What is cashback
In an exact translation, :cashback: means a return of funds. This is a bonus system introduced by financial institutions. It attracts new customers and increases the level of trust among existing ones.
The incentive principle is quite simple. When making a purchase, a certain percentage (5-10%) of the spent amount is returned to the account holder. For some stores, the refund amount reaches 20-30%. The rate depends on the product price, card type, commercial outlet, and other factors. This innovation promotes the development of cashless payments.
Answering the question of what cashback is and where its cost-effectiveness lies, we can say that this money return is beneficial for both financial institutions and cardholders. Moreover, the cards can be credit, debit, or universal. Of course, using this offer is pleasant and useful. However, when applying for a cashback card, we recommend first clarifying the cost of its maintenance.
Often, financial institutions provide the service of returning a percentage of spent money only at places where prices are initially high. Therefore, before using the bonus, it is worth calculating how economically justified it is.
Pros and cons
Many actively use cashback and are very satisfied. Others doubt and do not know if they need such a function. Let's highlight some points that will be useful for both.
- Find out which stores are partners in the program. If you do not buy their products or do so very rarely, what benefit do you get?
- Specify the cost of annual maintenance and card issuance to avoid getting a negative result instead of a bonus.
- Find out which operations are eligible for rewards to avoid waiting for them in vain. Bonuses for cash withdrawals, transfers to e-wallets, and other operations are usually not provided.
- Pay attention to the limit set for cashback. Typically, there is an amount above which the bonus will not be credited, no matter how actively you use the card.
Naturally, in case of loan debts, rewards are not credited. Let's emphasize that most cashback cards are credit cards. Holders know that part of the spent amount is returned. Therefore, they often exceed the interest-free period. As a result, cashback goes towards paying off overdue credit payments, and the bank does not lose its money.
For any financial institution, a credit card is preferable. Therefore, customers are offered additional attractive features, such as cashback, which is characteristic of this type of card. For consumers, this often becomes a significant argument. Especially when the credit card fully retains the functions of a debit card, the customer's choice is obvious.
How to make cashback profitable
In a big city, you can completely avoid using cash. Make it a habit.
You should not get 3-4 cards from different banks in pursuit of cashback. Many people use one card to buy goods in children's stores, another to pay for gas, and a third for lunch at a café. As a result, the total maintenance fees for all cards can eat up all the cashback you earn. Before applying for another card, calculate how many transactions you can realistically make and whether it will be economically justified.
To ensure you pay the required amount, transfer all mandatory payments to one card:
- utility bills;
- mobile services;
- parking;
- internet;
- education, etc.
Use the card for convenience and pleasure, get discounts for it, and enjoy life!
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