Whether it’s the supermarket run, getting petrol, buying birthday presents or something else, recommendations, habits and curiosity often drive us to spend money on products and services. However, price is one of the first things we look for to help us save and maintain good financial health. Below we tell you where cashback comes in.
There are two types of cashback. Traditional cashback is where we can get cash without having to go to an ATM or bank branch. All we need to do is go to a cashback-enabled establishment like a supermarket or petrol station and ask for cash when making a purchase. The amount will be added to the total. We pay with our bank card and the shop assistant hands over the purchased items plus the requested cash.
Imagine you’re in a clothes store and realize you need cash for something else. You buy a 10-euro t-shirt, and also tell the assistant you’d like 20 euros in cash. The assistant charges you 30 euros, which you pay with your credit card, and hands over the t-shirt plus a 20-euro note.
It has gained a lot of popularity recently. According to the European Bank, 2% of the people in the Eurozone use it.
Cashback can also refer to the fruits of loyalty or reward schemes.
Cashback reward schemes: What are they?
They are loyalty programmes through which specialist websites and apps, banks and card issuers give us back a percentage of what they spend at certain establishments. Often, we have to make the purchase through a particular platform to redeem the reward.
Imagine you want to start up a graphic design business and need a powerful laptop. After a price comparison, you find exactly what you’re looking for and decide to buy it. You open your online banking app, go to the “promotions and discounts” section and see that if you buy it with your credit card, you get 5% cashback.
There are three typical ways to receive it: Through points programmes, where we accumulate points to later exchange for other items; as money deposited into our bank account; or as a voucher to spend on the platform.
Thanks to this business model, websites, apps, banks and card issuers can:
We also benefit by saving on our shopping, since getting back a small portion of what we spend can be looked at as discount on what we originally buy.
Want to know how to save money when getting petrol and carrying out other day-to-day activities? Find out in this article (in Spanish) by Finanzas para Mortales (Finance for Mortals).