Cashback FAQs
What is Cashback
Cashback is a reward program offered by credit cards, debit cards, and some stores and websites. When you use your cashback card or program to make a purchase, you earn a small percentage of the purchase price back in the form of "cashback." This percentage typically ranges from 1% to 5%, depending on the program you're using. Once you've accumulated enough cashback, you can redeem it in various ways.
How does the cashback work
Cashback works like a mini-discount you earn on your purchases. Whenever you use a credit card, debit card, or participate in a store/website program that offers cashback, you start accumulating rewards. Let's say you buy a new pair of jeans for $50 using a credit card that offers 2% cashback. In this scenario, you'd earn $1 in cashback (2% of $50). Once you've accumulated enough cashback, you can redeem it for various benefits. Most programs have a minimum threshold you need to reach before redemption is possible. This minimum might be a specific dollar amount or a certain number of points.
Is cashback taxable
Generally, cashback rewards are not considered taxable income in US. The IRS views cashback as a rebate or discount on your purchases, similar to a coupon. Since you're not receiving additional income, you don't owe taxes on it. When you use cashback to reduce your credit card statement balance, it's essentially lowering the amount you actually paid for the item. You're not gaining new income, just reducing your overall spending.
Can you get cashback with apple pay
Apple Pay is a digital wallet and payment system that lets you use your existing credit, debit, or store cards with your iPhone, Apple Watch, or other compatible devices. It doesn't offer its own cashback program.
If you have a credit card or debit card that offers cashback rewards, you'll continue to earn those rewards when you use that card through Apple Pay. The cashback is offered by the card issuer itself, not Apple Pay. Similarly, if a store you're shopping at offers cashback through their loyalty program or credit card, you can still earn that cashback by using your store card linked to Apple Pay (assuming the store accepts Apple Pay).
Is cashback worth it
In most cases, cashback is worth using. However, whether it is truly beneficial depends on individual spending habits. For example some cashback cards have annual fees, which can negate the benefits if you don't spend enough to earn enough cashback to offset the fee.
For this situation, using cashback website maybe more cost-efficient. Because cashback websites have no spending threshold, they operate by partnering with various brands and stores. When you click on a link on the cashback website and make a purchase from the store, the store gives a certain percentage of the sale as a commission to the cashback website. The cashback website then shares a portion of this commission with the user as a thank you.
