What is cashback, how does it work and how to claim it

Have you ever been tempted by the idea of getting a return on your purchases? With cashback you can do just that. Some consumers already know and use this tool very well. Many others, however, wonder about the meaning of the term and the mechanism of the so-called "reward program", which is one of the innovations of recent years in terms of electronic purchases and payments.

But this does not mean that cashback is something new: various stores, credit cards, sites and payment apps have long been using it as a promotional tool that benefits users and companies. The immediate - or, in any case, periodic - refund of a percentage of the expense, credited directly back to the customer’s account, is, in fact, an excellent incentive to make purchases as well as a loyalty tool.

But how does it work exactly? In this article we will explore in detail what cashback is, how to request it and how to make the most of it to obtain real savings.

What is cashback: meaning and definition

Imagine being able to accumulate small sums of money every time you go shopping: that’s cashback. But what does "cashback" mean? Let’s start with the literal meaning.

The term comes from the English cash (“money”) and back (“back”). It literally translates to getting “"money back"" and was born in the United States, then quickly spreading throughout the world thanks to its simplicity and effectiveness in promoting savings on purchases. Simply put, cashback is an innovation in the commercial payment system that allows customers who purchase products to receive a percentage of reimbursement of the amounts spent.

In light of this definition, we can understand that cashback is not a real gain nor a discount on the purchase: it is, in fact, different from this and from discount codes (with which it is often confused) because in the case of cashback the money is credited retrospectively, after the expense has already been made.

It is, therefore, a reward with which the customer is rewarded for having made purchases from a specific retailer. The amount reimbursed (cashback) is a percentage of the amount spent by the customer and varies from case to case, with some companies offering higher reimbursement rates than others.

How cashback works

The functioning is simple: every time you make a purchase at physical or online stores affiliated with cashback programs, a portion of the amount spent is returned. This refund can vary from 1% to 10%, or even exceed these figures in particular cases or special promotions. The more you buy, the more cashback you accumulate, transforming each transaction into an opportunity to save.

How can this system change our spending habits? It could be said that the functioning of cashback is also stimulated by the progressive replacement of paper money (banknotes and coins) with the increasingly advantageous use of cards and electronic or totally digital tools.

After all, cashback is an incentive program that allows consumers to receive a cash refund for purchases made with certain means of payment, such as cards (credit or debit) or digital payment apps. This incentive is based on the concept of returning a percentage of the money spent during specific commercial transactions and tracking, as well as immediacy, represents a necessary condition for the correct process of functioning and use. Regardless of whether you proceed with purchases in physical stores or online.

Obviously, each entity or partner that offers cashback follows its own commercial and market logic. Therefore, there are no fixed and pre-established rules. The process of how the refund works, however, is more or less similar and involves some common steps.

1. Registration on the platform: the first step to use cashback is to sign up for one of the platforms that offer it. Some services are free, while others require a small registration fee. During registration, you will be asked to enter your personal data and configure the payment method or account to which your refunds will be credited.
2. Choose participating stores: Once registered, you can explore the list of stores that offer cashback. Most platforms work with thousands of retailers, from large electronics chains to clothing stores, to supermarkets and e-commerce platforms.
3. Make a purchase: After choosing a store, proceed with the purchase through the cashback platform or using a credit/debit card enabled for cashback. The system automatically tracks your spending and calculates the refund you are entitled to, usually a percentage of the total purchase.
4. Accumulate cashback: the money earned is accumulated in your account and can be collected once a minimum threshold is reached. Payment is made via bank transfer, credit (including PayPal) or in the form of vouchers.
5. Redeem cashback: Once you have accumulated a certain amount, you can request a refund. Some platforms allow you to withdraw funds at any time, while others require you to reach a minimum amount.

Cashback, how to claim it?

Cashback programs are often offered through specialized platforms, e-commerce apps or even credit and debit cards that include this benefit among their services. Companies that participate in cashback programs work with the providers of these services to offer benefits to customers, thus incentivizing further purchases. In fact, cashback is an effective marketing tool to retain customers and increase sales volume.

In addition to the simple return in money, some platforms offer cashback in the form of gift cards, loyalty points or other forms of reward that can be redeemed for further purchases. This variety of options makes this tool a flexible and customizable choice based on consumer preferences.

To claim cashback, it is usually sufficient to make a purchase using the designated payment method - provided that the purchased goods are eligible for cashback, of course. However, it is important to follow the specific instructions provided by the supplier to ensure that the purchase is valid and that the refund is correctly credited. In fact, at the time of payment, the consumer must know the timings and limits of the cashback, in addition to the expected refund percentage.

What is included in cashback?

Cashback does not only apply to one sector or type of purchase, but encompasses a wide range of product categories, making it possible to save in different areas and situations. By its very nature, cashback is a tool that has no limits and can be included in any field where there is a tracked and traceable purchase. In any case, here are the categories of purchase and sale in which it is most commonly used.

• Electronics and technology: many online electronics stores, such as Amazon, offer cashback - periodically or always. You can buy smartphones, computers, televisions, household appliances and other technological products, and get a percentage of the total cost back.
• Clothing and accessories: numerous cashback platforms include the main fashion and clothing retailers. Zara, H&M, Nike and other brands often offer cashback, allowing you to save on clothes, shoes, bags and accessories.
• Travel and holidays: Many travel and hotel booking sites, such as Expedia, Booking.com and Hotels.com, collaborate with cashback platforms. This allows you to recover a portion of the cost of your accommodation or booked flights.
• Supermarkets and food products: For the more petty economy, know that supermarkets and food stores are also adopting cashback. This way, you can save on everyday spending and on consumer products.
• Home expenses and furniture: If you are furnishing your home or making home improvements, some cashback platforms also collaborate with stores such as IKEA or Leroy Merlin. This allows you to recover part of your investments in furniture and decorative objects.

To know what is included in the cashback of the service you are using, however, you must always refer to the subscribed product. The types of purchases that are included in the refund, in fact, can vary depending on the specific program. Furthermore, the methods of use can involve payment at the customer’s premises or through credit apps (but the final result is the same). Only some solutions provide cashback regardless of the type of purchase.

How to use cashback

For those less accustomed, the meaning of cashback and its relative functioning are now certainly clearer. In fact, the more you spend, the more cashback you can get, always within the limits of the maximums provided for by the various credit options.

Cashback, therefore, can be used for a variety of purposes, including paying for future purchases or, essentially, having additional financial availability in your account. It is important, however, to carefully monitor the accumulated cashback and, in cases where it is provided, use it before it expires or is lost.

Remember that to "use cashback" effectively you need a good strategy. It is not enough to sign up to a platform and make random purchases, but rather it is necessary to plan and make the most of savings opportunities, taking advantage of promotions, choosing the right platforms (in line with your purchasing prospects) and always paying attention to the conditions of use (limits, deadlines, spending thresholds etc etc).

Original article published on Money.it Italy. Original title: Cos’è il cashback, come funziona e come richiederlo