What is cash back?

Cash back is an incentive used commonly with credit cards and online retail purchases in which customers earn a percentage of money back after making eligible purchases. These cash rewards can then be used on future sales, or this bonus cash can be deposited into the customer’s bank account or sent via a check or statement credit.  

Cash-back rewards became popular with cash-back cards. These credit card rewards allowed customers to earn cash back at grocery stores, restaurants, retail stores, and on other purchases. As customers discovered they could earn cash rewards for everyday purchases, they became motivated to use their credit cards and spend more. Now, online retailers have the opportunity to offer cash back as a reward for shopping with their brand, and as a powerful way to encourage higher retention.

Cash-back card categories

Cash-back credit cards typically fall under two different models. The first, flat-rate cash-back cards, offers a fixed percentage of cash back toward every purchase made. The second category, bonus cash-back cards, offers cash back for rotating bonus categories, which typically change at different points of the year. For example, customers might earn extra cash back on entertainment purchases made at movie theaters and other similar venues in a certain period of the year.

Offering cash rewards for purchases

Like the best cash-back credit cards, retailers who offer bonus cash rewards to their customers can have higher loyalty. This occurs because as customers discover they can earn money back with purchases, they’re more inclined to continue shopping with your store, so they can use their cash back and redeem rewards for their continued business. Many retailers have minimum spending amounts to redeem the cash back, meaning customers will return and be encouraged to spend even more when they make their next purchase.

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