Cashback is a way to be compensated for all your credit card purchases. However, how do Cashback credit cards work? The word “cashback” can indicate a number of different things. It speaks of receiving cash back at the counter after paying with a debit card. It can be a way of getting money back when you shop at certain merchants, and it also refers to getting extra money each time you make a purchase with a credit card. So, cashback what is it? In this guide, we will focus on cashback credit cards and how they work.
What is CashBack?
When you buy something, you get a percentage of the cost refunded to you. This means that cashback is a way of getting money back on purchases – think of it as a discount or incentive. Cashback is usually a feature of credit cards, but some checking accounts also provide it.
Cashback is often offered on specific purchases, such as gas or bills. However, many suppliers now offer cashback on any purchase.
How does cashback work?
Credit card cashback offers benefits to customers as a result of agreements made between credit card companies and the retailers they work with. The retailer is required to pay a certain percentage back to the card company for each purchase made by a customer using their card. The credit card company then returns a portion of the payment to the customer in the form of a refund.
The debit card rebate is usually paid directly to the customer by the bank.
How much CashBack do I get?
If your credit card offers 1% cashback on all purchases, you can earn $50 if you spend $5,000 per month. However, make sure you pay off your balance in full each month, or the interest will certainly offset the benefits.
When you use the card, you get a percentage of your spending back in the form of cashback.
For example, if your credit card offers a 2% discount and you spend $100 at a store, you will earn $2.
This refund is usually paid annually, although some cards offer monthly refunds.
There are several types of cashback cards:
Some simply pay a fixed cashback rate, regardless of how much or where you spend.
- Others offer cashback levels based on how much you spend. For example, if you spend less than $6,000 a year, you get 0.5%, and if you spend more, you get 1%.
- Some credit cards offer different cashback rates depending on where you spend your money. For example, 1% on supermarket purchases, 2% on department store purchases, and 3% on energy purchases.
Is CashBack worth it?
Credit cards can provide a significant financial benefit to borrowers if used correctly, which means paying the bill in full each month and never having a debt balance.
If you can pay off your balance each month, you can maximize your Cashback credit card by transferring as much of your day-to-day spending as possible to the card.
However, if you are thinking about getting a cashback credit card, make sure you are debt free and confident that you can pay off the balance each month.
If you end up paying interest or even missing card payments, any cashback bonus will be quickly used up.
