Cashback offers are a common phenomenon in the modern financial world. From cashback credit cards to e-commerce platforms, we encounter opportunities to get back some of the money we spend everywhere we turn.
But are cashback cards worth it? – The short answer:
Cashback programs should be seen as a useful extra, but one that requires thoughtful use. As long as you don’t suddenly spend more money unnecessarily to get more cashback, then cashback cards are well worth it.
Below, we examine the various aspects of cashback in a little more detail.
What is Cashback? 💸
Cashback refers to a rewards program where you get back a percentage of the amount you spend on a purchase or service. This can be in the form of cash, vouchers, or reward points that can be redeemed later.
How does it work?
Depending on the provider, the cashback process can vary. With credit cards, the cashback is often credited directly to the card account. With online shopping portals, you usually have to shop via a special link to activate the cashback.
In Switzerland, the credit card that offers the most cashback is the Swisscard Cashback credit card. With this one, you get unlimited 1% cashback and have no fees.
Advantages and Disadvantages
👍 Advantages of Cashback:
- Saving made easy: One of the most obvious benefits is that cashback can actually save you money. Even if the percentage is small, it can add up if you use it regularly.
- No extra effort: In most cases, the cashback process is automated. You don’t have to clip coupons or fill out forms.
- Flexibility and variety: Cashback is available in many areas. Credit cards, online stores, grocery stores, and even gas stations often offer cashback options.
👎 Disadvantages of Cashback:
- Marginal benefits: Cashback amounts tend to be rather small. With an average cashback rate of 0.5–1%, you’ll need to spend relatively large amounts to see significant savings.
- Hidden terms: Many cashback offers come with some conditions. These may include minimum spending amounts, maximum cashback limits, or restrictions on specific product categories.
- Incentive to spend more: The thought of getting money back may tempt some people to spend more than they intended.
Suppose you apply for a credit card that offers 1% cash back on all purchases. Here are a few examples of everyday spending and how much you would save annually.
Example 1, Daily coffee: You buy a coffee every morning for CHF 4. This results in 4 raps of cashback per coffee. At first glance, this seems trivial, but calculated over a month (30 days), you get back CHF 1.20. Over the course of a year, you’ll still save CHF 14.40 on coffee alone. When you consider that this is “free” money saved, one can’t complain, I think.
Example 2, Weekly supermarket shopping: You spend CHF 150 at the supermarket every week. So, with 1% cashback, you get CHF 1.50 back every week. In one month, that’s CHF 6, and over a year, you save CHF 78. For an expense that is necessary anyway, that’s not too bad.
Example 3, Monthly expenses: Let’s say your monthly expenses are CHF 2’500 and you can pay for them with a credit card that offers 1% cash back. This means you would receive CHF 25 in cashback each month. Projected over the year, that’s CHF 300. This is already a more substantial sum that can be used in a number of ways.
These examples show that even 1% cashback can mean notable savings over time. Especially when it comes to regular or high expenses, even low cashback percentages can be worth it.
Are They Worth It? – Conclusion
Cashback programs undoubtedly offer benefits ranging from savings on everyday expenses to some flexibility and variety in application. Although cashback rates are often low, as our 1% cashback examples have shown, they can add up to a noteworthy sum over time. Especially for recurring or high expenses, this can become a welcome financial bonus.
On the other hand, you should be aware of the potential drawbacks. These often include hidden conditions that can limit the effectiveness of the cashback program. For example, the psychological danger of spending more money than you actually planned due to the cashback incentive.
The bottom line is that cashback makes sense as long as you know exactly what the conditions are and as long as you don’t suddenly spend more money because of it.
If you are able to take advantage of it without spending extra, cashback is an easy way to get some money back when you need to spend.