It’s a bit like getting a tip for spending
Yes, it does make you want to shop more. Cashback rewards have become a common way for credit card companies to attract clients, especially in the United States and the United Kingdom. Just like a tip, when a customer spends, they get a small percentage of that sale back. Alternatively, it is an amount one receives back in cash or by check after making a larger purchase.
What are cash back rewards?
It’s kind of getting free money. It mainly refers to credit card benefits, which give cashback on cardholder’s purchases. Cashback rewards are popular due to the fact that they are not bound to the purchased product. One can spend the cashback on what one pleases, and in the case of credit card cash rewards, it can help pay off your bill. These rewards usually range between 1% and 3% of the purchase, and there are often deals doubling that percentage. In retail, cashback rewards are an amount of money which is returned after a purchase.
Cash is king.
Everyone loves a deal, and thanks to online shopping it is easier than ever to find the best promotions. Cashback rewards for products have really grown thanks to the availability of better information. Unlike with a discount, where a product loses its initial value, cashback allows for an item to retain its worth while providing a financial incentive to buy it. That’s why there are plenty of websites dedicated to cashback-offers on retail. The way these cashback companies make cash is through affiliate marketing. When users are interested in a cashback offer, they click on the link and are forwarded to the retailer’s site. The cashback company can charge the retailer for the successful sale they have facilitated. And ta-da! You’ve got a commission. How do banks offer cashback? They give their customers a portion of what they receive from the transaction fees they charge their merchants.
This sounds too good to be true...
Because it is. Although cashback rewards are a very effective way to reward loyal customers, their true purpose is to be spent. If you truly are a loyal customer, there’s a big chance you will spend your cashback on the brand you received it from. And because of the immediacy of the reward, it is very likely the reward will be spent in a short amount of time. With that in mind, it can actually take up to 90 days for a transaction to go through, so you really need to make sure you actually get your cashback back.
Why will your future self thank you?
Because free money! That being said, there are other ways one can redeem cashback. For example, one can receive a cash deposit, gift card, a credit statement, or donate the amount to a charity (we like this one!). And the truth is that you could go and save this money. The chances are, however, that you will not. That's why we thought of a new type of rewards, promising long-term monetary benefits and increased loyalty.
1. Beware of cashback: sometimes it sounds like a good deal, but the same product is available somewhere else for cheaper (a quick search online will help you figure that out).
3. Social rewards (like getting points for posting something on a social platform) do not motivate customers to join loyalty programs.