Cashback reward program facts for kids
Cashback is a cool way to get a little money back when you buy things, usually with a credit card. Imagine buying a new video game, and then getting a small percentage of that money back! It's like a thank-you gift from the bank or credit card company for using their card.
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What is Cashback?
Cashback means you get a small part of your money back after you make a purchase. It's often given as a bonus by credit card companies. For example, if you spend $100 and get 1% cashback, you'll receive $1 back. This money can be added to your credit card account, sent to you as a cheque, or even paid directly to your bank account.
In the United States, people sometimes say "cash back" as two separate words. The amount you get back is usually between 0.5% and 2% of what you spend. This is calculated on your "net spending," which means your total purchases minus any items you returned or any taxes. This bonus is often given once a year.
How Does Cashback Work?
When you use a credit card to pay for something, the store you're buying from pays a small fee to the bank or credit card company. This fee is called a "commission." Many credit card companies, especially in the United Kingdom and United States, share a part of this commission with you, the card owner. They do this by giving you money back, or sometimes points that you can trade for prizes or discounts.
Getting Your Cashback
The money you earn from cashback can be given to you in a few ways:
- It can be added directly to your credit card account, reducing the amount you owe.
- You might receive a cheque in the mail.
- Sometimes, the money can be sent directly to your bank account through a wire transfer.
Why Do Companies Offer Cashback?
Credit card companies offer cashback to encourage people to use their cards more often. It's a way to reward loyal customers. They want you to choose their card over others.
Recently, some major card companies have even increased the cashback amount to 5% for certain purchases. This often happens for things like groceries or petrol (gas) station purchases.
Important Tip for Cashback
Most of the time, bonuses like cashback are offered to customers who pay off their credit card bill completely and on time every month. This is a really important habit to have when using a credit card.
