Cashback has become a useful reward tool and is usually offered by credit card companies. Financial applications or services are becoming increasingly common and sophisticated, with each offering a different perk. In this cut-throat competition, it becomes necessary for businesses to devise something unique and meaningful that keeps their business customers loyal to their services.
One way business credit card companies earn the trust of their business customers and enroll new ones is by offering cashback. What is cashback, how is it used, what are its types, and whether it is worth the hype or not, you will find out in the following article.
What is cashback?
Cashback is a type of loyalty scheme that credit card and debit card companies offer their business customers where a percentage of money that they have spent using the company’s card is reimbursed to their account. This reward is often in the form of cash, hence the name. It has certain conditions to become applicable to the account holder, like the minimum amount of transactions. The percentage also varies from company to company. This is a useful marketing strategy for companies to get new business customers and keep the old ones from switching to competitor companies.
How does cashback work?
As mentioned above, cashback policies differ between companies. It is percentage-based and usually between 0.5% to 5% of the purchase amount. Before devising a credit card cashback scheme, check which credit card company is offering cashback and on what terms and conditions. You can compare the percentages that they offer. A cashback scheme is more readily available for businesses since the size of the purchase is different from personal spending. Make sure that you learn about all the criteria for enabling a cashback scheme for your credit card company and read the fine print thoroughly.
Types of cashback:
There are a few different types of cashback that different companies offer. A few of them are as follows.
Flat-rate cashback:
Flat-rate cashback is a type of fixed rate cash back system. In this, the percentage of the cashback is fixed irrespective of the purchase made. Any amount above the threshold will receive the same percentage of cashback. This type of incentivisation will increase the usage of your company’s credit card.
Tiered-rate cashback:
Tiered-rate cashback is one of the bonus category cashback systems. Unlike a flat-rate system, this cashback does not work on a fixed percentage system. It offers a higher percentage on certain purchases and lower on the others. It is beneficial for business owners to attract companies with large-scale spendings.
Rotating Bonus cashback:
It is similar to tiered-rate cashback, and is one of the bonus-type cashback systems. In this, there is a flat-rate or fixed cashback in certain categories while other categories have a higher percentage in a rotating quarter manner. Every quarter or so, the category for which the bonus applies changes, offering cashback on a varied range of products and services.
Customizable bonus cashback:
As the name suggests, customizable bonus cashback is a more flexible cashback system than the others mentioned before. In this scheme, a client can individually customised which category they want the cashback to be applied to. It allows for that option or automatically adjusts according to the their spending habits. Businesses can profit by enabling this scheme.
Advantages of cashback:
Cashback can provide many benefits. It is now offered by every other credit card company, and some offer it even on sign-up. They offer more offers, rewards, and discounts along with cashback. Cashback can make the business owner’s buying experience more convenient and exciting by saving on purchases and earning rewards while shopping. On the other hand, it can allow credit card companies to expand their business customer base and earn profits.
Things to look out for:
There are a few things to lookout for before enabling a cashback scheme. Cashback credit cards tend to have a higher APR or Annual Percentage Rate, which can increase with time. Cashback is not always deposited into the account in a timely manner. There can be only limited categories with a certain minimum purchase amount on which one can earn cashback, making it an exclusive scheme. Some cards will put a limit on how much cash back the credit card user can earn. However, as a business owner, you can choose the scheme which works best for you.
After learning about what cashback is, its know-how, types, and various advantages and disadvantages, you will be better able to understand which cashback credit card scheme you should enable for your business customers. Be vigilant and read all the terms, conditions and hidden costs before adopting any cashback-related scheme.
