Forex Cashback vs. Lower Spreads — Which Saves You More?
Many traders face this dilemma: should I pick the broker with the lowest possible spreads, or use a broker with slightly higher spreads and get cashback? It's a question that can mean the difference of thousands of dollars per year. In this guide, we break down both approaches with real numbers and show you the optimal strategy.
The Core Difference
Lower spreads reduce your trading cost at the source — you pay less to enter and exit each trade. This is a passive saving that happens automatically.
Cashback gives you money back after each trade — a rebate that's deposited into your cashback account. You still pay the full spread or commission initially, but get a portion returned.
The question is: which approach results in lower effective trading costs? Let's do the math.
The Math: Spread vs. Cashback
Let's compare three realistic scenarios on EUR/USD, assuming 100 lots per month:
| Scenario | Spread/Lot | Cashback | Effective Cost | Monthly Total |
|---|---|---|---|---|
| Broker A (tight spread, no cashback) | $5.00 | $0 | $5.00 | $500 |
| Broker B + 80% cashback | $7.00 | $5.60 | $1.40 | $140 |
| Broker C + 90% cashback | $7.00 | $6.30 | $0.70 | $70 |
| Broker D (tight spread + cashback) | $5.00 | $4.00 | $1.00 | $100 |
Result: Brokers B, C, and D are significantly cheaper despite potentially higher spreads — thanks to cashback. Even Broker D, which combines tight spreads with cashback, comes out far ahead of the no-cashback option.
Detailed Breakdown by Trading Style
Scalpers (50+ lots/month)
Scalpers are the biggest beneficiaries of cashback because their high volume amplifies the savings. A scalper doing 200 lots per month:
- Without cashback (tight spread): 200 × $5 = $1,000/month
- With cashback (higher spread): 200 × $1.40 effective = $280/month
- Savings: $720/month or $8,640/year
Day Traders (20-50 lots/month)
Day traders also see substantial benefits. At 40 lots per month:
- Without cashback: 40 × $5 = $200/month
- With cashback: 40 × $1.40 = $56/month
- Savings: $144/month or $1,728/year
Swing Traders (5-15 lots/month)
Even lower volume traders benefit meaningfully. At 10 lots per month:
- Without cashback: 10 × $5 = $50/month
- With cashback: 10 × $1.40 = $14/month
- Savings: $36/month or $432/year
Why Cashback Almost Always Wins
- Cashback is guaranteed: You get it on every trade, win or lose. There's no variable — it's a fixed rebate per lot.
- No spread comparison needed: Cashback works with any spread level. You don't need to hunt for the absolute lowest spread broker.
- Combinable with low spreads: The best strategy is using both — tight spreads PLUS cashback. This isn't an either/or decision.
- No hidden costs: What you see in the dashboard is what you get. No slippage manipulation, no hidden markups.
- Works across all instruments: Cashback applies to forex, metals, indices, crypto, and other CFDs — not just major pairs.
When Lower Spreads Are Actually Better
Cashback isn't always the answer. Here are scenarios where lower spreads might be preferable:
- Very small trading volume: Under 5 lots per month, the cashback amounts are minimal and the spread difference might be more meaningful.
- Extremely competitive broker pricing: Some brokers offer 0.0 pip spreads with just $3.50 commission per lot — without any cashback service needed.
- No access to a good cashback service: If you're in a region where quality cashback services aren't available, prioritizing low spreads makes sense.
- High-frequency algorithmic strategies: Some ultra-fast algo strategies need the absolute tightest spreads for their models to work, where even a 0.1 pip difference matters.
The Smart Strategy: Combine Both
The smartest traders don't choose between low spreads and cashback — they use both. Here's how:
- Choose a broker known for tight spreads — IC Markets, Exness, Pepperstone, or Tickmill
- Open a Raw Spread or ECN account — these typically offer spreads from 0.0 pips
- Connect through FxCash — add cashback on top of the already-low spreads
- Calculate your effective cost — spread cost + commission - cashback = your true trading cost
This approach gives you the best of both worlds: institutional-grade pricing plus cashback rebates on every trade.
Real-World Comparison: Five Popular Brokers
| Broker | Account Type | Spread | Commission | Cashback | Effective Cost |
|---|---|---|---|---|---|
| IC Markets | Raw Spread | 0.0 pips | $7.00/lot | $5.60/lot | $1.40/lot |
| Exness | Raw Spread | 0.0 pips | $7.00/lot | $5.00/lot | $2.00/lot |
| RoboForex | ECN | 0.0 pips | $4.00/lot | $8.00/lot | -$4.00/lot* |
| XM | Ultra Low | 0.6 pips | None | $6.00/lot | $0.00/lot* |
| Tickmill | Raw | 0.0 pips | $4.00/lot | $5.00/lot | -$1.00/lot* |
*Negative effective cost means cashback exceeds your trading expenses — you literally profit from trading costs.
Frequently Asked Questions
Can I use cashback with a low-spread broker?
Yes! The best strategy is combining both. Brokers like IC Markets and Exness offer very tight spreads, and you can add cashback on top through FxCash for maximum savings.
Does cashback increase my spreads?
No. Cashback has zero impact on your spreads or trading conditions. It's a separate payment from the broker's affiliate budget that doesn't touch your trading account parameters.
Which is better for scalping — low spreads or cashback?
For scalping, the ideal approach is both: use a broker with Raw Spread/ECN pricing (0.0 pip spreads + commission) and add cashback on top. This combination yields the lowest possible effective trading cost.
How do I calculate my effective cost with cashback?
Subtract your per-lot cashback from your total per-lot cost (spread cost + commission). For example, $7 commission - $5.60 cashback = $1.40 effective commission per lot.
Combine Low Spreads + Cashback
Open a broker account through FxCash's partner link to FxCash and cut your effective costs to the minimum. Free to set up, no impact on your trading.
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