What is a Cashback, and How Does it Work?

Cashbacks have become immensely popular among brands and customers alike. It is being used as a tool to incentivize purchases by rewarding customers with a fraction of the purchase amount. Most eCommerce brands offer some or the other type of cashback to their customers. Cashback indeed increases the likelihood of future purchases from the brand. The idea behind providing cashback is to make customers feel that they have earned a good bargain on their shopping. Let’s delve deeper to understand the concept of cashback and how it works.

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Understanding cashback 

Cashback is a partial refund of the purchase amount in the customer’s account. The concept of giving back to customers has existed ever since a long time. However, it has reached a new scale in the contemporary business world. Today, cashback applications exist solely to help users get cashback wherever possible. This has created a new demand for cashback app download

Transacting through these applications increases the likelihood of earning cashback. Using these applications, one can save a good amount of money on their daily shopping sprees. The best part is that you can earn cashback while doing both online and offline shoppingCashback app downloads have grown in the last few years as more people are becoming aware of these applications. 

How does cashback work?

The idea of cashback was first introduced in 1984 by the Discover Card company that aimed to introduce a reward program for credit card users. Its immense popularity among credit card users has made all credit card companies present the same. The idea was to make customers use a particular credit card for payments. The cashback mechanism differs from the traditional reward point system. 

Traditionally, most credit card companies offer reward points to customers, which they can use to buy goods, services or coupons. On the other hand, cashback offers complete flexibility to users for purchasing goods and services. It is equivalent to the cash amount since it is directly deposited into the user’s account. 

Types of cashback

Payment service providers deploy various cashback schemes to reward their customers. Some of the most common types of cashback include the following. 

  • Flat-rate cashback

A flat-rate cashback reward is not restricted by the type of spending done by the user. Most reputed credit card companies offer a flat cashback rate of 2%, which applies to most purchases, regardless of the category it falls under.

  • Tiered-rate cashback

A tiered rate cashback rewards customers based on the level of their annual spending. Credit card companies often create a spending benchmark, and the rewards on both ends are different. For example, some companies can offer 1% cashback on annual spending below two lakhs and 2% cashback on annual spending above two lakhs. 

  • Different rate cashback

These cash backs are offered after factoring in the category of your purchase. For example, users might earn a different cashback percentage while spending money on food, fuel, apparel, etc. 

Cashback applications and websites 

Modern consumerism is being fuelled by lucrative discounts and cashback offers from brands. Cashback applications and websites are helping customers to make the most of their purchases by finding good deals for them. The probability of earning cashback rewards is often relatively higher when using a cashback application. This has also led to an increase in cashback app downloads. Many UPI-based cashback applications reward users every time they make payments using UPI QR codes