All about cash back offers on your credit card

By | July 20, 2010

Normally, banks place a cap on the maximum amount of cash back that it offers. It is important to check this because even if you have spent more doesn’t necessarily mean that you are going to get a cash back amount as per that transaction.

With the increase in the competitiveness between different banks for credit card services, the credit card companies offer a host of additional benefits such as rewards programs, ‘lifetime-free’ services and cash-back offers increasingly nowadays to engage the brand awareness of the consumer consistently.  The hidden agenda behind each of these offerings is that the banks and financial institutions want the users to spend more. Spending is good as long as it is within predefined limits. This is within the user’s control and must be exercised in order to reap the benefits of such offers and yet not become addicted to spending excessively.

Let’s take a look at the features of one particular offering through credit cards which has generated quite a following in recent times – ‘cash-back’ offers, which are often promotional schemes for limited periods that are run periodically by all the credit card companies.

What are cash-back credit cards?

When accepting payment by credit card, merchants typically pay a percentage of the transaction amount in commission to their bank or merchant services provider. Many credit card issuers share the commission with the card holder by giving the card holder points, air miles or a monetary amount. A cash-back offer is specifically for providing the card holder a small monetary amount as a reward for using the card.

Which transactions are included in cash-back offers?

Cash back offers are valid on almost all kinds of expenditures or purchases done through the credit card. That is, besides spends on shopping and eating out, even balance transfers and bill payments are eligible.

How much money is returned through the cash back offer?

Where a card issuer operates such a cash back scheme, card holders typically receive between 0.5% and 2% of their net expenditure (purchases minus refunds) as an annual rebate, which is either credited to the credit card account or paid to the card holder separately, for example by cheque.

Cash-back percentage ranges around 2% – 5% for different cards and in some promotional schemes may even go up to 10% exclusive to customers with a good credit profile.

What are the things to keep in mind while using cash back cards?

There are some things that you should always keep in mind when you opt to avail such cash back offers.

Where you are spending

The credit card cannot be used at any establishment that you choose. There will be a list of shops, stores, restaurants etc. that will fall into the category of cash back transactions. If you spend at the establishments mentioned in this list you can avail cash back, else you do not receive any reward.

The list of approved establishments is available on the credit card issuer’s website or else can be asked for from the customer service department.

To ensure that you do receive cash back, always ensure that you are spending at an establishment mentioned in the list of the bank’s approved merchants.

Minimum cash spent

Normally, cash back is offered only when the credit card holder spends a minimum amount on it. This could range anywhere between Rs. 1500 and Rs. 2500. So if you spend only Rs. 500 on the card, chances are very slim that you would be able to get any cash back on that transaction.

Amount of cash back

Normally, banks place a cap on the maximum amount of cash back that it offers. It is important to check this because even if you have spent more doesn’t necessarily mean that you are going to get a cash back amount as per that transaction.

For e.g. If the bank’s says that there would be a 10 per cent cash back offer on all purchases, they would normally cap the maximum cash back amount at Rs. 1000. So even if you spent Rs. 40000 and expected a cash back of Rs. 4000, you are still going to get only Rs. 1000.

Other hidden requirements

Check for other requirements such as:

  • Whether the card falls under the offer category
  • Whether registration is required for earning cash back
  • Should one apply for a new card meant only for cash back
  • The period during which the offer is valid
  • Does the offer apply at outlets having point-of-sale terminals, or should the purchases be made only where the card-issuing bank has installed such terminals?
  • The products categories, which are eligible for the offer
  • Should cash back be collected at bank branches, redeem them at the POS outlets, or will the amount get credited automatically in the card-holder’s savings account

Using a cash back card can be very good indeed, provided that you use the card smartly within its limitations. As mentioned before, it is important to confirm the minimum amount to be spent to be eligible for cash back and the maximum amount you can receive as cash back, because if the delicate balance between the two is not struck correctly, you may be over-spending which can lead to interest charges. These things can completely overshadow the benefits of a cash back card.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.

5 thoughts on “All about cash back offers on your credit card

  1. Maneesha

    Excellent work to prevent people getting trapped in net of foul game by banks. Nothing is free in this world….so when u r offered such benefits, you should be more careful than getting trapped in greedyness. it is always to have double check on such offer else 1 ka 3 game would take place…what is that …..you buy 1 Rs item and would pay 3 Rs. think quitely before coming to conclusion of getting cash-back cards to prevent your valuable money from misuse or getting booby-trapped…All the best….Dont go for the game of 1 ka 3 like Mr, Jadeja of Ahmedabad/Gujarat lured lot of people and kicked away 1800 carore …………….

    Reply
  2. Anonymous

    gr8 work ,truly informational

    it would have been even better if u could provide some examples ofers or some comaprison about actual cards

    Reply
  3. manoj

    The Credit Card companies are now charging handling fees in case of reward points redumption and also take unusually very long time to despatch the vouchers. I have not got the redumption more than 8 months from HSBC.
    on first occasion they despatched to my previous address which I got it changed. Second Occasion their Courier returned without visiting my house. now I have been asked to redeem again although i have not been assured that I will get the vouchers

    Reply

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