How to turn cashback into real benefit: rules for cardholders

Cashback is not a discount, but a bank reward

Cashback has become a familiar part of banking offers, yet it is often perceived as an ordinary discount. For the bonus to actually help you save, it is important to understand the terms of the specific program and match them against your own spending, writes 360.ru citing explanations of how such programs work.

How the mechanism works

The reward may be credited to a bank account or provided as points and miles, which are then used for purchases or travel. The mechanism differs from a store discount program: first the customer pays for the item taking into account the seller's current promotions and discounts, and only afterwards does the bank credit the cashback — immediately or later. Thus, the discount and the cashback can be combined.

Where the bank gets the money for payouts

One source of payouts is the fee for processing card payments, which the merchant transfers to the acquiring bank. Part of the fee may go to the bank that issued the card, and that bank then pays the customer the reward set by the program. The size of the fee depends on the terms of service and other factors.

Five rules for rational use

The authors of the explanations offer several rules. First, choose boosted categories based on your planned expenses, not on the priorities pushed by the bank. Second, check sellers' offers: store promotions apply separately from cashback, and comparing terms helps find a more advantageous combination. Third, evaluate not only the cashback percentage: a high rate may apply to a limited amount or have a payout cap, and with regular spending a category with a more modest percentage but no significant restrictions can sometimes be more profitable. The authors do not advise buying unnecessary things just for the bonus. Fourth, compare programs from different banks, marketplaces and aggregators — several cards or programs can cover more everyday expenses, but before signing up you should check fees and other terms. Fifth, clarify the timing and rules of crediting: the reward may not arrive immediately, and points may have an expiration date.

An important caveat: credits can be revoked

A significant nuance that Russians previously learned about: banks can revoke funds already credited under a cashback program. This means that when planning your gains, you should find out in advance not only the size and form of the reward, but also the conditions under which the bank may withdraw it.