Cash back, often referred to as “cashback,” pertains to two types of financial transactions primarily linked to credit and debit cards. Over the past two decades, this has become a favored method for consumers to get a little extra from their spending. Predominantly, it is a benefit linked to credit cards, where the cardholder receives a small percentage of the amount they spend above a certain threshold back as a rebate. Additionally, cash back describes a feature of debit cards, where cardholders can receive cash when making a purchase, typically a small amount over the purchase price.
Key Takeaways
- Cash back is a credit card feature that refunds a small percentage of each purchase.
- Rewards can be redeemed as credit against your bill, as direct deposits, or checks.
- Cash back apps and websites offer ways for consumers to earn money back on purchases.
- Some cash-back rewards programs may involve annual fees or high APRs, but not all do.
- Debit card cash back allows receiving extra money in cash at points of sale.
How Cash Back Works
Cash-back programs are an offshoot of credit card issuers’ broader rewards offerings, gaining momentum since 1986 when the Discover card debuted nationally. These programs are now commonplace, with nearly all major card issuers featuring cash-back options. This feature incentivizes customers to use the card more frequently and attracts new clients from competitors.
Unlike traditional reward points, which are exchangeable for goods or services, cash-back rewards represent actual money. They often appear in the cardholder’s monthly statement as credit reductions.
Consumers can redeem these cash-back rewards via direct deposit to a bank account, as statement credits reducing their bill, as gift cards, or through mailed checks.
Cash Back Amounts
The cash-back reward is usually between 1% and 5% of the transaction amount. Additional rewards may be available through merchant partnerships, enhancing savings for purchases at specific partners.
Credit card issuers may stipulate varied cash-back levels per purchase category. For instance, cardholders might earn 3% back on gas, 2% on groceries, and 1% on other purchases. Seasonal promotions might temporarily increase cash-back percentages for specific categories, like dining or shopping.
Cardholders typically need to meet a minimum transaction level, often around $25, to qualify for cash back. Some programs allow cash rewards to be spent toward designated purchases such as travel or electronics.
Cash Back Sites and Apps
Cash-back apps and websites provide additional means to earn money back on purchases. These platforms often partner with major retailers, offering specific deals on various products and services. Popular cash-back programs include Rakuten, Ibotta, and Shopkick.
Rakuten
Rebranded from Ebates in 2019, Rakuten partners with over 2,500 stores including Walmart, Macy’s, and Lowe’s. Users earn up to 40% cash back on purchases through Rakuten’s links. Earnings can be deposited into a PayPal account or sent via check.
Despite mixed reviews and a BBB rating of B, Rakuten maintains a 4.25 out of five-star average from customer feedback.
Ibotta
Specializing in groceries, Ibotta operates in stores and online with over 1,500 partner brands and retailers including Walmart and Trader Joe’s. Users earn cash back on a wide spectrum of categories including health, travel, and restaurants. Earnings, paid out since its 2012 founding, typically show in user accounts within 24 hours.
Ibotta’s BBB rating is B, reflecting both positive feedback and complaints about delayed payments, averaging a 2.55 out of five-star rating based on customer reviews.
Shopkick
While Shopkick focuses on offering gift cards instead of direct cash back, it rewards users for scanning over products and making purchases at partnering retailers. Points, called “kicks,” can be redeemed for gift cards from major brands like Starbucks, Amazon, and Target.
Holding an A+ rating from BBB, Shopkick’s limited customer reviews (averaging 1.44 out of five stars) mainly mention delayed rewards.
Cash Back in Hand
Some credit and debit cards offer immediate cash back during transactions at supermarkets or other outlets. Consumers request extra cash added to their purchase, charging it to the card instead of a refund.
This practice often aids service providers in allowing customers to leave a cash tip.
Advantages and Disadvantages of Cash Back
Advantages
- Easy way to earn cash rewards on everyday purchases.
- Sign-up bonuses available on some cash-back credit cards.
- Apps and websites may offer extra discounts alongside cash-back rewards.
Disadvantages
- Delays in cash-back issuance by apps and websites.
- Higher APRs on cash-back credit cards compared to non-reward cards.
- Potential caps on annual earnings.
Understanding Cash Back Programs
What Does Cash Back Mean?
Cash back typically refers to a rewards program that returns a percentage of purchases to the buyer. It can also mean withdrawing extra cash above the purchase amount at a point of sale using a debit card.
Is Cash Back Free Money?
Not exactly. Credit card companies offset the cost of cash-back rewards through higher APRs and merchant fees, banking on increased cardholder spending.
What Stores Offer Cash Back?
Many retailers provide cash-back rewards, with specifics varying by each store’s program. This includes Kohl’s, The Home Depot, Dick’s Sporting Goods, and CVS, among others.
Can I Get a Cash Back Signing Bonus?
Some cash-back cards offer signing bonuses ranging from $200 to $1,500, contingent on meeting specific spending requirements within a set timeframe.
What Are the Best Cash Back Credit Cards?
Credit card offers frequently change, so it’s advisable to research the latest deals. Monitoring reputable financial guides for current lists of best cash-back cards can be helpful.
Conclusion
Utilizing cash-back rewards credit or debit cards offers an opportunity to earn extra money on daily purchases. Exploring cash-back apps and websites can optimize deals while further enhancing financial benefits.
While cash-back programs have notable advantages, they also come with potential drawbacks such as higher APRs, delays in accessing funds, and earning caps. In some instances, travel rewards like airline miles may even present more value than their cash-equivalent rewards.
Related Terms: annual percentage rate, direct deposit, PayPal, merchant partnerships, Rakuten, Ibotta, Shopkick.
References
- Experian. “How Do Cash Back Credit Cards Work?”
- Credit Karma. “Cash Back Credit Cards”.
- Discover. “Discover it Cash Back Credit Card”.
- RetailMeNot. “Featured Cash Back Offers”.
- Marketplace. “Cash-Back Shopping Savings, but at What Price?”
- Rakuten. “How Do You Earn Cash Back?”
- Better Business Bureau. “Business Profile: Rakuten”.
- Ibotta. “About Ibotta”.
- Ibotta. “Where to Get Cash Back at Over 500,000 Locations”.
- Ibotta. “Using Ibotta: Answers to Common Questions”.
- Better Business Bureau. “Business Profile: Ibotta, Inc.”
- Shopkick. “Score Rewards In-Store and Online”.
- Shopkick. “How to Earn Kicks: 15 Tips for Shopkick Success”.
- Shopkick. “The Benefits of Providing Customers with Incentives in Retail”.
- Better Business Bureau. “Business Profile: Shopkick, Inc.”
- American Consumer Credit Counseling. “ACCC Explains The Pros And Cons Of Cash Back Credit Cards”.
- Experian. “Do I Lose My Rewards When My Credit Card Closes?”
- Groupon. “Best Reward Programs”.
- Bank of America. “Compare and Find the Credit Card That’s Right for You”.
- Citi. “Rewards and Offers”.
