A cashback reward program is an incentive program operated by a credit card company in which a percentage of the amount spent is paid back to the cardholder. Many credit card issuers, especially those in the UK and the United States, run programs to encourage the use of cards where card holders are awarded points, frequent flyer miles or amount of money. This last benefit, the amount of money, is commonly known as a cashback reward or cash back .
Where card issuers operate such a program, cardholders typically receive between 0.5% and 2% of their net expenses (purchases minus refunds) as annual rebates, credited to credit card accounts or paid to cardholders separately.
When accepting credit card payments, merchants usually pay a percentage of the number of transactions in commission to their merchant bank or service provider. Sellers are often not allowed to charge higher prices when credit cards are used compared to other payment methods, so there is no penalty for cardholders to use their credit cards. Credit card issuers share some of these commissions with cardholders to incentivize them to use credit cards when making payments.
Credit card products based on rewards such as cashback are more useful for consumers who pay their credit card statement every month. Gift-based products generally have a higher Annual percentage rate. If the balance is not paid in full each month, then the extra interest will exceed the rewards received. Most consumers do not know that their gift-based credit card charges more fees to the vendor that receives it without the vendor having the notice.
Video Cashback reward program
History
In the 1990s, major card issuers in the US increased the percentage of cash-backs by up to 5%. A 5% cash refund rate usually only applies to purchases made at grocery stores, pharmacies, and gas stations for 6 months. This high refund rate is taken to entice potential applicants for them to consider applying for a card. Typically, the cash refund rate for all other purchases is about 1%.
A 2010 public policy study conducted by the Federal Reserve concluded that cash prize programs result in monetary transfers from low-income households to high-income. Eliminating the reward rewards program will reduce the merchant fees which in turn will reduce consumer prices because retail is a competitive environment.
In 2012 in the United States, due to an increase in the price of gasoline (petrol), cash cash or rebate credit cards are becoming very popular among consumers. The company provides an average of 3% APR on new gas credit cards. The main idea behind gasoline discount cards is that cardholders get a definite percentage of the amount they consume on gasoline each month in the form of a rebate check at the end of the year. It works similar to a cashback recognition discount card with one notable exception: gasoline discounts are often applied every month, whereas most cashback cards send a one-year discount check. This makes the savings easier to see for most consumers.
Maps Cashback reward program
See also
- Loyalty program
- Credit card interest
- Cashback website
References
Source of the article : Wikipedia
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