Cashback, Cashback, Cashback: The Five Things People Actually Mean

One thing I started writing these for was to explain things that you ‘should’ know but just don’t, stuff that makes you feel like a bit of an idiot because everybody else ‘knows’ it. They don’t, of course, but it can sometimes feel like they do and it’s not a nice feeling. This is definitely one of those things for me. 

I remember the first time I was offered ‘cashback’ at a till (Wollaton Coop, Nottingham, circa 2003), I was like ‘what on earth, are they giving me free money?!’ I must have looked as confused as I felt because the lady explained it to me nicely and then I got on with my day but the feeling of ‘these are words I’ve heard before, in context even, but never actually understood’ is a universal experience and I want to do my bit to help alleviate it. 

With that in mind - let’s talk about different kinds of cashback. 

Credit Card Cashback

This is the one we talked about last week so I’ll keep it super brief. 

A cashback credit card pays you back a small percentage of what you spend. In the UK it’s usually somewhere between 0.5% and 1% but it can be more in some circumstances. It’s funded largely by fees that the retailers pay and, more significantly, by interest charged to people who don’t clear their balance in full each month. 

They’re a great deal if you pay off your balance without fail, but carrying a balance - even occasionally - means the interest, often around 20% to 30%, eats away at the cashback many times over. 

Cashback At The Till

This is the one that got me thinking about all this.

Getting cash out as part of a card purchase in a shop. I used to offer this back in the day in my shop. It only works with a debit card, rather than credit cards, because it has to come out of an account that actually holds funds. It’s usually free for the shop to offer it, or close to it, since debit card fees tend to be a flat amount per transaction rather than a percentage and it’s been actively encouraged in the UK over the last few years as it keeps cash accessible to people even as bank branches and cash machines close on the high street. 

Cashback Websites and Apps

These have become super popular recently but I feel like you’re either a convert or not.

It centres around sites like TopCashback and Quidco. The mechanism is a bit different - when a retailer pays for online advertising, often through affiliate marketing, and they pay a small commission to whoever sent the customer to them. When you click through a cashback site’s link and they’re paid the commission, they pay most of it back to you rather than keeping it all. It costs you nothing extra, the retailer pays the same commission, all that’s happening is that you’re getting a cut rather than it all going to the middle man.

The rates vary wildly by retailer and they change often. The cashback isn’t always guaranteed either, sometimes it has been declined after the fact if the retailer disputes the sale so it’s probably worth treating as a nice bonus rather than money already spent in your head. 

Cashback Current Accounts

Some everyday bank accounts build cashback into the account itself as a feature of banking there - rather than it being tied to a specific card transaction. 

This can work really differently depending on the bank so let me give you a couple of examples. Santander’s Edge account charges a £3 monthly fee and pays 1% cashback on selected household bills paid by direct debit, capped at £10 a month but only if you pay in at least £500 and keep at least two active direct debits running. It feels like quite a lot to keep on top of but if you’re using this as your main place to put your salary and pay bills then Bob’s your uncle. A Chase UK account has no fees and offers 2% cashback, capped at £20 a month, but you have to maintain a £1,000 balance in their savings accounts (it can be in one account, or multiple) and make at least 15 payments each month. 

If you’re interested in either of these, or other cashback accounts, make sure you check that you’re eligible and that it will suit your lifestyle but really, I don’t see what could be better than a bit of free money for your everyday bits and bobs - can you? 

Mortgage Cashback

Finally, this is a little less everyday but worth knowing about and defining as it’s different from the others. Some mortgage deals offer a one-off cashback payment - either a fixed sum (commonly somewhere around £250 to £1,000) or a percentage of the loan, paid to you around the time that your mortgage completes. It’s meant to help with the costs of moving - legal fees, a valuation, furniture - that sort of thing (my ears are pricking up as you know that’s relevant to me right now…). 

Some deals also include a clawback clause, which means you’d have to repay the cashback if you switch or repay your mortgage within a set period. It’s worth watching out for whether the lender gives a slightly higher rate to build the cost of the cashback into their offer - I know you’ll do your due diligence and check it’s worth it overall rather than just chasing free cash. As always, read the small print. 

The Round-Up

Five different ‘cashbacks’ and five totally different deals. All of these are everyday concepts that people throw about without really considering that we might not get that nuance. 

Some of it really is a great deal - free money even - some is simply not free money but your own cash given back to you and some is… somewhere in the middle depending on the small print. So. There you have it. 

What else comes to mind as something you ‘should’ understand but, embarrassingly perhaps, just don’t?

Love Eleanor. xxx

P.s. I’m going to start sharing what the photos are on the post previews from the main blog page - partly because I’m struggling to find ‘appropriate’ photos because I don’t want to use AI but I don’t live a typical financial professional’s life and partly because one friend asks me what I was thinking about when the photo choice is particularly random- and this week’s is particularly random.

So here’s the photo:

A Basket Bauble

This is the second bauble I’ve made from a fantastic kit from La Basketry which appears to be no longer available. My friend gave it to me some time ago because she knew she wouldn’t do it herself and I was inspired to give it a go this week. I’m hoping there will be more, and more complicated, baubles in the coming weeks!

There is no connection to the blog. Obviously.