Cashback: Definition, Advantages, Simulation, and Types of Cashback

cashback and discount
What is Cashback?

Cashback is a cash prize or it can be in the form of points given by a company after someone purchases goods or services at that company.

Cashback is a variation of the marketing strategy to attract more users besides discounts and bonuses. If a discount provides a direct initial discount at the time of purchase, cash prizes or points from cashback can provide a discount when the buyer makes the next purchase.

At first, the term cashback was often found when transacting using a credit card. When a user makes transaction with his credit card, he will get a percentage point prize. After a certain amount has been accumulated, these points can be used again to make transactions according to the terms and conditions.

Along with the development of online buying and selling transactions, cashback schemes are also increasingly popular. Many digital industry players offer cashback for every purchase of goods or services. This of course provides many advantages, especially on the consumer side.

Cashback Advantages

For buyers, cashback schemes can save expenses, especially for recurring transactions such as monthly bill payments. On the next purchase opportunity, buyers can save money because they can pay with the cashback that has been collected. Often have the potential to get cashback back.

The cashback promotion scheme provides benefits for companies because it can keep consumers from continuing to transact in the same place. This is because the cash prizes or points earned can usually only be used at the related company. In contrast to discounts, there is no guarantee for consumers to make transactions again because the discount is given in advance.

Cashback Simulation

A company provides a cashback promotion of 5% for every purchase of cars. By taking advantage of this promo, Jacky purchased a car for $ 10.000. After the purchase was successful, Rendra received a cashback prize of $ 500 which could be used to reduce the purchase price for the next product purchased at the company.

The cashback scheme can be different for each program and company. Usually, there is a minimum purchase limit and conditions for how to purchase to get it. Therefore it is very important to read all the terms and conditions that apply before making a purchase and using the promo.

Types of Cashback

  • Credit Card Cashback, which is cashback given for every transaction using a credit card.
  • Debit Card Cashback, which is cashback given for every transaction using a debit card.
  • Online Shop Cashback, which is cashback given for every transaction at the related online store.
  • Cashback Reward, which is cashback not in the form of cash, but points that can be exchanged for certain prizes.

Difference between Cashback and Discount

Regardless of whether the promotions being offered are cashback or discounts, it's good to know some of the differences and terms and conditions that apply to avoid losses.

Main Difference

Cashback usually provides benefits through credit that can be used to make further purchases.
While discounts provide benefits in the form of direct payment discounts, and consumers can make payments at a reduced price.

Way of work

In cashback, if a consumer, for example, buys a cellphone for $1000, and the cashback percentage is 10% of the purchase price, the consumer will get a cashback of $100. But consumers still have to pay the full $1000.
The cashback that will be given can be in various ways, for example in the form of cellphone accessories for $100, or it can be in the form of a coupon or voucher worth $100 for the next purchase of a cellphone at the same store.
Whereas for a discount, if a consumer buys goods worth $1000, and the discount percentage is 10% of the purchase price, which is $100, then the consumer only has to pay $1000 minus $100, which is only $900. Because a discount is a direct discount from a certain percentage of the original price of an item.
The difference is clear, in cashback, consumers still pay the full price of the item to be given cashback, while at a discount, consumers can immediately pay the cut price.

Time

Cashback is usually given within a certain period, within weeks or months, so it cannot be used immediately by consumers.
Meanwhile, direct discounts are given at the time of purchase, because the form is a discount.

Discounts / Fees

There are times when cashback organizers impose a kind of fee that must be paid by consumers who are usually given a deadline. If there is a delay in payment, the consumer will lose cashback. But not all cashback organizers apply this kind of fee, many do not charge any fees.
At a discount, currently, many discount organizers are making some kind of membership or membership in the form of a card, but usually do not charge any fees for their members.

The period of validity

Cashback generally has a long time to be used by consumers, which can last for several months or years.
Another case with discounts that have a fairly short validity period, starting from one month, one week, there are even discounts that only last a matter of days or hours.
When the predetermined period has ended, consumers will not be able to receive the cashback or discount.

Flexibility

The form of cashback is usually determined by the cashback program organizer, consumers cannot choose the cashback they will receive. For example, the cashback has been determined to be limited to purchases of certain types of goods, or even the cashback has been determined in the form of certain products, and so on.
While the discount is a direct price discount that must be paid by consumers.

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