Debit card cashback
Encyclopedia
Debit card cashback is a service offered to retail
customer
s whereby an amount is added to the total purchase price of a transaction paid by debit card
and the customer receives that amount in cash
along with the purchase. For example, a customer purchasing $18.99 worth of goods might ask for twenty dollars cashback. They would pay a total of $38.99 ($18.99 + $20.00) with their debit card and receive $20 in cash along with their goods. Many customers find this a useful way to obtain cash, instead of making a separate trip to a cash machine
. The idea was originally that of British-based retail chain Tesco
in order to reduce the amount of cash banking the stores needed to carry out, the customer service aspect being a side effect of this.
The service is offered by both bank
s and merchant
s in countries such as the United States
, United Kingdom
, Republic of Ireland
, Belgium
, Germany
, Sweden
, Norway
, Canada
, Poland
, the Netherlands
and Australia
because of the fee structures in use in these countries:
The combination of these two factors means that the retailer can save money
by offering the cashback service. It does not cost the retailer more in commission to add cashback to a debit card purchase, but in the process of giving cashback, the retailer can "offload" cash which they would otherwise have to pay to deposit at the bank.
Merchants do not offer cashback on payments by credit card because they would pay a percentage
commission on the additional cash amount to their bank or merchant service provider.
Some vendors enforce a minimum purchase amount or add a fixed fee when providing cashback to a customer.
In many cases, retailers require customers to initial the cashback entry on the till receipt to confirm they have received the cash. This system is used to prevent cashier
s surreptitiously adding cashback amounts to a transaction and keeping the money for themselves (or accusations of same), but more importantly, to ensure that customers cannot return to the store with allegations that the attendant "forgot" to hand over the requested cash.
Cashback can have benefits for the customer in many scenarios. In locations where there are no cash machines nearby, or the nearby machines are out of order or empty, a local retailer may be able to supply the required cash instead and to offer more flexibility in note denominations. Sometimes it is simply more convenient to combine the transactions at the retailer and ATM into a single cashback transaction with the retailer.
Additionally, although fees for debit card ATM usage
are very rare in countries such as the UK, where cashback originated, this is not the case in some other countries. In Canada and the United States, fees of $1~2 are typical when using an ATM from a different bank than the one with which the customer has an account. The fees in some other counties are even higher. In Germany, for instance, usual fees are €4~5. This gives rise to another potential cashback advantage for the consumer: by making use of the cashback procedure, this ATM fee can be avoided for the cardholder.
Retail
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
customer
Customer
A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...
s whereby an amount is added to the total purchase price of a transaction paid by debit card
Debit card
A debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...
and the customer receives that amount in cash
Cash
In common language cash refers to money in the physical form of currency, such as banknotes and coins.In bookkeeping and finance, cash refers to current assets comprising currency or currency equivalents that can be accessed immediately or near-immediately...
along with the purchase. For example, a customer purchasing $18.99 worth of goods might ask for twenty dollars cashback. They would pay a total of $38.99 ($18.99 + $20.00) with their debit card and receive $20 in cash along with their goods. Many customers find this a useful way to obtain cash, instead of making a separate trip to a cash machine
Automated teller machine
An automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...
. The idea was originally that of British-based retail chain Tesco
Tesco
Tesco plc is a global grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom. It is the third-largest retailer in the world measured by revenues and the second-largest measured by profits...
in order to reduce the amount of cash banking the stores needed to carry out, the customer service aspect being a side effect of this.
The service is offered by both bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s and merchant
Merchant
A merchant is a businessperson who trades in commodities that were produced by others, in order to earn a profit.Merchants can be one of two types:# A wholesale merchant operates in the chain between producer and retail merchant...
s in countries such as the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, Republic of Ireland
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
, Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
, Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
, Norway
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, Poland
Poland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
, the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
and Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
because of the fee structures in use in these countries:
- When accepting payment by debit card, merchants pay a fixed commissionCommission (remuneration)The payment of commission as remuneration for services rendered or products sold is a common way to reward sales people. Payments often will be calculated on the basis of a percentage of the goods sold...
fee (as opposed to a percentage) to their bank or merchant service provider. (This is because the commission paid by the merchant for accepting debit cards, unlike credit cardCredit cardA credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...
s, does not need to fund interest free credit or other incentives). - Accepting payments in cash can be costly for merchants, given that many British banks charge around 0.5% for depositing cash into a business bank account, along with the costs of transporting and insuring the cash.
The combination of these two factors means that the retailer can save money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
by offering the cashback service. It does not cost the retailer more in commission to add cashback to a debit card purchase, but in the process of giving cashback, the retailer can "offload" cash which they would otherwise have to pay to deposit at the bank.
Merchants do not offer cashback on payments by credit card because they would pay a percentage
Percentage
In mathematics, a percentage is a way of expressing a number as a fraction of 100 . It is often denoted using the percent sign, “%”, or the abbreviation “pct”. For example, 45% is equal to 45/100, or 0.45.Percentages are used to express how large/small one quantity is, relative to another quantity...
commission on the additional cash amount to their bank or merchant service provider.
Some vendors enforce a minimum purchase amount or add a fixed fee when providing cashback to a customer.
In many cases, retailers require customers to initial the cashback entry on the till receipt to confirm they have received the cash. This system is used to prevent cashier
Cashier
Cashier is an occupation focused on the handling of cash money.- Retail :In a shop, a cashier is a person who scans the goods through a machine called a cash register that the consumer wishes to purchase at the retail store. After all of the goods have been scanned, the cashier then collects...
s surreptitiously adding cashback amounts to a transaction and keeping the money for themselves (or accusations of same), but more importantly, to ensure that customers cannot return to the store with allegations that the attendant "forgot" to hand over the requested cash.
Cashback can have benefits for the customer in many scenarios. In locations where there are no cash machines nearby, or the nearby machines are out of order or empty, a local retailer may be able to supply the required cash instead and to offer more flexibility in note denominations. Sometimes it is simply more convenient to combine the transactions at the retailer and ATM into a single cashback transaction with the retailer.
Additionally, although fees for debit card ATM usage
ATM usage fees
ATM usage fees are the fees that many banks and interbank networks charge for the use of their Automated Teller Machines . In some cases, these fees are assessed solely for non-members of the bank; in other cases, they apply to all users...
are very rare in countries such as the UK, where cashback originated, this is not the case in some other countries. In Canada and the United States, fees of $1~2 are typical when using an ATM from a different bank than the one with which the customer has an account. The fees in some other counties are even higher. In Germany, for instance, usual fees are €4~5. This gives rise to another potential cashback advantage for the consumer: by making use of the cashback procedure, this ATM fee can be avoided for the cardholder.