So when I cash out I have to cash out into a wallet, which is something you need to create if you haven't created one yet?
Nah, a wallet is just a place to store your coins off the exhcnages server, you don't want to leave them on a server longer than you need to, your account & the exchange are still vulnerable to hack -
Tether says nearly $31 million worth of its digital tokens have been stolen after hack
We also have a hardware wallet to take the coins completely out of play so that even if our network got breached you'd get nothing. If you want to cash out, you can sell off what you have, then send it back to coinbase or wherever you have your main account located.