10 Feb
What Is Cashback? Explained
February 10, 2021
What is cashback?
Cash back, or “cashback,” is a popular credit card benefit that refunds cardholders a percentage of their purchases above a specified threshold. It also refers to a debit card transaction where cardholders receive a small amount of cash in addition to the item cost.
Cashback comes in many forms, and offers can be substantial. That’s why you need to always keep an eye out for possible cashback offers so you can pounce on them.
Cashback sites are set up to advertise the most popular merchants that are available online. The business model here is to provide you with the consumer with a platform that has available links to the merchants advertised on the site. The cashback site has set up a program that links the cashback site to the merchants.
Why does the cashback site do this?
With this an agreement that all referrals will generate a small commission paid by the merchant to the cashback site.
The cashback site then gives you the consumer a fee for your business. So basically the consumer and website share commissions raised from the purchase.
Why do companies offer cashback?
This is pure and simple good advertisement best practice. As a retailer in this online-dominated industry, it has become extremely difficult to survive with the huge online competition.
The Internet is a global platform where anyone in any country can sell anything.
This has become the most accessible marketplace for consumers. For retailers, it has made them and broken some.
For small businesses the internet has forced them into closure, unable to compete with the big established brands.
For the fortunate retailers who can hold top positions in the retail world cashback sites have become invaluable. Historical marketing has required retailers to spend huge fees on advertisements upfront without a single sale!
This in itself has risk, there is no guarantee the advert that a retailer has commissioned will generate sales. Some would say this is a gamble for the retailer, where do you advertise, when, and what is the target audience? There are so many variables to this challenge.
What Is Cashback? All You Need To Know
How does cashback work? A Step-by-step guide
- Research best know sites
- Become a member of the site you have chosen
- Search for the item you wish to purchase
- Buy the selected item
- Generated at a certain percentage
- Paid into your bank account
Cashback is a term that a lot of people throw around these days. If you’re like most people, cashback probably sounds like a scam or unknowable fringe concept.
But it’s not. Cashback comes in the form of either an instant financial reward for a purchase made or as a discount on a future purchase.
What Is Cashback
What is cashback, and how does it work?
Cashback is simply money you earn for doing things you’d be doing anyway. It’s not a loan, it doesn’t cost you anything, and it comes in the form of either an instant financial reward for a purchase made or a discount on a future purchase.
Cashback can be found in the form of credits on credit cards or a percentage of future purchases. How does cashback work? It’s as easy as checking out at most retailers or shopping online and then using a merchant’s credit card to make your purchase.
However, sometimes you don’t need a credit card to get cashback — you just need to make sure you’re enrolled in the right program.
For example, if you’re shopping online with a merchant and you see a cashback button, you’ll want to click on that to make sure your purchase is tracked properly.
Then, when the purchase is made, you could receive your reward immediately or when your credit card bill is due. You never have to do anything other than purchase to receive your cashback.
If the site asks you to do something else, be cautious as they might be up to no good. Cashback should be as simple as buying from the right place, using a certain card, or entering in a promo code.
What is the point of cashback?
Cashback is free money. It helps you out when you’re making purchases anyway and encourages you to shop at merchants and make purchases that you may not have made in the first place.
For example, say you enjoy shopping at certain stores now because they offer cashback rewards.
Or say you always buy a pair of shoes from Nordstrom. However, you never would have thought to shop at either of these stores without the lure of cashback.
A store, credit card, or bank can make a transaction more lucrative by offering you cashback.
You can be sure that they’re not losing out on much by doing so, as the amount of interest or profit they’ll make on a website, store, or credit card will still be far more than the amount of cashback.
Plus, the merchant is encouraging repeat business from you.
If they always offer cashback, the business knows you’re more than likely going to come back and shop with them again in the not-so-distant future.
Companies aren’t stupid, and they will lure you in any way that they can. Cashback is a great way to get you to spend money that you otherwise wouldn’t have.
On top of that, you’ll be encouraged to shop with them again in the future. With that in mind, as you can see, cashback isn’t the free lunch that many people think it is. Offering cashback makes sense if it means a bigger bottom line for the company.
What Is Cashback
Which cashback site is best?
The best cashback site depends on what type of purchase you plan on making. Some cashback programs, like Ebates, offer free coupons and cashback on future purchases. These coupons can be printed out and used when you’re ready to make another purchase.
If you’re shopping online, you’ll want to go with a cashback website that gives you back percentages instead of flat amounts.
Other cashback websites offer gift cards. These are great because they can be used for virtually any purpose. The best cashback website will provide you with the most variety, the most bonuses and gifts, and the best deals overall.
Always see which site offers options for what you want to buy and compare to see who is offering the best deal. There is no one-size-fits-all solution for cashback, and you’ve got to see what’s best for your particular situation.
Be suspicious of fly-by-night cashback sites that offer the moon in hopes of you purchasing them. These sites can disappear overnight, taking your money with them and leaving you high and dry.
You should always stick with a well-known cashback website that has been in business for some time now. Luckily, there are many that you can choose from, which means you can avoid the risk of losing your money by going with a company that hasn’t built up a rock-solid reputation.
Do I have to pay tax on cashback?
Cashback is considered a rebate in the form of cash, check, or gift card. As such, you’ll generally have to pay taxes on it. However, some merchants will offer you the choice to receive your cashback as a gift card and not pay taxes on it. This is generally the case if you’re doing a lot of online shopping.
If you’re in doubt about your tax situation, call a tax expert and get their advice. You may be able to avoid paying taxes on cashback depending on how it’s presented, but you need to be sure.
Taxes are one of those things that you should never leave open to interpretation. If you are unsure, get the answers right away to be left in the dark.
If there’s one thing certain in life, it’s that the taxman doesn’t leave any stone unturned. He will always be looking for more ways to get money out of you, and that’s why being armed with the right information is crucial.
More importantly, you want to avoid getting yourself into any kind of trouble in the future. If you get audited, and it turns out you owe money on cashback, you will have to pay it.
Is cashback free money?
This is a question you have to answer for yourself. Some people say it’s free money, and some people say it’s not. With cashback, you do get money back for your purchase. The only issue is that you have to spend the cashback amount before you get the cash. If you can’t pay off the balance in full, then it’s not free money.
This isn’t to say you won’t get a little extra out of it, but you have to spend the money before you get your cashback. It’s also worth noting that not all cashback websites are created equal. Some may offer you more cashback than others.
It’s up to you to decide if it’s worth the time and effort to compare sites and search for deals. In most cases, it should be.
Cashback is free money, but it’s money that you must spend money to earn. It’s a trade-off. You get money, but you have to spend it before you get it. The more money you spend, the more of a discount you can expect to receive.
You also need to find the cashback site that will give you the most for your money.
Conclusion
With that being said, it’s clear that cashback is free money. Though you need to spend money in order to get it, you can certainly earn a little extra money for your spending.
It takes some work to get it, but you will reap the benefits of your shopping efforts. As long as you view cashback as free money that you earn from your purchases, you shouldn’t have any problems with this opportunity.
Study what is being offered to you and make your purchases based on who is offering you the best options. It’s not a lot of money, but it will make your purchases a little bit easier to swallow.
If you’re going to make a big purchase, it’s best to study who is offering what and how much the final price is before determining if it’s a good deal or not. A store might offer a CB, but their original price is so high that it’s cheaper to shop elsewhere even if they offer cashback.
A great source of CB is credit cards. You can get all kinds of perks for using certain cards, which you should look into. Some credit cards will give you cashback for purchases that you make every day, and that in itself is well worth checking out.
The right credit card can save you money on gas and groceries and even help you get more out of certain online purchases.
Be an educated consumer and learn all that you can so that your wallet will be a little faster the next time you make a purchase.
FAQs
Do cashback sites charge an annual fee?
Yes, and No, some sites do and some do not, it’s best to research and understand this before proceeding.
What can you get cashback on?
Almost anything, these days nearly all online retailers participate in cashback schemes.
Is cashback taxable?
The short answer is NO, cashback is classed as a discount. Please get legal advice if you require an official answer.
What is Cashback by Redemption?
Cashback by redemption gives you money back (usually by cheque) on your mobile phone contract at defined periods.
What is a Cashback credit card?
Cashback credit cards offer you the chance to earn cash from the money you spend, by paying you a percentage back or giving you reward points.
What is Cashback on a mortgage?
A cashback mortgage will give you a cash lump sum when you successfully apply for one, but catches do apply so make sure you know what to look out for.
What is rewards?
Cash back rewards are actual cash that can be applied to a credit card bill or received as a check or bank account deposit.
How does cashback work for debit cards?
Debit card cashback is a service offered to customers whereby an amount is added to the total purchase price of a transaction paid by debit card and the customer receives that amount in cash along with the purchase.
How does cashback work at Walmart?
How much cash back can you get at Walmart? If you are considering CB by using a debit card, then you can get back $20, $40, $60, $80, or $100.
