What is cashback and when should I use it?

When looking into the world of personal finance, one phrase regularly used is cashback but what is cashback and when can you benefit from it? Whether you're new to managing money or simply looking to make more informed financial decisions, understanding what cashback is and when to use it can massively impact and improve how you spend. In this piece we look into the meaning of cashback, how it works and when it can work best for you.

What is Cashback?

Cashback is like getting a small reward for spending money on everyday items or services. This incentive can come in a variety of ways, such as a percentage of your purchase amount credited back to your account or a fixed amount deducted from one of your bills.

How Does Cashback Work?

Let’s use an example- you’re looking to buy a new pair of shoes. You find a pair you like, head to checkout, and make the purchase. If the business you bought from offers a cashback scheme, a percentage of the total amount you spent on those shoes could be refunded to you after the transaction is completed. This refund could be credited directly to your bank account, processed as store points for future purchases, or applied as a discount on your next purchase.

When Should You Use Cashback?

Repeated Purchases: An incredibly useful way to make the most of cashback is for consistent life necessity spending such as food shopping, household items, or even potentially paying monthly bills. Every bit of cashback earned on these essentials can add up over an extended period.

Expensive Items: When looking to make big money purchases such as a new sofa or TV for your house, it’s best to look for retailers or credit cards offering cashback deals. This can help with the initial cost or potentially provide extra savings.

Online Shopping: There are a number of e-commerce platforms and websites that offer exclusive cashback deals. Before you make an online purchase, it’s always worthwhile to do some research to compare the difference in cashback each place offers across different platforms to best suit your own wants and make the most in savings.

Credit Cards: Some credit cards also provide cashback as a reward for using their services. If you stay consistent in managing your credit, using a cashback credit card for everyday expenses can be a clever part of financial planning.

What Are The Benefits of Cashback

Making Additional Savings: Cashback essentially reduces the overall cost of your purchases, allowing you to save money effortlessly.

Extra Rewards: Cashback provides an additional benefit for spending money on the things you want to buy as well as the things need to buy.

Variety of Options: Depending on what you choose and the scheme, cashback rewards can often be used in various ways, offering you flexibility in how you choose to use them.

Things to Consider

Terms and Conditions: With everything you buy the first time or wish to use without prior experience, it’s always vital to read the fine print to understand how and when you'll receive cashback rewards.

Interest Rates: If using a cashback credit card, It’s important to remember to pay off your balance in full each month to avoid accruing interest charges. Allowing these interest charges to grow could cut all of the benefits you receive from the cashback choice you’ve picked.

Summary

To conclude, cashback is a practical and straightforward way to make your money work harder for you. By researching and selecting the best cashback offers for you wisely, you can stretch your budget further and enjoy additional perks from your spending. Whether it's for everyday food shopping or a well-deserved special purchase, exploring cashback options can be a rewarding experience in more ways than one.

By understanding the basics of cashback, how it can best help your financial life and knowing when to use it, you can embark on a journey towards smarter spending and saving.

It’s important to remember that continually improving your financial knowledge on topics like cashback is key to making the most informed decisions.

Here at the GLOSS Vault, we have made it our mission to help as many people like you across Australia feel in control of your money and ensure you’re getting the most out of it. To find out more about us and what we do click here. If you’d like to see our app in action for yourself head here!