What is a cashback and how does it work?

What is a cashback and how does it work?

Cashback is one of the benefits offered by bank cards, which enables a certain part of the customer’s business expenses to be reimbursed. Traditionally, this was something exclusive to credit cards, but today some debit cards also offer rewards in the form of cashback.

This method can be confused with the cashback rewards programs, but we are not talking about the same thing. Traditional cashback is a service offered by some stores through which customers can withdraw money using their debit card at checkout. The total amount of cash required is added to the purchase price and deducted from the card in the same transaction. It is similar to withdrawing money from an ATM and has no rewards.

Other types of cashback are offered through rewards programs, such as refunding a small percentage of the total purchase. Many banks and financial institutions offer cashback programs, although their proportions and benefits vary widely among banks and other financial institutions. Some companies offer points that can then be redeemed for cash, gift cards, airline tickets, and more.

How cashback programs work

Cashback can be made through agreements between card issuers and the stores they work with. For each purchase made by the customer with his card, the store pays a percentage to the issuer, who can return a part of said earnings to the customer. This cashback is a great incentive for customers to open accounts with some banks and card issuers, especially as they offer better deals than partner companies.

The total of the cashback varies according to the bank, the type of card, and the place where you live. Cashback programs are more popular in the United States than in countries with more conservative tax systems. Some establishments require customers to exceed the minimum spend to enjoy their benefits, while others offer cashback on every purchase.

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How to activate it in your business

If you are interested in activating this option in your business, you should talk to your bank to find out what modalities and options they offer you, depending on your needs. Currently, it is not a particularly widespread system, but some banks such as ING have opted for its implementation. In this specific case, cash can be withdrawn at more than 8,000 stores, supermarkets, and gas stations throughout the country,

Through the mobile app, both customers and non-customers can withdraw between 20 and 150 points at the checkout line while making a purchase at the store. Users will be able to pay both with the card and with the mobile, through the mobile payment application.


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