With the advent of cashless transactions, plastic currency, digital payment platforms, and online shopping portals, a race has started between the service providers to incentivize the customers to choose between the different players. Cash back promotes healthy competition among the players and thus provides multiple benefits to the customers.

What is Cash back?

Cash back is getting money back in exchange for your purchase. It is a reward given to a customer for purchasing from a specific retailer or for using a payment method and an incentive to retain the customer. The amount received as cash back is a specific percentage of the actual money spent on the purchase, which varies for every retailer and payment method.

Cash back is always calculated and applied on the total bill at the time of checkout, and a certain amount of money is credited to your bank account or e-wallets after completing the transaction. This amount can be used for future payments.

How does cash back work?

An online shopping portal may offer 10% cash back on purchasing certain items from their website. So, if you purchase a product for Rs.100, you get Rs.10 as cash back. This is a retailer providing the incentive to retain a customer.

In a lot of cases, the cash back is given on payments made using a specific method. This entails cash back for using a payment gateway or a certain bank’s card. This cash back incentivizes the customers to use the payment method for every future payment.

The cash back offers are usually limited in time, subject to conditions and customers must meet certain criteria to avail the benefits. You may need to use a specific bank's card or use a particular payment gateway.

There is a base value of goods to be purchased, for example, cash back may be valid only on purchases above Rs. 500. Also, there is a ceiling to the amount that will be paid back, so even if cash back is of 10% the amount paid back may not exceed Rs.500.

How to utilize the cash back amount?

Once cash back is processed, the amount either gets credited to your specific bank account or the e-wallets of online portals. Although sometimes the amount must utilized explicitly with the merchant giving the cash back, many payment portals have their own wallets and the money credited can be used across various platforms, thus promoting the use of the digital mode of payments and cashless transactions.

Learn more about Mutual Funds for a good personal financial management.

DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



Trending Articles

Popularly Searched Terms

Financial Advisor

Recurring Deposit vs Fixed Deposit

What is Fixed Deposit

What is a Credit Score

What is a Savings Account

Latest Articles

abc-of-personal-money
abc-of-personal-money

How Important Is It To Have Plan B To Lead A Lavish Life?

Read More
Posted on 07 May 2020
abc-of-personal-money
abc-of-personal-money

Cost for MS in USA for Indian students

Read More
Posted on 07 May 2020
abc-of-personal-money
abc-of-personal-money

Keys to Successfully Managing Personal Finance

Read More
Posted on 27 April 2020

Featured Articles

image abc-of-personal-money
abc-of-personal-money

Are Millennials Any Different When It Comes To Planning Financials?

Read More
Posted on 05 February 2020

Relevant Articles

image abc-of-taxes
abc-of-taxes

Points to Note While Filling Salary Details in ITR 2

Read More
Posted on 29 May 2020
image abc-of-taxes
abc-of-taxes

Want to Save Tax? Start With Understanding Your Payslip Better

Read More
Posted on 27 May 2020
image abc-of-taxes
abc-of-taxes

10 Reasons Why You May Get a Notice From The Income Tax Department

Read More
Posted on 26 May 2020