What is Cashback and How does it work?
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Key takeaways
Cashback reward schemes give people a percentage of whatever they spend back to them. This could be tracked directly to your card or through a website that tracks your transactions.
A cashback credit card is a type of reward credit card that allows you to earn a percentage of your spending back in cash. This cashback can then be redeemed for statement credits, cash, or other rewards.
With a HyperJar prepaid debit card, you can receive between 1 to 2% cashback rewards when spending with your favourite retailers.
What is cashback?
‘Cashback is a reward scheme where you receive a percentage of your spending back after making a purchase. It can be offered through cashback cards, websites, or platforms that track your transactions. The money can either be transferred directly to your bank account or collected as credit, which you can cash out later.
Some cashback is received instantly, while others require reaching a minimum amount before payout or are issued at regular intervals, such as monthly or annually. Cashback rates can vary depending on the type of purchase or be consistent across all transactions. It applies to both online and in-store purchases.
How does cashback work?
How do cashback credit cards work?
These can pay you in cash, which will be a percentage back of what you spend, or in points that you can then convert to spend with hotels, airlines or shops.
How do cashback debit cards work?
These are linked to bank accounts, and can pay a flat cashback rate on all or some of your spending.
How do cashback prepaid debit cards work?
An account like HyperJar, which might offer cashback as a percentage of what you spend, or offer cashback when you buy special gift cards.
How does a cashback store card work?
Some shops offer their own rewards cards that will pay you in cashback you can spend with them.
How cashback websites work?
Typically, they will offer you cashback when you shop via them for your purchases’.
What is a cashback card with rewards?
Some cashback credit cards offer additional perks, such as event access, 0% APR transfers, and discounts with specific retailers. With HyperJar, you get exclusive deals through merchant partnerships, like spending £50 with a brand and earning an extra £10.
HyperJar also provides higher cashback rates when you buy vouchers in the app for stores like John Lewis, Boots, or Costa. You’ll receive instant cashback and can use the vouchers in-store or online.
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What are the benefits of using a cashback card?
Earning money back on your purchases
‘For each purchase a cardholder makes, cashback cards give users a percentage of the value of their purchase back. So, cashback cards can be a money-saving hack that makes your money go further and gives cardholders more money to play with.’
Gaining cashbacks from brands
Cashback platforms offer cashbacks for a variety of retailers, including popular brands and stores. This allows you to receive cashbacks on a variety of stores and products.
Enjoying additional discounts
Some cashback platforms offer additional discounts or coupons on certain products or services, which can increase the overall discount for you.
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How to choose the right cashback card
Evaluate your spending habits
Before diving into the world of cashback cards, take a step back and assess your spending habits. Scrutinise your monthly expenses, identifying the budget categories where you consistently spend the most. Do you regularly get takeaways, fill up on petrol, or shop for groceries? Once you've mapped out your spending patterns, compare them to the cashback rewards offered by different credit cards. Remember, the key is to maximise cashback without altering your spending behaviour.
Choose a cashback card with reward categories that match your spending
Once you’ve evaluated your spending habits you will be more aware of what bonuses would be most useful to you. For example, if you dine out frequently, a card with a higher rate on restaurants and pubs would be beneficial. Or if you spend a lot on groceries, you might choose a card that offers 5% cashback at the supermarket.
Compare annual fees and other fees
When comparing annual fees and other fees on cashback cards, it’s important to consider the overall value you’re getting from the card. Some cards may have high annual fees but offer generous cashback rewards or other benefits that may offset the cost. Other cards will have lower annual fees but may also have lower cashback rewards or more restrictive terms. The best way to compare cashback credit cards is to look at the total cost of ownership, which includes the annual fee, interest charges, and any other fees. By comparing the total cost of ownership, you can identify the card that offers the best value for your needs.
HyperJar has no annual fees, and you get generous cashback, even compared to a flat rate cashback credit card. Plus, access to their Cashback Vouchers - think digital gift cards that you buy for yourself - which offer up to 20% cashback.
Cashback FAQs
Are there any downsides to Cashback?
So, is cashback a good deal? For some, it can be an easy way to earn a little, or save a little, depending on how you look at it, from spending.
1. Can encourage you to spend more
With the promise of earning cashback on your purchases, cashback credit cards sometimes encourage cardholders to spend more than they otherwise would. This is especially true for cards that have a minimum spending amount to earn any money back on your purchases.
Cashback can be a good deal if you have the self-control to only spend as much as you usually would. Buying more just to earn cashback defeats the purpose of owning a cashback card. If you don’t trust yourself to be disciplined, it might be better to use HyperJar, which is a prepaid debit card. It’s impossible to get into debt so the card just won’t work if there is no money in your account.
2. Cost of the card can exceed cashback earned
Some cashback credit cards charge cardholders an annual fee. Though you might be lured in by a card provider’s generous cashback offer, you should check that the cashback, perks, and rewards you receive from using the card outweigh how much the card will cost you each year.
After all, many people don’t use their credit card enough to earn enough cashback to cover this fee.
3. Usually have higher interest rates
If you cannot pay your cashback credit card back in full each month, then the balance you owe on your card will be subject to high interest rate, usually above those of traditional credit cards (which is high enough already).
Is cashback a good deal? Well, not always. If you’re inclined to spend more than you can pay off immediately, cashback cards can be a dangerous way to acquire debt quickly. This far outweighs the benefits of earning cashback. It’s important to learn how to avoid debt where possible to remain financially stable.
Is Cashback worth it?
Cashback reward schemes pay cardholders a percentage of their purchase back each time they spend and can be an excellent way to make extra cash back on your purchases… in some cases.
If you can trust yourself to pay off your cashback credit card balance in full each month and not overspend in pursuit of cashback, you might reap the rewards of a cashback credit card. If not, you’ll probably end up racking up more debt than the cashback card is worth. But there is a way to get cashback and avoid debt, and it’s as simple as downloading the HyperJar app and registering for your free HyperJar cashback card. There are no annual fees to cancel out your cashback and you can earn up to a generous 2% on everything, plus get extra rewards.
How do I redeem Cashback with HyperJar?
HyperJar gives you access to huge discounts from every big-name retailer you can think of. You’ll find these on the Shops tab of the HyperJar app, where you’ll see discounts on everything from theatre tickets to takeaway pizza. Or you can get up to 15% instant cashback at other retailers when you buy a HyperJar cashback voucher. For example, if you love a takeaway coffee, buy a £30 Costa card for the week. You’ll get 7.5% cashback on the £30 instantly (£2.25), that you can spend on whatever you want, and you can use the voucher at the till every day until it runs out.
There are hundreds of retailers to choose from in the app.
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