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The Truth Behind Credit Card Cashbacks

By Sakshi Srivastava - 25 May 2021 Last Updated: 11 Aug 2022
The Truth Behind Credit Card Cashbacks

In today’s day and age, with the pandemic hitting us hard, we are forced to stay indoors and live our lives accordingly. With recent lockdown norms you are not able to go outside to experience a good weekend stroll which was once a piece of cake for you and you took that for granted. Be that as it may we have to be conducive with what the situations are for now. With regard to buying new commodities or basic shopping, one can always facilitate online shopping forums. These online shopping forums or platforms are booming on a large scale due to the unavailability of us to actually reach out a store physically. Supplementing this incline are the Banks which are providing heavy cash backs on the use of their bank cards to make the orders, which in return lures the customer to buy more and more. But do you know the actual truth behind the banks giving out those cash backs without any hassle, buckle up and let’s learn!

Let us clear our concept about what actually cash back is?

Despite the fact that Banking corporations are in the business of making money, they often promote bonuses such as cash back on credit or debit card purchases. Many customers are bombarded with online offers and mailers offering great benefits, such as zero or low introductory interest rates, one-time bonus rewards offers, and cash back deals when they use their credit cards. Also after the promotional bonus period has ended, it's not uncommon to see banks give what seem to be very generous cash back bonuses to their cardholders.

Cash back eliminates the need to discount your items, preventing undervaluation of your offering. You may also give customers a financial reward at the same time. This helps you to satisfy consumers without having to devalue or discount your goods. Simply put, cash back deals are an excellent way to boost revenue, raise volume across the networks, and reward customers. Let's get into the specifics of what cash back is and how it works now that we've identified the value of cash back promotions.

The important takeaways are explained below-

  • Although most cash bonus programme offer a generous 5% cash back incentive, there may be an annual cap or overall limit you can meet.
  • When retailers accept credit card payments, they must pay the credit card company a portion of the purchase sum as a fee.
  • Banks also profit from charging high interest rates on credit or debit cards and charging late fees on balances carried forward from month to month.

What cash back means for your business?

Cash back is a simple way for customers to earn money, and many websites and credit card companies now offer it. Customers shop as they normally would, and they are compensated with a small sum of money. Although cash back will not make you wealthy in a week, month, or even year, it will encourage you to make purchases. Customers are typically given cashback incentive plans by credit card issuers when they first sign up for a credit card. Customers have two choices for redemption: cash back or incentives.

Customers who use a cash back credit card receive a percentage of their purchases back as cash back. Customers often collect cash back on a monthly basis and must request their cash back as a check or statement credit. Cash back requests often have a minimum cash requirement. Cash back deals must be claimed within a certain amount of time after an order has been made. Customers who buy promotional items online usually receive payment within a few weeks of submitting a request for a cash refund. The primary goal of cash back deals is to entice consumers to purchase a company's goods which will benefit the company as a whole

Read More : Why taking Out Cash from Credit Card is a poor financial decision.

How does cash back works?

You get a percentage of your spend back in the form of cash back any time you use the card. If your card offers 2% cash back and you spend 100 AEDs in a store, you will receive 2 AEDs. This cash back is usually charged once a year, but some cards offer monthly cash back.

The money you receive on most cash back cards is credited to your statement, lowering your credit card bill. Some cards allow you to deposit cash back into a bank account or turn it to points or vouchers. Once you have enough reward points to apply for a reward, you can usually trade them at any time.

Generally customers are asked to include their bank account information in order to collect the cash back. In many circumstances, most cash back is handled via a website that the bank has developed. The advertised goods, the deadline to receive the cash back, the form to participate in the promotion, and the terms and conditions, among other things, are generally listed here for the convenience of the customer.

Different types of cash back schemes may include the following-

  • Some offer a flat rate of cash back like flat 5 or 10 % regardless of how much you spend or where you spend it.
  • Others offer tiered rates based on how much you spend. For eg, if you spend less than 6,000 AEDs a year, you'll pay 0.5 percent, and if you spend more, you'll pay 1%. Make sure this doesn't tempt you to spend more than you can easily repay.
  • Depending on where you spend your money, some cards give different cash back rates. For instance, 1% of money spent in supermarkets, 2% of money spent in department stores, and 3% of money spent on fuel.

Don’t be fooled by thinking that it is free cash!

When retailers accept credit card payments, they must pay the credit card company a portion of the purchase sum as a fee. If the cardholder is enrolled in a cash back rewards programme, the credit card company actually splits the merchant fees with the cardholder. The aim is to encourage people to pay with their credit cards rather than cash or debit cards, which have no incentives. The more a customer uses his or her credit card, the more merchant fees the credit card company may collect. The bank also profit from charging high interest rates on credit and charging late fees on balances carried forward every month. The more credit cards people use, the more likely they are to miss a payment or hold a balance on which they would be charged fees and interest. As compared to a comparable card with a lower rewards package or none at all, credit cards with the most generous sounding rewards plans also have the highest fees and interest rates, so choose according to your need and don’t get carried away by those fancy schemes.

When is it safe idea to use cash back cards?

Cash back credit cards can be a good investment if you pay your credit card bill in full every month. You'll be compensated for saving money that you would have spent anyway. Cash back credit cards are not a good option if you don't always pay off your credit card balance in full. Although you'll get cash back on your purchases, it'll normally be less than the interest you're paying on your debt.

Are there any advantages or disadvantages to getting cash backs-

The benefits of participating in cash back schemes are obvious. You get money back when you spend it, whether it's on a credit or debit card, or even when you shop online. Cash back credit cards, on the other hand, can have high APRs or annual fees, and you must spend money to get it back. If you don't pay your bills on time, some programmes will cancel your earned rewards.


  • Cash back apps and websites may include product discounts as well as cash back rewards.
  • A sign-up bonus is available on some cash-back credit cards.
  • A simple way to win cash rewards while you shop.


  • Cash back apps and websites aren't always fast to refund your money.
  • Cash-back credit cards can have a higher annual percentage rate (APR) than cards with no rewards.
  • There could be a limit on how much money you will get back.


Signing up for cash back rewards credit or debit card will help you earn money back on your purchases. Cash back incentives sound appealing, and they will help certain people save money when they use their credit cards. However, once the restrictions and requirements, such as the limits on how much cash back credit card users may receive each year, are set out in the fine print, these schemes do not tend to be as generous as they can appear in reality. Cash back schemes require you to spend money in order to earn money. By offering cash back, banks promise to store your money for a set period of time and refund the cash back sum to your bank account at the end of that time. Most of us disregard the time frame, but banks profit from it. Therefore it’s a wise trade and you should not be carried away by it all the time. Everything in moderation will keep your financial condition stable.

By Sakshi Srivastava

25-May, 2021

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Frequently Asked Questions

  • How to Apply for a Credit Card?

    You can apply for credit card online by visiting Dhanguard and selecting type of credit card as per your requirement. We will further assist you with the process and requirement as per your requirements.

  • What is the eligibility Criteria for Credit Card in UAE?

    According to the UAE Central Bank regulations, any individual should earn a minimum salary of AED 5,000 per month to be considered eligible for credit card. Also, the Debt Burden Ratio of the consumer should not exceed 50%, to be eligible for a credit card.

  • What is the late fees applicable on late payment for Credit Card?

    Late payment fees are charged by banks if the minimum payment due on a credit card is not received on or before the payment due date. It vary from bank to bank but is generally about AED 250 per month.

  • What is Sharia Compliant Credit Card?

    As per the Shariah law, some banks in the UAE offers Shariah Compliant Credit Cards. This type of Islamic credit card stringently follows shariah principles that charges profit rate instead of interest rate as Riba is sternly prohibited as per the Islamic law. Though, Shariah Islamic credit card works similarly like a traditional credit card but with minor difference in the offered benefits.

  • What are the features of Credit Card?

    The credit card has a fixed credit limit, grace period, annual percentage rate, annual fees and bifurcation in offered benefits.

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