APR:
    14.99% – 23.74% Variable
  • Recommended credit:
    670-850 (Good to Excellent)
  • Apply Now externa link icon At Chase’s secure site
Wells Fargo Active Cash℠ Card

Wells Fargo Active Cash℠ Card

Editor’s Score: (4.6/5)
Blue Cash Preferred® Card from American Express

Blue Cash Preferred® Card from American Express

Editor’s Score: (4.3/5)
  • Intro bonus:
    $300
  • Annual fee:
    $0 introductory annual fee for the first year, then $95.
  • Regular APR:
    13.99%-23.99% Variable
  • Recommended credit:
    670-850 (Good to Excellent)
  • Learn more externa link icon At our partner’s secure site See Rates & Fees, Terms Apply.

Chase Freedom Flex

With the Chase Freedom Flex Card, you get 5% back on travel when purchased through Chase Ultimate Rewards, 3% back at restaurants (including takeout), 3% back at the drugstores, and 1% back on everything else. You can also get 5% back in rotating bonus categories each quarter on up to $1,500 when you activate.

Wells Fargo Active Cash Card

The Wells Fargo Active Cash℠ Card provides 2% unlimited cash rewards on purchases. To redeem the cash rewards, you can use the rewards as a statement credit, deposit the money into your Wells Fargo account, redeem the money in cash at an ATM, or get the money on a gift card. You can also earn $200 in cash rewards if you spend $1,000 in purchases within the first three months.

Blue Cash Preferred from Amex

The Amex Blue Cash Preferred Card offers 6% cash back at U.S. supermarkets on up to $6,000 in annual purchases. You can get 6% cash back on some streaming services, 3% cash back at U.S. gas stations and on transit, and 1% cash back on all other purchases. As an introductory offer, Blue Cash Preferred cardholders can also earn a $300 statement credit after making $3,000 in purchases over the first six months. However, you can only redeem cash back for a statement credit.

Editorial Independence

As with all of our credit card reviews, our analysis is not influenced by any partnerships or advertising relationships.