When we acquire banking products, such as credit cards, we always think of the benefits or all those little favors or extra goods that come with paying handling fees or insurance for our loans: accumulating miles, discounts in stores or redeemable points are perhaps the benefits more common But have you heard about cashback?
Cashback is not a new benefit for cardholders, however, banks and neobanks in Colombia and the world use this benefit to attract more consumers to their products – in the case of cashback, credit cards.
The interest: What are neobanks?
For this reason, in Knowing More, Being More We give you a definitive guide on cashback, what it is, how to understand it, how to use it and what benefits it brings to your pocket.
The ABC of cashback
Cashback could translate into Spanish “cash back or return of money” this term refers to two types of financial transactions related to credit and debit cards that have become increasingly popular in the last two decades. Cashback is usually a credit card benefit that reimburses the cardholder for a small percentage of the amount spent on each purchase over a certain limit.
A financial consumer can receive that money in cashwhen we talk about that kind of cash back, we also refer to debit card transactions in which cardholders receive cash when they make a purchase.
Can read: How to invest my money in 2022?
How does it work?
The operation and the percentage of cashback you will receive depends on the card you have purchased. For example, Some cards that have cashback offer the same rate or percentage of cash back on each purchase (1%, 5%, etc.).
Other banks offer higher cash back percentages for certain types of purchases, such as airline tickets, restaurant dining, food, or gasoline. On the other hand, other banks that offer you cashback keep alternating categories of higher earning cashback every certain period of time or allow you to choose what to invest that return in.
Of course, the best way to know how to earn cash with a particular credit card is by contacting the bank of your choice and asking about the benefits for cardholders.
How can I use the cashback?
There are many smart ways to use the rewards that banks give you for cashback once you have accumulated a certain balance. Some of the most popular alternatives you have to “redeem” cashback are contributions to your account statement, online purchases or the purchase of gift cards.
Through cashback, certain cards allow you to deposit such benefit directly into a bank account or use it to make a charitable donation. As we mentioned before, some cards even offer the option of using cashback to book discounted trips, which are sometimes difficult to find by surfing the net, or directly from the financial institution’s website.
Some credit card issuers allow you to connect your cash back rewards to PayPal or Amazon, allowing you to use your cash back rewards to cover some or all of your international purchase. Understanding the percentage or return at each bank allows you to expand your finances, save, or build a solid foundation for the future.
You can also read: Let’s talk about the credit situation in Colombia.
Advantages and disadvantages of cashback
The advantages of acquiring a card or financial product that gives you cashback are obvious, we have been listing them throughout the article: You get cash back or thousands of benefits for spending your money, whether it’s using your credit or debit card or even shopping online.
However, you have to be careful because there are credit cards, which have cashback but at the same time have high management fees, interest or put a limit on the amount of cashback you can earn or accumulate.
Keep in mind that you may also be losing rewards earned if you don’t pay your bills on time, go into delinquency, or cancel your credit card. Here are some advantages and disadvantages that cashback has:
Advantages
- The money refunds you receive for the money you spend.
- The rewards and discounts you can earn.
Disadvantages
- Credit cards that have this benefit may have a higher annual interest rate than cards without rewards or cashback
- There may be a limit to the amount of cash you can get back.
How do I choose a card with cashback?
In Saber Más, Ser Más we give you some quick tips so you can choose the credit card that has cashback, that fits your needs and budget.
- Understand the benefit: Does cashback apply to all purchases, select categories, or a combination of both? Understand the maximum amounts you can earn and when and where you can redeem them.
- Know your spending habits: Once you’ve defined the details of each benefit, the next step is to analyze your spending habits and match the cashback categories to your style. What kind of products and services do you buy more: books and movies? Home improvement? Travels? As we have seen, some cards offer cash back bonuses in different stores.
- Look beyond cashback: While the perks are tempting, don’t forget to compare the card’s other features to your spending style. yesIf you want to get the most out of a card with cashback, it may be a good idea to use that balance to pay your minimum monthly payment to avoid paying interest.
- Compare tarifas. When it comes to credit card fees, be sure to read the fine print. Credit cards can vary significantly in what they will charge you for annual fees, late payments, balance transfer fees, etc. So make sure you understand how these charges can affect you.
In conclusion, find a card that has cashback. And meeting your needs as a consumer is hard work, but you don’t have to stress. We always invite you to read both the offer and the terms and conditions; If you feel that something is not clear to you, you can contact the financial institution of your choice.
Once you’ve chosen a card and have it in hand, monitor your spending habits to see how the new card with the new benefit fits into your lifestyle.
Continue on Know More, Be More by reading: Digital banks vs virtual banking and their new financial products.
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