OT'ish: What does the US mean by 'Cashback'

Ian McCall wrote in news: snipped-for-privacy@mid.individual.net:

Refunds.

Some credit card companies will give you a percentage of the amount you charge. But usually there are restrictions. For example they might offer to refund 5% for all gasoline purchases in March, or 2.5% for all restaurant charges in April.

Porter Smith wrote in news:Xns9EB48E1384D0Fmyport2000yahoocom@207.246.207.169:

The notion of "cashback" when you pay with a credit card for your purchases (eg at a grocery store) and ask for some cash does exist in these parts (NE US) too.

And when used in this context I post the cash received to a "Cash on hand" bank account. Its cash in my pocket not an expense. Then as you spend the cash record those expenses.

I know I'm going to get into trouble with this one, but (deep breath), here goes!

So Laura, when you take $25 out of an ATM, do you keep track of what you spent that on (newspaper, gum, pretzel on street vendor, subway fare, etc?). I realize for cash flow analysis one *should*; I am merely curious how far we take these things. I personally gave up on that sort of spending tracking a LONG time ago (I know I probably shouldn't, but even I can't worry about 'petty cash' expenditures.). Yes, I do have a 'CASH' account on Quicken and use it when I am forced to allocate a entry like this, but I usually just say, screw it, and update the balance to zero every once in a while.--

------------------------------------------------------------- Regards -

- Andrew

Far back in the mists of time when I first started using accounts packages, I tried to track cash as well. Quickly found that not only was it wasting my time, it actually put me off using the accounts package because it was so tedious. It's one of the reasons I use the debit card so much more than cash - it's so much easier to track what happened.

Cheers, Ian

Ah - ok. Yes, similar offers exist in the UK too, although rarely so detailed. It's normally just a percentage of an overall amount spent. Thanks.

Cheers, Ian

Valid question. It depends...

If the money came out of my personal bank account probably not. I don't go crazy tracking everything in our personal bank accounts. If it is not tax related then I'm not too picky as to how it gets recorded in Quicken. A lot of personal expenses get lumped into Groceries, Food & Beverage or Personal Spending.

My husband regularly hits the ATM machine so I have an account called "Cash withdrawals" for those withdrawals. If I take money as "Cashback" at the grocery store that cash gets lumped into the total amount posted to Groceries. Any cash taken out this way (ATM or cashback) is used on minor purchases during the week (lunch, newspapers)--nothing tax related so I don't care where they get posted.

If the money came out of my business account there usually is a reason why I took cash out. For those business related cases, yes, I track that cash. For example, I am going to a networking meeting where there is an admission charge. I'll grab $20-$30 in cash for those events because they don't take credit/debit cards at the door.

If I purchase something for the business with cash in my wallet, i just keep the receipt and post it out of the Cash on hand account. I zero out this account periodically to the Cash Withdrawal account to keep things clean.

I use credit cards for almost all purchases, so they are easy to track. I even use a credit card for very small purchases at the grocery store. The credit cards also provide a few hundred dollars in rebates each year. I never use the "cash back" option now offered at stores, as that brings with it fees or interest payments. I won't pay either of those.

I have a "cash reserve" account that includes cash that is kept in a safe place for a possible emergency. That usually doesn't change, as I don't use that money on a day to day basis.

I also have a category called "allowances" that is used for "walking around money" and the occasional cash purchase. Over time, that category has decreased, as the credit card purchases have become much more common. I don't try to track it any finer than that.

Ian McCall wrote in news: snipped-for-privacy@mid.individual.net:

I'm not positive about this, but 'cash back' to me is when you make a debit purchace, say at the supermarket, and then ask for cash on top of the purchase. i.e. the purchase was $12.50 and you ask for $40.00 cash. I always track the cash as 'cash back' on the purchase, which would now total $52.50.

I suppose the difference here is that debit card usage is much more common in the UK (and Europe generally I believe). I rarely use a credit card, but constantly use a debit card. With a debit card there's no fee or interest payment.

Cheers, Ian

I don't usually have much cash in my wallet so I tend to use my debit card everywhere. For larger ticket items that I might want "buyer protection" I will use my credit card. Plus my debit card has a daily limit on it so for some things like buying a computer I have to use my credit card.

Ian McCall wrote in news: snipped-for-privacy@mid.individual.net:

There are no fees or interest charges with credit cards if you pay them off in full each month.

Ian,

Not totally true. Your merchant pays a fee (called the interchange fee) for every credit/debit transaction. The strange thing is the debit interchange rate is considerably higher than the rate for a comparable credit transaction. A credit transaction amounts to your bank making you an unsecured loan that you will have to pay in 25-30 days. There's a risk you may default on that loan.

The debit card however, has very little risk for your bank. No money in the account, transaction declined. In the US your liability for a lost credit card is limited to $50. There's no similar protection in place if a thief drains your account via a stolen debit card. Some banks will reimburse you but they're under no obligation to do so.

Also, in the US there's a new law that calls for limits on debit fees that's now being lobbied to death by the banks claiming that this is bad for all businesses.They have "threatened" to add fees to debit and credit cards (and checking accounts, etc). I used to work for a world-wide credit card network and never understood this logic. Still don't, I only use my credit card and pay it off in full each month.

ScottB

I almost always use a credit card for anything I buy. I always pay in full each month. I pay no interest of fees on my credit cards, and I only use cards that offer a rebate. I always sign up for their 5% rebate offerings on select categories, and I remember to use the correct card for each category.

I just brought up a quick report in Quicken. I received $1,116.00 in credit card rebates last year. They paid me that money for using their cards. They also extended the warranty on much of what I purchased. And, every purchase is easily downloaded into Quicken each day. I can't see why I would shop any other way.

Not to mention many of the banks are getting rid of program points from the Debit cards now. Assuming one can manage their credit cards appropriately (if one has them), I never could understand the logic of using debit cards over credit cards. Not sure anyone mentioned the block that can go on that money for hotels and gas when using it too; I believe that is also a downside.

In the early days of our family I tracked all of the miniscule daily cash expenses, thereby generating a few categories of those cash outlays. This was tedious for me and annoying for my wife so it didn't last long, but it did create the basic structure for what I do now.

Today, when I get cash back on a debit card purchase or get cash from an ATM, I allocate that cash in the same proportions, as earlier determined, to those same categories.

In other words, I am guessing, or estimating where that loose cash is going. Those categories include items like "misc supplies" and "personal notions". I have no need to be precise about this kind of stuff. The house payments, heating bills, car payments, medical costs, income tax, etc are a much greater percentage of the expense picture.

I use the same allocation process for cash reimbursements from friends when they share a pizza and pitcher of beer that I might buy at one of our Fridays night gatherings. I just estimate what proportion of the food and beverage debit card purchase is mine (that part goes to "dining out") and the rest (cash received from the group) is allocated as above. It's the same as if I had received cash back from the pizza parlor cashier.

Dick Dick Ballard snipped-for-privacy@comcast.net

Actually some of the banks in the US are starting to charge fees for debit card usage. Citizens bank charges 0.35 per debit card charge. It is not consistent on my client's bank statements (i have 2 clients with CB) so I don't know if it happens when they use the card for debit or credit.