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What Is a Statement Credit?
Statement credits have a special place in the hearts of point chasers and credit card optimizers. Statement credits seem like a fairly straightforward area of study, but a closer look reveals some significant differences in the way the major issuers treat them. And more importantly, the way cardholders can benefit the most from them.
Statement credits defined
The concept is simple: A statement credit is any decrease in your credit card’s balance. Returning an item at the store? You’ll be issued a statement credit. Getting reimbursed for a merchant’s overcharge? That’s a statement credit. Settling up after your card has been stolen and used for a fraudulent purchase? That’s a statement credit, too.
Any instance in which your balance is reduced qualifies as a statement credit. And in some cases, you can redeem points for cash via your card’s rewards program.
That’s where the fun starts.
Statement credits vs. cash back
Pick a rewards card in your wallet. Any rewards card. Regardless of its primary benefits — travel-focused, low-interest, no annual fee, or any other offering under the sun — it likely gives you the option to redeem your points directly for cash. The best cash back credit cards aren’t shy about it; free cash is as big a sell for both new and repeat cardholders. Who doesn’t love the idea of padding their pockets with no extra effort?
But “cash back” and “statement credit” are not synonymous.
“Cash back,” in fact, can be a bit misleading, seeing as your “cash” could just as easily (or more advantageously) come back in the form of a statement credit, gift cards, point transfer or funds deposited directly to your bank account. Many credit card companies use “cash back” as a catchall marketing tool for cards that reward you monetarily, but the differences matter:
– Statement credits happen all within your card’s online portal, reflecting a near-immediate reduction to your card’s balance. It’s a no-fuss way to shave down your debt with little more than a click.
– True cash back means your points are converted to check which is then mailed or deposited directly into your bank account. Keep in mind that this process can take a few days.
– Gift cards are a popular choice at the end of the month. Whether you’ve got a birthday coming up or plans for a big purchase at a specific retailer, a gift card might make the most sense. Most of the major credit card companies will offer rotating discounts in the 10-15% range with vendors like Target, Amazon, Starbucks and more.
– Transferring your rewards points to another program is another solid alternative, depending on your credit card company’s partnerships. For example, Pooling and transferring points is a popular route for cardholders with a particular interest in travel, given that nearly every card issuer has a relationship with one or more airlines. Even if the transfer rate is something less than 1:1, it could still be worth it to push your points over to another program if it means securing a flight or night in a hotel without using any cash out of pocket.
All in all, be scrupulous about how you make use of your points, and know when a statement credit makes sense versus your other options.
When is a statement credit your top choice?
A lot depends on whether or not — and how quickly — you need actual cash in hand. If you’re in healthy financial standing and aren’t looking to attribute points to another loyalty program, a statement credit is an easy pick.
Another caveat, however, is the specific program of your card and the issuer standing behind it. Each major card company treats statement credits a little bit differently, distributing them at rates that fit their business model and/or marketing strategy.
Additionally, some issuers will set limits on when you can request a statement credit, requiring point thresholds or their dollar value equivalent. Others will allow you to set up automatic statement credit redemptions at month’s end. Here’s glance at some of the big names’ policies on their top cash back cards:
|Card||Cash Back Features||Statement Credit Redemption Minimum|
|Blue Cash Everyday® Card from American Express||3% cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%).
2% cash back at U.S. gas stations and at select U.S. department stores, 1% back on other purchases
|Bank of America® Cash Rewards credit card||3% cash back on choice category purchases (up to 2,500 in combined choice/grocery/wholesale purchases quarterly)||No minimum for statement credit|
|Capital One QuicksilverOne Cash Rewards Credit Card||1.5% cash back on everything||None|
|Chase Freedom®||5% cash back on select category purchases (up to 1,500 in combined purchases quarterly) after activation||None|
|Citi® Double Cash Card||2% total cash back on everything (1% when you buy, 1% when you pay)||$25|
|Discover it® Cash Back||5% cash back on select rotating categories (up to $1,500 in combined purchases quarterly) after activation; Plus, earn 1% cash back on all other purchases||None|
A final note on statement credits and minimum monthly payments
Typically, a statement credit won’t count toward your minimum monthly payment. You can use it to hack away at your balance.
It’s a small and somewhat confusing distinction, albeit an important one. If you’re tight on cash at the end of the month, it would be ill-conceived to rely on your rewards points to bridge the gap. You could still end up absorbing the late fees or delinquency penalties, even if your ending balance meets the minimum payment.
Stay up-to-date with the industry’s top news and strategies for earning cash back. Check out Bankrate’s cash back catalog for everything you need to know to earn the most out of every swipe.
Editorial disclosure: All reviews are prepared by Bankrate.com staff. Opinions expressed therein are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including card rates and fees, presented in the review is accurate as of the date of the review. Check the data at the top of this page and the bank’s website for the most current information.