What is cashback?
Cashback is a card benefit that allows consumers to
get a proportion of their money back in cash.
Several debit card accounts now give cashback benefits, which were previously only available
with credit cards.
Cashback is a type of incentive or reward used to enable customers to use credit cards
more frequently.
A credit card's cashback function allows the cardholder to receive a proportion of eligible
spending (usually 0.25 % to 5%).
The Flipkart Axis Bank Credit Card, for example, offers a 3% cashback on all items purchased
with the card.
When Discover Financial Services, a part of Morgan Stanley, debuted a credit card without
any annual fees, a cashback benefit on some transactions, and a higher-than-normal credit
limit in 1986, the concept of cashback acquired broad acceptance.
Frequently Asked Questions (FAQs)
What is the process for getting cashback?
Cashback programmes began in the 1990s as an extension of credit card issuers' general
rewards schemes.
However, in the 21st century, they have become popular; practically every major card issuer
now gives the feature on at least one of its products.
It's a way to entice current consumers to use the card early and often and potential
consumers to switch from a competitor's card or register for one.
Unlike traditional rewards points, which can only be used to purchase products or services,
such as travel, or gift cards from the card issuer, cashback incentives are similar to
receiving cash.
They are frequently included on cardholders' monthly credit card statements and can be
used to make purchases on the account; in other words, they can be used to pay down
the credit card bill.
Consumers have the option of having their cashback reward deposited straight into their
connected checking account or receiving it in the mail.
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What are the most popular types of cashbacks?
Cashback rate on the annual expenditure
Cashback rates are scaled based on annual spending.
So, for example, if your yearly expenditure is less than AU$10,000, you'll get a 1% cash
back rate, and if your yearly spend is more than AU$10,000, you'll get a 2% cashback rate.
Flat rate cashback
You'll get a flat rate cashback regardless of how much you spend.
The Amazon Pay ICICI Credit Card, for example, offers a 1.5% reward on all purchases made
with the card.
Cashback at varying rates
The rate of this type of payback varies based on where the money is spent.
For example, a 3% payback on food and a 1% cashback on the medicine may be offered, and
so on.
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How does the cashback redemption process work?
Several cashback credit cards require a minimal redemption threshold.
Therefore, it's crucial to read the fine print on the back of the credit card.
Cashback is usually redeemed in one of the following ways, based on credit card terms:
Direct bank deposit
You might be able to deposit money into your checking or savings account directly.
In addition, you could cash out your points balance at any moment with Discover.
However, other banks may need the amount of a specific reward before cashing out.
Make sure you understand your redemption thresholds by reading your terms and conditions.
Gift card
Some credit card companies offer e-certificates or gift cards for popular merchants to redeem
your cashback.
Statement credit
The reward is applied to the current credit card balance.
Charitable donations
Some credit card providers you to contribute a portion or all of your cashback to a charity
of your choice.
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What are the risks of earning cashback?
Cashback should not be viewed as an inducement to overspend.
Instead, think of cashback as a bonus for the money you would have spent otherwise.
The last thing you must do is charge more than you can manage to make more money.
If you overspend and go into debt, you risk accruing interest costs, which could negate
the benefits of rewards programmes.