Cashback
A reward mechanism where a percentage of your spending is returned to you as real money, either as a statement credit or direct deposit.
What is Cashback?
Cashback is a type of credit card benefit where a percentage of the amount you spend is returned to you as actual money. Unlike reward points, cashback has a direct and transparent monetary value — you know exactly how much you’re getting back.
How Cashback Works
When you make a purchase with a cashback card, a percentage of the transaction value is credited back to you. This happens in one of two ways:
- Statement credit: The cashback is deducted from your next bill
- Direct credit: The cashback is deposited into your linked account
For example, if your card offers 2% cashback and you spend ₹10,000 on groceries, you receive ₹200 back.
Types of Cashback Cards in India
Flat Cashback
Every purchase earns the same rate regardless of category:
- HSBC Cashback Card: 1.5% on all spends
- AU Small Finance LIT Card: Up to 2% on all spends
Category-Based Cashback
Higher rates on specific spending categories:
- Axis Ace: 5% on bill payments via Google Pay, 4% on food delivery
- ICICI Amazon Pay: 5% on Amazon for Prime members
- HDFC Millennia: 5% on Amazon, Flipkart, Swiggy
Rotating Category Cashback
Some cards offer elevated cashback on categories that change quarterly or monthly.
Cashback vs. Reward Points
| Feature | Cashback | Reward Points |
|---|---|---|
| Value clarity | Direct ₹ value | Value varies by redemption |
| Flexibility | Always useful as money | May have limited redemption options |
| Complexity | Simple | Often complex tier structures |
| Best for | Simplicity seekers | Strategic optimisers |
Things to Watch Out For
- Monthly/annual caps: Many cards limit the maximum cashback you can earn per month or year
- Minimum transaction thresholds: Some cashback applies only above a certain spend amount
- Excluded categories: Insurance, fuel, rent, and wallet loads are often excluded from cashback
- Cashback reversal: If you return a purchase, the associated cashback is typically reversed
Related Terms
Annual Fee
The yearly charge levied by the bank for maintaining and providing the benefits of a credit or debit card.
Forex Markup
An additional fee charged by banks on transactions made in foreign currencies, typically ranging from 1% to 3.5% of the transaction amount.
Reward Points
A loyalty currency earned on card transactions that can be redeemed for merchandise, vouchers, travel bookings, or statement credits.