What is cashback?
Cashback is a type of incentive offered by credit cards, banks, and online retailers where customers receive a percentage of money back after making eligible purchases. This reward can be paid as cash into a customer’s bank account, used as credit against future purchases, or applied as a statement credit to reduce the balance on a credit card. Cashback originally grew popular with credit cards that gave customers a way to earn money back on everyday spending, such as groceries, travel, dining out, or shopping. Nowadays, online shops and brands also use cashback as a loyalty tool, offering money back on purchases to encourage customers to return and spend more.
Cashback credit card categories
Cashback credit cards generally come in two types. The first, flat-rate cashback cards, pay the same percentage back on all spending, no matter where you shop. The second type, bonus category cashback cards, offers higher cashback rates in specific spending categories that might change throughout the year, for instance, higher cashback on supermarket shopping one quarter, and on travel expenses the next.
Why offer cashback rewards?
Much like cashback credit cards, retailers and brands who provide cashback incentives can strengthen customer loyalty. When shoppers know they’ll earn money back from purchases, they’re more likely to keep spending with the same retailer so they can redeem their rewards. Some retailers set a minimum spending threshold before cashback can be redeemed, which can encourage customers to return and spend more on future purchases. For businesses, cashback schemes are an effective way to reward loyal customers, drive repeat purchases, and increase customer lifetime value.
