Cashback vs Loyalty Points on Shopify: Which Wins?

Cashback gives customers real store credit, in money, after each purchase. Loyalty points give them a balance they trade for rewards later. Cashback is simpler and works best for repeat buyers such as subscribers; points are better for gamification, tiers and rewarding actions beyond buying. Many Shopify stores, especially subscription brands, run both.

This guide breaks down how each works, when to use one over the other, how to combine them, and how to set up both in SubzWallet.

How loyalty points work

A points program assigns a point value to customer actions: purchases, referrals, reviews, social follows, birthdays. Customers accumulate points and redeem them for rewards like discounts, free products, or free shipping.

Points create a gamification layer. Customers see a balance growing and feel motivated to reach the next reward threshold. VIP tiers add another dimension: earn enough points or spend enough money and you unlock a higher tier with better earning rates and exclusive perks.

The psychological driver behind points is accumulation and aspiration. Customers think "I'm 200 points away from a free product" and that gap motivates the next purchase.

Shopify's store credit system, which can be used as a redemption mechanism, is documented here: Store credit (help.shopify.com/en/manual/customers/store-credit).

How cashback wallets work

A cashback wallet gives customers real store credit on every purchase. Buy a $50 product with 5% cashback, and $2.50 appears in your wallet once the order is paid. That balance sits in the customer's account and can be applied to any future order.

Cashback is simpler than points. There is no conversion math, no redemption thresholds, no wondering "how much is 500 points actually worth?" The customer sees a dollar amount they can spend. That clarity removes the main reason points go unused: customers forget or get confused about what their points are worth.

The psychological driver behind cashback is loss aversion. Once a customer has $12.50 sitting in their wallet, walking away from that money feels like losing it. This pulls customers back to your store even without promotions or discount codes.

Head-to-head comparison

• Simplicity: cashback wins. Dollar amounts are instantly understood. Points require explanation and conversion math.
• Gamification: points win. Tiers, milestones, and earning multipliers create engagement loops that cashback alone cannot match.
• Ease of redemption: cashback wins. There is no threshold to hit, so every balance is spendable.
• Perceived value: depends. Points can feel more valuable when customers earn "1000 points" vs "$5 cashback," even if the actual value is similar. Bigger numbers feel more rewarding.
• Subscription retention: cashback wins for subscriptions. Subscribers who see their wallet growing with every renewal have a concrete reason to stay.
• Brand differentiation: cashback often wins. Points programs are common on Shopify; a real store-credit wallet is less common and easier to explain in one line.

When to use points only

Points work best when your store has diverse customer actions to reward (reviews, referrals, social engagement) and you want to gamify the full customer journey. Fashion and lifestyle brands where aspiration drives purchasing tend to do well with points-only programs.

When to use cashback only

Cashback works best for subscription businesses, consumable products (coffee, supplements, pet food), and stores with high purchase frequency. If your customers already buy regularly, cashback reinforces that behavior with the simplest possible reward mechanism.

When to combine both

The strongest retention programs use both. Points handle engagement and gamification (reviews, referrals, tier progression in most loyalty apps). Cashback handles purchase retention (every order adds wallet value that pulls customers back). This is the approach SubzWallet takes: points and tiers for engagement, a cashback wallet for retention, and subscriptions to lock in recurring revenue.

Here is how a combined setup could work, with example numbers you would set yourself:

1. Customer places a subscription order for $60.
2. They earn 60 loyalty points (1 point per dollar) and $3 cashback (a 5% cashback rule).
3. Their wallet now shows $3.00 of store credit.
4. At 500 points they reach a Silver tier with a 1.5x points multiplier and a 1.4x cashback multiplier.
5. Next renewal: 90 points (1.5x) and $4.20 cashback (5% x 1.4 = 7% of $60).
6. After several renewals their wallet holds real money and they have a tier to keep. Leaving means giving up both.

Setting up points and a cashback wallet in SubzWallet

In SubzWallet, points, cashback and tiers each have their own page in the app sidebar and share one customer balance view. Points are on every plan, including Free. Cashback and Tiers need the Growth plan or higher, and the sidebar shows them as locked on lower plans.

Points

1. Open Points and add an earning rule. Choose the points type: points per dollar spent, fixed points per order, or a percentage of the order subtotal as points.
2. Choose which orders the rule applies to: all orders, subscription orders or one-time orders. Add conditions (match all or any), a priority when several rules could apply, and an optional end date for limited-time rules.
3. Add redemption options with a points cost: a discount code (percentage off, fixed amount off or free shipping) or Convert to Cashback, which moves points into the wallet. Set a max per customer and a max total uses if you need limits. Redemption codes expire after 30 days.
4. Turn on birthday rewards so customers can add their birthday and get bonus points or a cashback amount on the day.

Cashback wallet

1. Open Cashback and create a cashback rule. Pick the trigger (subscription, one-time or all orders) and the type: a percentage of the order or a fixed amount.
2. Set a minimum order amount, a maximum cashback per order and optional valid-from and valid-until dates.
3. Use advanced conditions to target it, such as first order, order count, item count, a customer tag or tier, or an order minimum and maximum.
4. Tick Use tier multipliers if VIP tiers should boost the rate. Every credit is logged in the Transactions list with the order, amount and balance after.

Cashback is added as Shopify store credit after each subscription billing, so customers spend it at checkout like any other store credit. They can see their cashback and points balances and redeem points on the Rewards page in their Shopify customer account, and the customer portal shows their points and what they can redeem.

VIP tiers

On the Tiers page, start from a preset (Classic Tiers: Bronze, Silver, Gold; VIP Diamond: Member, Diamond, Crown; or Simple: Standard and VIP) or build your own. Tiers can be based on order count, money spent or points earned. Each tier has a threshold, a points multiplier (1.5 = 50% more points), a cashback multiplier (2.0 = double cashback), and benefit text shown to customers. Perks like free shipping or early access you run with Shopify discounts or your own campaigns.

For the customer-side view, see the Shopify cashback wallet page, and for a points-only walkthrough, our loyalty program setup guide. Plan details are on the pricing page.

If you use Klaviyo for email, SubzWallet sends subscription and rewards events to your Klaviyo account, so you can build flows around them. See our Klaviyo integration page and Klaviyo's documentation on custom properties (developers.klaviyo.com/en/docs/guide_to_integrating_a_platform_without_a_pre-built_klaviyo_integration).

Measuring what works

• Repeat purchase rate: the percentage of customers who buy more than once within 90 days. This is the clearest signal that your loyalty program works.
• Redemption rate: what percentage of earned points or cashback actually get used. Low redemption means your program has no pull.
• Customer lifetime value (LTV): total revenue per customer over their relationship with your store. Track this by loyalty tier to see whether tier progression drives real revenue.
• Subscription retention rate: for subscription businesses, the percentage of subscribers still active after 3, 6, and 12 months.
• Wallet utilization: average cashback balance and percentage of customers who apply their balance to orders. Higher utilization means the wallet is driving purchases.