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What Does Cashback on Credit Cards Mean, and How Does It Work?
What Does Cashback on Credit Cards Mean, and How Does It Work?
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What Does Cashback on Credit Cards Mean, and How Does It Work?

Doris Kendi
February 17, 2022

How many times did you get a percentage of your money back while spending? Probably not too many, right? You might get a discount from the merchant or supplier every once in a while but not too often.

But with a credit card, things might be different. With the credit card cashback system, the issuer gives you a few cents back for every shilling you spend on the card. This can make it feel like free money when you get some cash back simply by spending on your card when you were going to spend anyway. 

But before you start swiping your credit card everywhere, it is crucial first to understand how the cashback system works. This article explains what credit card cashback is and how it works. 

Learn more: Who Qualifies for Credit Cards in Kenya (And What to Do If You Don’t)

What Is a Credit Card Cash Back?

A credit card cashback is a perk where you receive a percentage of the purchase amount back after using your credit card. For example, If you spend Ksh.5,000 on a 5% cashback rate, you will receive a refund of 250 back to spend towards further purchases. 

Instead of a flat rate, some credit card issuers offer different reward programs for different types of purchases, and the cashback carries different percentages. For example, you could get 1% cashback for purchases at a grocery store and 5% cashback for air ticket purchases. 

How Credit Card Cash Back Works

But how exactly does cashback work? 

Unlike traditional credit card rewards, cashback works just as the name suggests. You get cashback for every qualifying purchase. The issuer gives you a few cents back for every shilling you spend on the credit card.

Depending on your issuer, there are differences in what type of spending qualifies for cashback and what percentage each category gets.

There are two main types of cashback:

  • Flat-rate. With this card, you earn a fixed percentage for all purchases made. 
  • Tiered/Category cashback. You earn a higher cashback percentage on a few specific purchase categories with this card. The issuer determines these categories and might change them from time to time. With tiered cashback rewards, you accrue higher rewards when you purchase specific categories, e.g., Supermarket shopping, hotel and accommodation, fuel station purchases, etc. 

Card issuers afford to pay cashback because merchants pay a commission on each transaction(also known as interchange fees). For example, on a Ksh 5,000 purchase, the merchant might receive only Ksh.4,700. Also, the rewards might be funded through direct deal negotiation between the issuer and the merchant. 

The few hundred shillings might seem insignificant at first, but the amount eventually adds up with time and regular spending. Also, keep in mind that some issuers have a limit on the amount of cashback you can get per month. 

How to Earn Cash Back From Your Credit Card Spending

So how do you earn cashback? It is simple! You simply need to spend on an eligible purchase to earn cashback. 

Whenever you swipe your credit card to make an eligible purchase, you automatically get a percentage of the amount spent back based on the rules of your card. These rules vary from one issuer to another. 

For example, if your issuer offers 5% cashback on all over two thousand purchases at Naivas, you will receive this every time you spend over two thousand on your card at Naivas. 

Also, did you know you can negotiate your credit card perks with your issuer?

Learn more: 10 Questions You Should Ask Your Credit Card Issuer

How Cash Back Credit Card Rewards Are Paid Out to You

So, how do you redeem your cashback once you earn it? The actual process depends on the rules of the individual issuer of the card that you hold.

However, in most cases, the issuer calculates your cashback rewards every month and presents them on your credit card statement. After which, you can choose to either spend it on reducing your bill or claim the cash through a linked bank account or by cheque. You can also receive it as a gift card or by transferring the credits into other rewards programs, e.g., travel perks.   

The most common ways to redeem your cashback rewards are by requesting a statement credit to offset your current balance. Also, keep in mind some issuers require you to accrue a minimum amount of cashback before you can cash out.

Learn more: Who Is A Credit Card Not For?

Frequently Asked Questions

Do I get cashback every time I use my credit card?

Yes. Depending on your issuer, you earn cashback every time you spend on your credit card. On flat rate terms, you earn flat percentage cash back on every purchase you make, while on tiered cashback terms, you earn more rewards on specific purchase categories. For example, you can earn more on groceries, dining, fuel station, etc. 

Is cashback free money?

Yes and no. Yes, because cashback is a bonus scheme that gives you back a percent of the money you have already spent - which you could not have earned otherwise. No, because you have to spend money in order to earn cashback. If you do not spend, you do not earn. 

Which credit cards in Kenya have cash-back benefits?

Check out our Kenya’s top Credit Cards guide to compare all the available credit cards in the market today. 


Isn’t it a great feeling to earn money while spending money? The credit card cashback system gives you just that—a chance to get a small percentage of your spending back. It might be just 1% or 2%, but it adds up, making the credit card experience much more enjoyable with time. 

It can help reduce the amount you owe your issuer, put a few more shillings in your pocket (if you decide to cash it), or earn you other perks like a discount on a date night with your loved one. Whatever it is, credit card cashback works, and it is worth it. 

Doris is a finance professional, freelance writer and SEO expert. She has experience helping businesses of all sizes create content that helps improve their site quality and increase their online traffic. She is a personal finance and wealth creation enthusiast and a frequent contributor to Money254. Visit Doris' personal website to learn more about her work.

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