Statement credit vs. cash back: What’s the difference?

When it comes to credit cards, rewards are often a big factor in deciding which one to apply for. Cardmembers may find that a versatile way to redeem credit card rewards is through cash back or a statement credit.

In this article, we’ll explore how each of those work and the differences between them.

How are statement credits and cash back different?

Cash back and statement credits are both a form of rewards that credit card companies may offer their cardmembers. However, there are some differences between the two.

Statement credit

A statement credit is when money is credited to your credit card account. It reduces the balance you owe. For example, if you have a $200 balance and you receive a $50 statement credit, your new balance will be $150.

Cash back

In contrast, cash back is when you have the ability to redeem a percentage of your eligible purchases back as cash. The amount of cash back can vary depending on the credit card and the spending category. For example, some credit cards may offer 3% cash back at gas stations and 1.5% back on all other purchases. Unlike statement credits though, cash back does not reduce the balance you owe on your card.

What is a statement credit?

A statement credit reduces the outstanding balance on your credit card account. The credit card issuer applies a specific amount of money directly to your account, which lowers the balance you owe.

Why would I receive a statement credit?

You may receive a statement credit for a number of reasons. Here are just a few:

• You redeemed rewards. If you have a rewards credit card, you can usually redeem that reward in the form of a statement credit. Some people prefer statement credits over other kinds of rewards because they lower the balance on your credit card account.
• You made a qualifying purchase. Depending on the card you use, you may be able to earn a statement credit when you make purchases at certain merchants. This could even include certain travel partners, dining destinations or streaming services.
• You returned an item to a merchant. Many merchants will provide a statement credit as a refund when you return an item that you paid for with a credit card. In this case, the refund will show up as a statement credit on your credit card balance.
• Annual travel credit issued by your credit card. Some credit cards offer cardmembers an annual credit toward certain services or memberships. For example, the Chase Sapphire Reserve^® credit card offers an annual travel credit to use toward eligible travel purchases. In addition, cardmembers can receive a statement credit of up to $100 every four years as reimbursement for the application fee for Global Entry^®, TSA PreCheck^® or NEXUS. If you apply and pay for these memberships with your card and are eligible, your reimbursement will appear on your statement as a statement credit.
• You received a new cardmember bonus. Many card issuers offer a cash back credit card new cardmember bonus. For cards that offer cash back rewards, these bonuses may take the form of a statement credit or a prepaid debit card. For points-based rewards cards, you'll generally receive points instead. Note that bonus offers typically require you to spend a certain amount within a few months of opening the card or you do not earn the bonus.

Is a statement credit the same as a payment?

A statement credit reduces your credit card balance but will not be counted as a payment toward your minimum balance. You’ll still accrue interest and/or late fees if you do not submit your minimum payment, even if you have a statement credit during that billing cycle.

Can I decide if I want my cash reward issued as a statement credit or cash back?

Some credit card issuers, including Chase, allow you to choose how you want to receive your cash back rewards. These choices include a statement credit, cash back or ACH/Direct Deposit. An ACH/Direct Deposit sends funds directly into a checking or savings account.

Some issuers only allow cash back rewards to be applied as a statement credit. If you have a strong preference on how you'd like to receive your cash, you may want to find out which credit cards offer your preferred option before applying for one.

The bottom line

While both cash back and statement credits offer financial advantages, they are issued in different ways. Cash back returns a percentage of your spending back which you can redeem for cash, which offers you flexibility in how you want to utilize that earned reward. Statement credits are directly applied to your outstanding balance and reduce the amount you owe. This can provide a convenient way of lowering your debt.