What is cashback and how does it work?


Imagine you go out without any cash, but you do have your mobile phone or your card to make payments. If you don’t live near an ATM or a bank branch, but you'd like some cash in your wallet, the cashback option exists.

How does cashback work? Imagine you’re going shopping at the supermarket or to fill up with petrol and you spend €50. At the till, you ask for €20 in cash. When you pay with your card they’ll charge you €70. Handy, right? Bear in mind that there may be a daily limit on the amount you can ask for, but it should be enough to meet most customers’ needs.

How much does it cost? There is no cost for customers (as long as they don’t use their revolving credit cards). Retailers earn a small fee in exchange for providing the cashback service, while banks provide an additional service to their customers that supplements their branches and ATMs.

According to a 2019 study by the European Central BankAbre en ventana nueva, euro area citizens sourced 2% of all cash through cashback, which was more prevalent in Belgium (6%) and Ireland (5%). This service has just launched in Spain, although more and more banks are likely to offer the service through agreements with certain retailers.

Although more than 10,.000 ATMs have been removed over the last decade, Spain remains the EU country with the second most ATMs per 1,000 inhabitants. Drawing on a study on access to cash in Spain conducted in September 2020, there are 4,378 branchless municipalities, affecting 3.1% of the Spanish population. On average, residents in these municipalities need to travel seven kilometres to reach the nearest branch. Castile-Leon and Extremadura are the regions with the highest percentage of the population without access to a bank branch in their locality.

As a result, other alternatives, such as off-site ATMs, and other facilities, such as mobile bank branches in rural areas, are becoming the norm. Cashback might be a solution for those people who just don’t feel comfortable using an ATM, as they might be happier with someone handing the cash to them.

But be careful! Don’t confuse cashback with cashback websites (or some cards’ cashback reward programmes) that pay back a small percentage of your purchases at participating establishments. They are different things.

Do you fancy trying it? Have you used it already?

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