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John is credited with a salary on the card, but she usually immediately withdraws cash from his and puts it in envelopes for different types of spending. This makes it easier for her to control her family budget. And John's friends always pay with cards - and benefit from it. Banks return them some of the money spent. Boyfriends go to them in the cinema and cafes, buy shoes, book tickets and hotels. We will tell you what cashback is and how John will be able to please herself with it without harming the family's budget.
Cashback means "money back" in translation from English. For example, Ivan, John's friend, buys an art album in a bookstore for $ 15. You pay by card and get $ 1 back to your account. This is cashback. In a month, Ivan has enough money back on his card to spend it on movies, cosmetics or going to a cafe.
How and why do banks pay cashback?
When you pay in a store with a card, the merchant deducts a commission for the operation to his bank (also called the acquiring bank). Part of this commission remains with the seller's bank, and part of the payment systems (Visa, MasterCard and others) are transferred to the bank that issued your card (the issuing bank).
Issuing banks are interested in actively using their cards. Therefore, they return to customers a part of the amount paid on the card in the form of a cashback. Issuing banks themselves benefit from this - after all, the higher the turnover of money on the cards, the more commissions they will collect. In addition, cashback is a marketing technique that helps banks attract new customers and retain old ones.
Large banks today are creating their own ecosystems with a variety of services - from online stores to mobile operators and travel agencies. To attract new users and increase sales, banks are ready to offer especially lucrative cashback programs for those who use these services.
Banks often cooperate with large retail chains, carrier companies, telecom operators. And partners of banks offer increased cashback for purchases from them - up to 30% of the check amount. In this case, the bank does not share its commission with the cardholder - the seller reimburses the bank a part of the purchase price and the bank returns it to the client in the form of a cashback.
For bank partners, participation in cashback programs is also a marketing ploy. Sellers are ready to share part of their profits, but they save on advertising - banks advise them to their customers and the circle of buyers is expanding. Stores often offer high cashback for certain products: from old collections or those that are reluctant to buy. This is how sellers unload warehouses and increase turnover.
What are the types of cashback?
Three types of returns are popular today. This is not only a classic cashback - with money, but also the accrual of bonuses, points or miles.
Money
Pros: You can spend them on anything.
Unlike other loyalty programs, the money returned to the account will not be burned under any circumstances.
Cons: Refunds are usually small - 0.5–2%. But for some categories of goods, it can be higher - in rare cases, even up to 30%.
Most often, the bank does not add them to the account immediately, but at the end of the month.
Bonuses
Pros: they are usually credited to a special bonus account immediately after payment.
You can often choose the categories of purchases (entertainment, children, education, or others), for which increased bonuses will be accrued - up to 15%. According to special offers of the bank's partners, they can return up to 30% of the purchase amount with bonuses.
Banks often allow you to attach several cards to one bonus account - this allows the whole family to accumulate bonuses.
Cons : bonuses are not available everywhere. Usually only in certain stores, cafes and online services. Part of the bill still needs to be paid in cash.
The system of transferring bonuses to rubles is not always transparent. For example, if you want to buy something for bonuses, sometimes 1 bonus is equal to one $, and sometimes - pennys. You need to carefully read the terms of the bonus program.
In many programs, bonuses expire if you do not spend them within a certain period - within a year or three from the date of accrual.
Miles
Pros: often the refund amount in miles is more than in cash - up to 30% in certain stores and up to 2% for all purchases, regardless of the category.
Cons: Usually miles are spent only on travel - on tickets and hotel reservations. Although for some this is a plus - there will be no temptation to let them down on all sorts of trifles.
If a bank offers a loyalty program in partnership with a certain carrier, for example an airline, then you can pay with miles only for tickets of this particular company.
Some banks offer special "travel cards". Miles on such cards are exchanged for tickets of different carriers, hotels and tours - but only for those that are sold on a special website of the bank itself. Sometimes the same offers can be found on other resources at a better price.
Miles also usually expire after a certain period, but not for all banks.
As a rule, cashback can only be obtained on purchases. For cash withdrawals, utility bills, fined transfers from card to card, neither money will be returned, nor bonuses and miles will not be credited.
It is also worth considering that banks usually charge more money for servicing a card with a cashback than without it. And even the same bank may have different commissions for cards with different types of cashback.
How to choose the most profitable program?
To get the most out of it, you'll need to equip yourself with a calculator and be patient. Try to:
Cashback means "money back" in translation from English. For example, Ivan, John's friend, buys an art album in a bookstore for $ 15. You pay by card and get $ 1 back to your account. This is cashback. In a month, Ivan has enough money back on his card to spend it on movies, cosmetics or going to a cafe.
How and why do banks pay cashback?
When you pay in a store with a card, the merchant deducts a commission for the operation to his bank (also called the acquiring bank). Part of this commission remains with the seller's bank, and part of the payment systems (Visa, MasterCard and others) are transferred to the bank that issued your card (the issuing bank).
Issuing banks are interested in actively using their cards. Therefore, they return to customers a part of the amount paid on the card in the form of a cashback. Issuing banks themselves benefit from this - after all, the higher the turnover of money on the cards, the more commissions they will collect. In addition, cashback is a marketing technique that helps banks attract new customers and retain old ones.
Large banks today are creating their own ecosystems with a variety of services - from online stores to mobile operators and travel agencies. To attract new users and increase sales, banks are ready to offer especially lucrative cashback programs for those who use these services.
Banks often cooperate with large retail chains, carrier companies, telecom operators. And partners of banks offer increased cashback for purchases from them - up to 30% of the check amount. In this case, the bank does not share its commission with the cardholder - the seller reimburses the bank a part of the purchase price and the bank returns it to the client in the form of a cashback.
For bank partners, participation in cashback programs is also a marketing ploy. Sellers are ready to share part of their profits, but they save on advertising - banks advise them to their customers and the circle of buyers is expanding. Stores often offer high cashback for certain products: from old collections or those that are reluctant to buy. This is how sellers unload warehouses and increase turnover.
What are the types of cashback?
Three types of returns are popular today. This is not only a classic cashback - with money, but also the accrual of bonuses, points or miles.
Money
Pros: You can spend them on anything.
Unlike other loyalty programs, the money returned to the account will not be burned under any circumstances.
Cons: Refunds are usually small - 0.5–2%. But for some categories of goods, it can be higher - in rare cases, even up to 30%.
Most often, the bank does not add them to the account immediately, but at the end of the month.
Bonuses
Pros: they are usually credited to a special bonus account immediately after payment.
You can often choose the categories of purchases (entertainment, children, education, or others), for which increased bonuses will be accrued - up to 15%. According to special offers of the bank's partners, they can return up to 30% of the purchase amount with bonuses.
Banks often allow you to attach several cards to one bonus account - this allows the whole family to accumulate bonuses.
Cons : bonuses are not available everywhere. Usually only in certain stores, cafes and online services. Part of the bill still needs to be paid in cash.
The system of transferring bonuses to rubles is not always transparent. For example, if you want to buy something for bonuses, sometimes 1 bonus is equal to one $, and sometimes - pennys. You need to carefully read the terms of the bonus program.
In many programs, bonuses expire if you do not spend them within a certain period - within a year or three from the date of accrual.
Miles
Pros: often the refund amount in miles is more than in cash - up to 30% in certain stores and up to 2% for all purchases, regardless of the category.
Cons: Usually miles are spent only on travel - on tickets and hotel reservations. Although for some this is a plus - there will be no temptation to let them down on all sorts of trifles.
If a bank offers a loyalty program in partnership with a certain carrier, for example an airline, then you can pay with miles only for tickets of this particular company.
Some banks offer special "travel cards". Miles on such cards are exchanged for tickets of different carriers, hotels and tours - but only for those that are sold on a special website of the bank itself. Sometimes the same offers can be found on other resources at a better price.
Miles also usually expire after a certain period, but not for all banks.
As a rule, cashback can only be obtained on purchases. For cash withdrawals, utility bills, fined transfers from card to card, neither money will be returned, nor bonuses and miles will not be credited.
It is also worth considering that banks usually charge more money for servicing a card with a cashback than without it. And even the same bank may have different commissions for cards with different types of cashback.
How to choose the most profitable program?
To get the most out of it, you'll need to equip yourself with a calculator and be patient. Try to:
- A month or two to track your spending. You can do this simply in a spreadsheet or use a special mobile application for budgeting.
It is important for each purchase to note which category it belongs to - entertainment, food, baby products, education, and so on. So you will understand what the most significant share of the budget is spent on, which is worth getting the maximum cashback.
For example, John's husband drives a lot on weekdays, and on weekends they often go out of town by car. Cost analysis showed that a lot of money is spent on gasoline. It would be nice to return them at least partially.
There are also large, but irregular expenses - for example, buying air tickets and paying for hotels. They should be written in a separate line - perhaps it would be more expedient to have a special map under them. - Think over which type of cashback would suit you best: money, bonuses or miles.
For example, John and her family usually go on vacation by car. They don't need miles to spend on air or train tickets. There is almost nowhere to pay with bonuses in their city. And converting bonuses into $ is extremely unprofitable. So, only cashback with regular money is suitable for her.
And John's friend Steve, on the contrary, purposefully accumulates bonuses, which she spends every three to four months in a shoe store. - Analyze the offers of banks in your region. Check if there are any higher bonuses, miles, or cash back for those product categories that take up the most of your budget.
The percentage of cashback may depend on the amount of purchases on the card - the more you spend, the more you get. For example, John mainly buys groceries in the market, where she often has to pay in cash. Although this is a significant part of the costs, it will not affect cashback.
Pay attention to details that can nullify all the benefits. For example, some banks do not charge cashback on expenses on salary cards.
Many loyalty programs come with additional conditions. Let's say you need to spend at least $ 150 a month on your card. Or keep a minimum account balance of at least $ 500. Otherwise, you will have to pay $ 2-5 per month for servicing the card.
