Cashback vs Discount: Which Saves You More?

As a shopper in the UAE, you’ll come across 2 main types of savings: discounts and cashback rebates. A discount is an upfront price drop on the product, while cashback is earned after you make the purchase.

Both are cost-effective ways to save money on shopping, but they work differently and apply in different scenarios. It brings us to an important question: is a discount always better than a cashback?

Read on to find the answers and learn which saves you more: cashback or a discount.

Cashback vs Discounts: At a Glance

Cashback and Discounts: What is the Difference?

A discount is an immediate price cut at checkout, so you pay less upfront.

For cashback, you pay the full price upfront. After the transaction is processed, you get a percentage of the amount back as cash, wallet credit, or statement credit.

How Cashback Works

• You pay the full retail price initially
• A portion of your spend returns to your credit cards statement later

It encourages you to come back and spend your accumulated rewards on a future purchase.

How Discounts Work

• The price reduces right at the register or checkout page
• The drop applies only to the specific product

Sellers use discounts to clear old stock and/or attract one-time buyers.

When Do Discounts Save You More?

In the UAE, an upfront discount saves you more than cashback does, especially when the discount rate exceeds your credit card’s cashback rate.

• Higher Discount Percentage: A 20% promotional discount reduces your out-of-pocket cost upfront. Cashback rates, on the other hand, cap out at 1% to 10% on specific categories.
• Hitting Spending Caps: Many UAE cashback credit cards limit how much you can earn every month. For large purchases like furniture or electronics, a discount sounds reasonable.
• Lower Upfront VAT: The VAT is calculated on the final price after the discount is applied. It means an instant markdown that also lowers the total tax you need to pay.

When Does Cashback Save You More?

Cashback saves you more than an upfront discount when its rate is higher than the one-time discount. The rate helps you save more on recurring expenses like utilities or school fees, or with merchant promotions without spending caps.

• High Percentage Rates: A 5% to 10% category cashback card beats a standard 2% to 3% partner store discount.
• Combined with Sales: Cashback on a credit card applies to the final invoice after the upfront store sale or promotional discount is already deducted, saving you more.
• Non-discounted Essentials: Utility bills, school fees, and telecommunications rarely offer upfront merchant discounts. This makes category cashback the only savings option.

Cashback vs Discounts: What to Choose?

When choosing between cashback and discounts in the UAE, analyse whether you want immediate savings or long-term savings. Discounts cut the price right at the checkout. Cashback returns a portion of your spending later as statement credit or wallet credit.

Can You Combine Cashback and Discounts?

Yes, you can combine cashback and discounts in the UAE. When you pay a discounted price using a cashback credit card, you still earn eligible cashback on the final transaction amount charged.

Here’s how the combining works.

• Discount First: The store/merchant applies the upfront discount or sale amount to the specific item during checkout.
• Then Cashback: If you pay with your cashback credit card, the bank calculates the applicable cashback percentage on the final, discounted amount. This cashback will be credited to your credit account or statement later.

Things to Keep in Mind

1. Since cashback is a percentage of what you actually spend, a lower final price means you’ll earn less cashback.
2. To earn cashback, you need to meet the monthly spending threshold, regardless of the discount.
3. For maximum savings, confirm that the discounted item falls under the eligible cashback category defined by your bank.

How to Maximise Shopping Savings in the UAE?

Maximising your shopping savings is no rocket science. Time your purchases, use smart savings tools or cards, and check for discounts consistently to get the best deals.

Time the Purchase/Sales

• Shop during major sales seasons like Dubai Shopping Festival, Ramadan/Eid sales, and White Friday in November for discounted prices
• Consider buying clothes and seasonal gear from retailers’ old inventory
• Purchase tech or electronic items during major exhibitions

Use Saving Tools/Programs

• Sign up for store loyalty schemes to earn reward points and vouchers
• Pay for your eligible purchases (including groceries, fuel, and online shopping) using a relevant cashback credit card
• Check aggregator or grocery apps to compare prices across major local stores before checking out

Visit the Discount or Factory Outlet Locations

• Go to the dedicated discounted hubs like Dubai Outlet Mall or The Outlet Village for deals on major global brands
• Try bulk-buying non-perishable products to reduce the per-item cost over time

As a UAE shopper, if you want to get a cashback credit card and compare multiple cards for their features, cashback categories, eligibility requirements, and fees, use sites like Paisabazaar.ae before applying.

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