What if you could receive monetary rewards for products you have already purchased? That’s the basic idea of cashback.
Consumers love cash-back rewards programs that offer small discounts on everyday purchases like groceries and dining out, and for businesses, cash back means small savings on costs like shipping, office supplies, and travel.
Below we explain how cashback works and some of the best cashback programs out there.
What is cashback?
Many credit and debit cards offer cashback rewards programs that give you a small amount of cash back on every eligible purchase. This percentage reward acts like a discount on the item you purchase.
for example, credit card Or debit cardholders can earn 1.5% or 1.5 cents cash back on the dollar on eligible purchases. Cash back reward amounts vary, but typically range from 0.5% to 5% of the eligible purchase amount.
How does cashback work?
Depending on the cashback program, you can earn rewards through a flat rate or a tiered system. A flat rate gives you a set percentage of cash back on all purchases. A tiered rate card usually gives you different percentages of cash back for different categories based on the type of purchase. For example, you might get 3% cash back on hotels, 2% on rental cars, and 1% on all other purchases.
Cash rewards are usually offered as direct payments to your bank account, statement credits, or rewards points that can be redeemed for cash or gift cards. Programs often have a set annual spending threshold (such as $100,000) at which you must earn cash back.
Cashback is loan or free money that cannot be immediately converted into cash. Some cards only give cash back rewards after one or two billing cycles or after you pay off your purchases. Your monthly credit card statement will show the amount of cash back earned and received over the past 30 days.
Business Lines of Credit or Revolving Credit Facility They usually don’t offer the same cashback programs.
Is cashback a good thing or a bad thing?
Cash back isn’t inherently good or bad; it depends on your spending habits and how you manage your cards. If you regularly pay off your monthly statement balance in full, cash back can be a good thing because it saves you money on purchases. However, if high interest rates or fees outweigh the cash back rewards you earn, it may be less beneficial.
Benefits of cashback
- Get discounts on things you already spend money on.
- Earn money while you build Business Credit Through regular expenditure and on-time payments.
- Reduce your overall costs by recovering a percentage of your business expenses.
- Improve your cash flow with rewards that you can reinvest in your business.
- You can strategize to maximize your rewards.
- Cards often offer a welcome bonus once you meet minimum spending requirements.
Disadvantages of cashback
- It may take some time before the cashback you earn is available for use.
- If you don’t pay your balance in full each month, you could be subject to higher interest rates.
- Rewards are capped and may limit the points you can earn on larger purchases.
- Card issuers may charge fees that offset cash back earnings.
- To get the best rates, you often need to book hotels and cars through the card’s portal.
- Most cash back rewards cards require good to excellent credit.
How to use cashback
Cashback, especially Start a businessNo matter what stage you’re at, you can get cash back to help you reduce your business costs.
Business Travel
Traveling to a trade show or professional conference? Many cash-back credit cards offer discounts that allow you to use bonus cash on car rentals, hotels, restaurant meals, and airfare.
gas
If you drive a lot to meet with suppliers, ship products, or travel between brick-and-mortar stores, a cash-back credit card with gas station rewards could be a good choice.
Office supplies
To earn extra cash back on office essentials like printer ink, shipping supplies, and sticky notes, look for cards that offer rewards from office supply stores.
Internet and Telephone Services
Some popular cash back business cards offer rewards for paying for internet and phone services, so why not try and get a small discount on these unavoidable expenses?
Everyday shopping
Flat-rate cards offer a flat rate of rewards on all purchases (usually between 1% and 3%), making it simple by allowing you to earn points on all your business purchases, from PPC ads to packaging supplies.
Best Cash Back Program
Discover Financial Services created the first cash-back bonus card in 1986, and similar rewards programs have proliferated since then. Here are some of the best cash-back cards for business.
- Ink Business Cash Credit Card: Earn 5% cash back on office supply stores, internet, cable and phone services, 2% cash back at gas stations and restaurants (up to $25,000 per tier). 1% cash back (no cap) on all other card purchases. No annual fee.
- Capital One Spark Cash Select: Earn 1.5% cash back on all purchases. Plus, earn unlimited 5% cash back on hotel and car rentals booked through Capital One Travel. Get a $750 welcome bonus after you spend $6,000 in your first three months. No annual fee.
- Ink Business Unlimited Credit Card: Earn 1.5% cash back rewards on every business purchase. No rewards cap. No annual fee.
- Cashback Rewards Visa Card via Shopify Credit: Shopify is Shopify Credits3% cash back on one eligible major spend category (Marketing, Fulfillment, or Wholesale) and 1% cash back on the other two will be automatically applied to your account as a statement credit. Available to US merchants only.
Cashback FAQ
How long does it take to receive the cashback money?
This varies by card issuer. Some cards credit rewards immediately after purchase, while others may take several weeks or one or two billing cycles. On average, it takes 30-90 days for cash back to appear in your bank account or statement. Check your card issuer’s terms and conditions for specific information.
What are the pitfalls of cashback?
There are a few pitfalls with cashback programs:
- Some cards require a minimum spend to earn cash back.
- There may be limitations on the amount of Cash Back you can earn in any given time period and the types of purchases you can make that earn Cash Back.
- Cashback rewards may expire if not used within a certain period of time.
- If you don’t pay your balance in full each month, annual fees and high interest rates could offset the cash back benefits.
- Higher reward rates may only apply to certain spending categories.
- In some cases, it can take up to 90 days to receive your cashback rewards, making them less convenient than instant discounts.
What are the disadvantages of cashback?
Cash-back credit cards have high annual fees that can outweigh the rewards, limited redemption options limit the ability to use your credit card rewards for something other than cash, and carrying a balance on your card can result in higher interest rates and reduced rewards.
Capped rewards and spending category restrictions can further limit your potential benefits. To get the most out of your cash back card and make sure your interest charges don’t exceed your rewards, be disciplined with your spending.
Who pays out cashback rewards?
Cash back card rewards are funded by the credit or debit card issuer, in part through interest and fees paid by customers and transaction fees paid by merchants to the card issuer.
