Although cash backs can be quite a lucrative deal, they aren’t that simple a scheme that demands sheer indulgence. Cash backs are a tool by which banks make you believe that spending is indeed saving. Cash back refers to an offer where customers are given a miniscule percentage of money that they spend on their transactions, in select outlets, and during a stipulated period of time. There is nothing more appealing to a credit card user than a cash back scheme during the festive season. Customers feel as though they have been given a genie of great savings where they can spend all they want, yet still get some added benefit out of it. Other banks believe in why wait to indulge and spend, thereby entailing a cash back spree all around the year. One of the major reasons why cash back is such a major hit among the masses may be attributed to the fact that it provides instant and tangible gratification to the customer. This modest looking feature is said to massively impact and influence customer behavior, as it lures and tempts people to break off all shackles holding them off their spending.
If you want to be a spoiler and peer carefully in what exactly makes cash back a profitable scheme for banks, a simple answer awaits you. When you carefully go through the fine print of your bank on cash back, you will realize that this seemingly “no frills” deal has a lot of strings attached to it. For instance, a cash back scheme may be applicable only on the first specified amount you spend during the month. This means that any other transaction carried by you during the month will not be eligible for cash back. Also, if there is any dispute in transaction between you and the bank, you may just have bid adieu to your cash back. There may also be limitations on the maximum amount of cash back a bank may provide to a customer during a year. Also, cash backs are not instant rewards as it may take quite some time before you get cognizance for your spending. Cash back schemes may only be applicable on certain products, stores, outlets, or other expenses. This means that if you spend a huge sum of money on other items, you will not be entitled to cash back by the bank. Other prominent restrictions include:
a) Credit card issuers may not receive cash back for multiple transactions in a single purchase by banks. You will be entitled to the same amount of cash back irrespective of the amount you have spent in that transaction.
b) Some banks may offer cash bank only if you hold a minimum outstanding amount in your credit card account. While you must strictly avoid doing so, banks encourage this practice as it allows them to charge high interest rates on such an outstanding amount.
c) You may not be eligible for cash back if after shopping at a store, your credit card is swiped in the machine of another bank. This is because banks make profit every time your card is swiped in their machine, splitting the profits between the bank and the merchant establishment.
d) Cash back schemes are not “free” in the sense of the word as you may be required to pay registration fees when signing up for such a scheme, in addition to the annual fees.
e) If you want to utilize the cash back scheme while shopping, you must involuntary ignore all other offers given by its partnering merchants.
In order to use cash back as a profit maximizing tool, do not blow money in the haste for more cash back in your account. Everything that you spend from your credit card entails a certain rate of interest with it. You obviously do not want to borrowing more debt in the form of loans, personal loans etc to pay back the debt on your credit card. While cash back may be a temporary phenomenon, interest is certainly not, and you may be struggling to repay it long after the cash back has gone with the wind.