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Are Cash Back offers really worth it?

First of all, let’s understand cash back offers. These are essentially discounts given to buyers by e-wallets, credit card companies, and banks. It is applicable over and above the usual discounts that you get. Often, though, they come with caveats.

Cash back offers are ubiquitous. You start the day taking a Metro and it smiles at you. You order food online and they make an appearance. You pay phone bills and you are rewarded.

Cash backs are now available on electricity bills, DTH recharge, flight tickets and almost all products sold in retail stores and online portals.

What are cash backs?

First of all, let’s understand cash back offers. These are essentially discounts given to buyers by e-wallets, credit card companies, and banks. It is applicable over and above the usual discounts that you get.  Often, though, they come with caveats.

E-wallets and Credit card companies partner with different retailers (retail store as well as online) and partly pass on their commissions in the form of cash backs to their customers. It is primarily to encourage you to use their platform for shopping and shop more.

Is it a marketing gimmick?

Essentially, sellers and retailers are using different ways to incentivise customers to purchase their products and cash back is the new way to lure customers in the digital era. They are essentially doing what the local mom-and-pop store did in the past by giving cash discounts; but in a different way.

While it might be a marketing exercise for sellers, buyers also benefit from lower prices. Small savings on multiple household items on a regular basis adds up to a large amount over time and so cash backs are certainly worth a look.

However, keep in mind the following points:

Don’t let it make your purchasing decision

Say, you are choosing between two refrigerator brands. While one is an established brand (with assurance of quality), the other is a new kid-on-the-block. And a lucrative time-bound cash back offer makes you go for the latter.

While you might have got a good deal, the big question is whether the product you bought is worth owning. And what will be the consequences if it needs a replacement in a year or two.

So, do a thorough research on products and only then check for any cash back offers for it. A reverse approach can prove disastrous.

Don’t overspend

Credit card companies essentially want you to spend more and more so that they keep getting their commissions. Ensure you don’t fall prey to these offers and overshoot your budget.

Fine print

Go through the fine print. These offers often come with caveats. While some are applicable on first purchase, others have a limit on cash back amount. Some others have a minimum transaction amount or quarterly limits. Effective discounts might work out to a paltry sum for big ticket purchases.

Safety and Credibility

As a thumb rule, transact only on reputed e-commerce portals and buy its products only after checking its customer ratings.

If you are planning to sign up for an e-wallet, check for its online reviews and redressal systems.

While you might have got a good deal, the big question is whether the product you bought is worth owning. And what will be the consequences if it needs a replacement in a year or two.

Convenience is paramount

Time is money. If you are going to research for four hours to find the best offer on a stiletto, probably you are wasting your time (and money). 

Do the research and shortlist one or two e-wallets and a credit/debit cards. Don’t keep signing for all e-wallets just to avail some offer.

Often, people have multiple e-wallets with some money in it. Transferring money from e-wallets to bank account entails a huge 3%-4% cost. So, promptly utilise all the e-wallet balances.

Nutshell 

In short, leverage cash backs but don’t let it make your purchasing decisions. Do your due diligence on those who offer cash backs and read the fine print.

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