Cash Back on Credit and Debit Cards

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Cash Back is a feature offered by various Banks to make sure that existing customers are retained and also to get new customers.

Cash Back as the name suggests is cash given back to the customers on any purchase made using their cards. Cash Back is generally offered on Debit and Credit Cards both. The amount of cash back that can be earned will possibly be higher on a Credit Card than on Debit Cards as Banks generally do not earn much on Debit Cards as compared to Credit Cards.

Before going any further let me give a brief explanation on Debit and Credit Cards. A debit card is a card issued by the Bank on its account to allow customers to withdraw cash from ATM's as per their need and also can be swiped on merchant terminals to purchase goods. The basic difference between a debit card and a credit card is that a debit card works only when money is available in your account wherein credit card is the money provided by the Bank to utilize and spend which does not belong to the customer but he/she is supposed to pay the outstanding before the due date to avoid interest or charges levied on the card.

I prefer using a Debit Card as I am aware of how much do i have in my Bank account and how much can i spend wherein incase of a Credit Card, customers generally tend to spend more than their repayment capacity and falls into a debt trap from where very few make it out. Spending more than the repayment capacity can happen as Banks provide a limit of 6-7 times a persons income/salary and if the customer utilizes the complete limit then he will find it really difficult to repay as his income would not even be enough to pay the interest levied on the credit card outstanding.

Coming back to the topic of cash back, customers who use their cards wisely earn cash back and also redeem them before they expire. All Banks set an expiry date for cash back earned as they do not want customers to redeem these. If every customer redeems the cash back earned, Bank would loose a lot of money by paying cash back and hence Banks generally do not inform the customers that their cash back is about to expire. Once the cash back expires, statement is sent to customers informing them about the expired cash back which will never be reinstated.

Every purchase made by the customer using the Banks card earns him a cash back but their is always a limit at the maximum amount that can be availed by customers as cash back. A humble request to all is to regularly monitor their debit and credit card statements and to make sure that they redeem the cash back as soon as it reaches the minimum limit set for redeeming the same.