The Briefing

Cashback: what you really get back

How does cashback actually work?

February 10, 2022
Reading time 2 min.

🌈 A quick taster for you:  

  • With cashback, you get money back while shopping.
  • Notice if cashback leads to you splashing the cash.
  • Keep track of any fees that banks charge for cashback.

🧐 Why do I care?

Have you ever thought shortly after buying something: Hey, I want my money back! The good news is that this can happen with cashback.... okay, that’s a massive exaggeration! Cashback will only give you back a small part of what you spent. We’re here to guide you through how it works, and what the advantages and drawbacks are. Let’s go!

🔍 What exactly is happening here?

  • Cashback = money back?
    It sounds simple, and it is. When you buy something, you get a percentage of the amount credited back into your account. Whether on travel platforms, in the supermarket or shopping online — it’s easy peasy! In essence it’s simply a type of reward program. Other well-known programs allow you to collect points, and when you have enough points you can exchange them for a cheaper flight or a new set of knives. 
    With cashback, rather than collecting points you immediately get a percentage of what you paid transferred back into your account. With every payment? Well, that rather depends! 
  • What types of cashback are there?
    Cashback was first used for credit cards. The credit card companies make deals with various sellers, such as Adidas, Zalando, Kaufland and so on. For every purchase someone makes at one of these stores, the sellers pay something back to the credit card company — who, in turn, give a portion back to the customer. It's a shiny circle of cash.  
    There’s also cashback on debit cards. 
    A brief digression on the difference between credit cards and debit cards: With a credit card, when you buy something the payment is postponed until a later date. With a debit card, the bank account is charged immediately. Digression over!
    Cashback on debit cards works in such a way that every time you really make a payment with your card, a portion of the amount spent is immediately transferred back to you. There are no deals with stores — the bank pays you the cashback. 
    As well as banks, there are also websites that offer cashback. So all in all, there are plenty of deals that allow you to save some money. 
  • Is cashback really worth it?
    Cashback is king! Right? It lets you save money every day. Yay! But, as with all offers, there’s a catch. You only get money back, if you’ve spent money. That’s what makes it worthwhile for stores and websites — they know you’re more likely to shop at Adidas than Nike if you’re able to get cashback from Adidas.
    As for banks, they earn money on every payment you make with your credit or debit card. In the battle for more customers, they offer cashback in order to win you over as an active customer — and they hope that you’ll make as many payments as possible.
    Cashback offers are often very attractive at the beginning and are usually free of charge. Over time, however, many banks offer cashback only for paid accounts, which means that it may cost you something.

🤓 What does this mean for me?

Whether cashback is really worth it is actually pretty easy to calculate. Just take advantage of a free cashback offer, and then pay close attention to what you spend your money on. Are you really saving money because you’re still shopping in the same stores as before, or are you suddenly spending more money? Of course, it’s often not quite so black or white. For example, you might end up spending a little more money, but getting a higher quality of products in return — which can be a win!

To sum it up: cashback can be great, but you need to keep track of the actual benefits!

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