Cash back is a reward incentive program operated by credit card and debit card companies in which a percentage of the amount spent by the card holder is paid back to the card holder. The purpose of this program is to encourage use of the card; thereby the card holder is given benefits such as points, flyer miles or a monetary amount. The monetary benefit is usually known as the cash back. This benefit refunds a small percentage of the amount spent on each purchase or purchases above a certain dollar.
Various levels of cash back are offered by credit cards and debit cards from time to time depending on the type of purchase or transaction. Generally, the card holder must reach a certain transaction level to qualify for cash back or the other benefits such as points or flyer miles. This cash back is paid annually; however some cards pay on a monthly basis. Mostly, cash back cards credit the earned amount onto the statement, reducing the card holder’s credit card bill. Whereas some cards send the cash back to a bank account so that the card holder can spend it or let the holder convert it to points or vouchers.Explore Definition
Cash back can be redeemed in many ways:
• Statement credit: One can apply cash back to the current credit card balance.
• Bank Deposit: This cash back is earned and deposited directly into one’s checking or saving account.
• Donation: Some credit card companies allow the card holder to donate some or all of the cash back to a charity of the holder’s choice.
• Gift cards: Many credit card companies allow the card holder to get additional benefit by redeeming the cash back in the form of gifts of popular brands.
Cash back cards are beneficial if one pays off the credit card bill in full ever month as then the individual gets rewards for spending money that one would have spent anyway. However, the cash back benefits entice everyone to spend more in order to gain points or cash back and might hamper one’s saving plans. Therefore, when choosing the best cash back card, one must consider the following:
• Financial preferences – do you want to pay an annual fee? The best cash back credit cards in Canada have an annual fee because they offer higher cash back rebate percentages, higher spending limits than other cards and special bonuses such as extensive travel insurances, etc.
• Financial situation – your income
• Where you mostly spend your money – Do you want to spend more on specific things than the others and for that do you really need the cash back credit cards?
It is always advisable to read the entire cash back offers thoroughly while choosing the best cash back credit card, to get familiarize with all the terms and conditions. Moreover, after getting the card, monitor the spending over the next few weeks to check how well the new card fits in your budget and lifestyle.