The use of cashback, along with discounts, credits, promotions and other ways to save money, has already become common among users. But its principle for many still remains incomprehensible to the end, that’s why many people consider it a fraud on the buyer. For what and why return the money? Maybe it’s a scam?
What is a cashback
The word “Cashback” translates from English as “cashback” – this term means a return of part of the cost of goods or services on the client’s card. Usually the amount of cashback ranges from 1 to 10%. Essentially, this is a type of loyalty program, with the only difference being that the customer receives the money not before or during the purchase, but after.
This program is used in many areas, but most users are faced with it when buying in online stores or paying for goods and services by bank card. Refunds cause many people to be distrustful, they don’t understand why stores or banks should get refunds. In fact, it is beneficial to all participants – financial institutions, stores, and customers.
Discount and cashback – differences and principle of action
In order to get the maximum profit and attract as many customers as possible, any seller has to invest in advertising. The advertising costs are initially built into the cost of goods or services. And its effectiveness determines the extent to which the seller can reduce the cost, and still get a high profit. The seller returns the difference to its customers in the form of cacheback.
Important: The use of cashback allows you to distinguish the same product or service among competitors, making them more attractive and desirable to the buyer.
For this reason, it can be called a type of advertising, the purpose of which is to attract the attention of customers and increase sales.
Discounts work in a similar way – stores inform the audience about the availability of promotions and sales. The seller distributes information about discounts, thus increasing the flow of potential buyers and increasing sales. In addition to those products for which there is a discount, people buy and others, which fully recoups the advertising and the difference in cost of goods, declared as a discount.
Thus, the benefit of both methods of attracting potential customers may be the same, but psychologically, the buyer is more pleasant not just buy cheaper products, but get the money back. The benefit of the bank is that when it receives the money, it can use it for a while and then return to the buyer its interest.
Types of Cashback
There are the following types of cashback;
- From the bank;
- From a special site.
In the first option, you need to issue a bank card in the financial institution that provides this service. Special programs are connected to the card, allowing you to make a choice of the sphere of purchases. For example, food, clothing, travel and more. In the first case, restaurants, cafes, stores and other organizations that have signed an agreement with this institution, in the second – clothing stores, showrooms, and so on.
The first option involves paying for your purchase with your card – with your own funds or with credit cards. In the second case, the percentage of refunds is usually higher.
You can also receive your refund by making use of the special website offers – you just need to register there. On the site you can read the list of stores and make purchases directly from them. The peculiarity of such a resource is the conclusion of a special contract with the store. The site advertises certain stores and resources, attracting attention to them, and for this it receives a certain percentage.
How bank programs for small business are beneficial
Signing a partnership agreement with a banking structure allows a company to gain many benefits:
- increased brand awareness;
- advertising of one’s business;
- wide coverage of the target solvent audience;
- increase in sales.
Banks issue two types of cards with cashback – credit and debit. Some banks allow you to get money back not from every purchase, but from a certain limited number. Cashback can be part of a banking institution’s customer loyalty program, encouraging customers to pay with cashback, or it can be a coalition loyalty program designed to stimulate demand for certain goods and services. If a merchant and a bank work together in this area, such card is called a co-branded card. In addition to the advantages, such a card has disadvantages for the customer – it is necessary to pay for its maintenance and registration.