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Cash back refers to a credit card that refunds a small percentage of money spent on purchases. You can also sign up through cash-back sites and apps.
Cash back, commonly associated with credit and debit cards, involves two main types of transactions. For credit cards, it offers a percentage of each purchase back to the cardholder, either as a credit on the bill, a check, or a deposit. For debit cards, it allows customers to receive cash by adding extra to purchase amounts at a sale point. This concept started in 1986 with Discover card and has since become standard among major credit card issuers.
Cash-back credit cards incentivize use with rewards varying from flat-rate to tiered systems, often providing higher rewards in specific categories, such as gas or groceries. Some of these cards might have annual fees or higher APRs. Cash-back apps and websites like Rakuten, Ibotta, and Shopkick extend these benefits to broader shopping experiences, often offering additional promotions through partnerships with retailers. While Rakuten and Ibotta offer cash or account credits, Shopkick provides gift cards as rewards.
Cash-back programs encourage card usage and can be lucrative, though potential downsides include high interest rates, fees, and reward caps. These programs thrive on the premise that increased consumer spending will surpass the costs of offering rewards. Yet, consumers must monitor their spending habits and remain cautious of the conditions attached to these rewards to effectively benefit from the cash back system.