Cash Back

What cash back is

At checkout, cash back means a customer uses a PIN-authenticated debit or prepaid card to pay for a purchase and withdraw cash at the same time. The customer chooses an amount at the terminal, and the funds come from their linked checking account, savings account, or prepaid balance. Your business hands over the cash from its drawer.

This is different from cash-back rewards on a credit card. Those rewards are a benefit the issuer gives its cardholder, often based on card spending. They do not involve your register handing over cash during the sale.

Cash back gives customers convenient cash, but each withdrawal has a processing cost and reduces the cash in your drawer.

How it works at checkout

You decide whether to offer cash back, which withdrawal amounts to display, the transaction limit, and whether to charge a customer fee. A 2024 review of retail policies found per-transaction maximums from $20 to $300 among sampled retailers. Across retail cash-back transactions from 2017 to 2022, the median withdrawal was $20.

The customer’s card is used for the purchase and cash withdrawal together. For your staff, that means the register must have enough cash to cover the withdrawal, and the customer receives less cash in their account. If a customer makes repeat withdrawals, a fee charged per withdrawal can apply each time.

Modeled extra cost on a $20 purchase

Published model estimates of additional transaction costs. They are not universal processing rates.

What it means for your costs

Cash-back debit transactions add payment-processing costs, including interchange, network fees, processing, and fraud controls. Modeling of the additional marginal cost puts it at about $0.01 to $0.20 per cash-back transaction. The result depends on the merchant type and withdrawal amount, so the cash handed out is not the only cost to consider.

In modeled examples with a $20 purchase, adding $10 cash back cost a discount retailer $0.05 and a grocery store $0.01 in additional transaction costs. With $40 cash back, the modeled costs were $0.19 and $0.02, respectively. Those amounts are model estimates, not universal rates.

Some stores charge customers a separate cash-back fee. In reported retail policies as of August 2024, fees ranged from $0.50 to $3.50, depending on the store and withdrawal amount. The cash service also reduces cash in your drawer, which can lower the amount you handle, transport, and deposit.

What customers should see

A fee can take a large share of a small withdrawal. For example, a $1 fee on $10 cash back is 10% of the cash received. A 2022 mystery-shopping review found that the applicable fee was not always clear to customers before they completed the transaction, so show the amount and fee clearly before the customer confirms.

What you can actually change

1. 01
   Set clear limits. Choose withdrawal amounts that fit your cash drawer and display them at the register. Review the limits when cash availability or customer demand changes.
2. 02
   Show every fee. If you charge customers, display the fee and the withdrawal amount before they confirm the transaction. Make sure staff can explain the total.
3. 03
   Compare transaction costs. Review your debit processing costs alongside cash-back volume and any cash-handling savings. Do not treat the amount dispensed as a processing fee.

Frequently asked questions