Forex Cashback vs Lower Spread Account – Which Is Better for Traders?
If you are serious about reducing your trading cost, you have probably asked this question:
“Forex cashback vs lower spread account – which is better?”
Many traders think a lower spread account is always cheaper. Others prefer forex cashback because it gives money back on every trade. But the real answer depends on your trading style, lot size, and broker structure.
In this detailed guide, I will explain everything in simple wording so you can clearly understand:
- What is forex cashback?
- What is a lower spread account?
- Real cost comparison with examples
- Which option is better for scalpers, swing traders, and beginners?
- Common myths about cashback and spreads
This article is written based on real trading cost models used by brokers and Introducing Brokers (IBs), so you can make an informed decision.
What Is Forex Cashback?
Forex cashback (also called a forex rebate) is money you receive back from a broker through a partner or Introducing Broker (IB) whenever you place a trade. The partner receives a commission from the broker for referring you and shares a portion of it with you, effectively reducing your trading costs and increasing your potential profits.
Here is how it works:
- You open a trading account through a cashback provider (IB).
- The broker pays a commission to the IB.
- The IB shares a part of that commission with you.
- You receive cashback per lot traded.
👉 Important:
Cashback does NOT change your spread during the trade.
It refunds part of the cost after the trade.
Example:
- You trade 1 standard lot EUR/USD.
- Spread cost = $10
- Cashback = $4 per lot
Your effective cost becomes:
$10 – $4 = $6 actual cost
That is why many traders prefer forex rebates.
What Is a Lower Spread Account?
A lower spread account usually means:
- Raw spread (0.0 – 0.3 pips)
- Plus a fixed commission per lot
This type of account is often called:
- Raw spread account
- ECN account
- Pro account
Example:
Raw Spread Account:
- Spread = 0.2 pips
- Commission = $7 per lot
- Total cost ≈ $9 per lot
Compared to:
Standard Account:
- Spread = 1.2 pips
- No commission
- Total cost ≈ $12 per lot
Lower spread accounts look cheaper at first glance. But the question is:
👉 Is it still cheaper when cashback is added?
Forex Cashback vs Lower Spread Account – Cost Comparison
Let’s compare 3 situations.
Scenario 1: Standard Account Without Cashback
- Spread = 1.2 pips
- Cost per lot = $12
- Cashback = $0
Final cost = $12
Scenario 2: Standard Account With Cashback
- Spread = 1.2 pips
- Cost per lot = $12
- Cashback = $4
Final cost = $8
Scenario 3: Raw Spread Account (No Cashback)
- Spread = 0.2 pips
- Commission = $7
- Total cost = $9
Final cost = $9
Conclusion from Example:
Standard account + cashback = $8
Raw spread account = $9
In this case, forex cashback is cheaper.
But this depends on:
- Broker structure
- Cashback rate
- Trading volume
Which Is Better for Different Types of Traders?
1️⃣ Scalpers
Scalpers open many trades per day.
They need:
- Very tight spreads
- Fast execution
- Low cost per trade
If cashback is available on raw spread account, that is usually the best option.
But if cashback is only available on standard accounts, sometimes the standard + rebate becomes cheaper.
👉 For scalpers, small cost differences matter a lot.
2️⃣ Day Traders
Day traders open multiple trades daily but hold them longer than scalpers.
For them:
- Cashback gives stable monthly returns.
- Even $3–$5 per lot can add up significantly.
If you trade 100 lots per month and get $4 rebate:
100 × $4 = $400 extra income
That is not small.
3️⃣ Swing Traders
Swing traders trade less frequently.
If you trade only 5–10 lots per month, the difference between $8 and $9 per lot is small.
For swing traders:
- Execution quality matters more.
- Spread stability is important.
- Cashback is a bonus, not a major factor.
Does Forex Cashback Reduce Spread?
This is a common question.
The simple answer:
❌ No, it does not reduce spread during the trade.
✅ It refunds part of your trading cost after the trade.
Your platform will still show the same spread.
Cashback is credited separately to your account or wallet.
Advantages of Forex Cashback
- Reduces overall trading cost
- Works even if your trade is losing
- Helps increase long-term profitability
- Good for high-volume traders
- No extra risk involved
Advantages of Lower Spread Accounts
- Better for scalping strategies
- More transparent pricing
- Usually faster execution
- Suitable for EA and algorithmic trading
Common Myths About Forex Cashback
Myth 1: Cashback Increases Spread
False.
If you choose a trusted provider, the spread remains the same as broker pricing.
Myth 2: Cashback Is a Scam
Cashback is a legal IB commission-sharing model.
Brokers pay IBs for referring clients.
IBs share part of that commission with traders.
This is a standard industry practice.
Myth 3: Lower Spread Is Always Cheaper
Not always.
If cashback reduces effective cost more than raw spread difference, then cashback wins.
Key Factors to Decide Which Is Better
When comparing forex cashback vs lower spread account, check:
- Spread size
- Commission per lot
- Cashback amount per lot
- Your monthly trading volume
- Broker execution quality
Do not decide based on spread only.
Real Professional Opinion
From an industry perspective, serious traders calculate effective cost per lot, not just spread.
The formula is:
Effective Cost = Spread + Commission – Cashback
This is the only number that matters.
Professional traders and fund managers always focus on net trading cost.
Final Verdict: Forex Cashback vs Lower Spread Account – Which Is Better?
There is no one-size-fits-all answer.
Choose Forex Cashback If:
- You trade high volume
- Rebate per lot is strong
- Broker spreads are competitive
- You want additional monthly income
Choose Lower Spread Account If:
- You are a scalper
- You use automated trading
- Execution speed is your priority
- Cashback is not available
In many real cases, raw spread + cashback together is the best combination.
Smart Strategy for Traders
Instead of choosing one blindly:
- Calculate your monthly lot size.
- Compare effective cost.
- Test both account types on demo.
- Check broker regulation and execution.
Trading success is not about spread only.
It is about risk management, discipline, and cost control.
Conclusion
When comparing forex cashback vs lower spread account, the best option depends on your trading style and volume.
For high-volume traders, cashback can significantly reduce total cost.
For scalpers, raw spreads may provide better execution advantage.
The smartest traders do not guess — they calculate.
If you want long-term profitability, always focus on your effective trading cost per lot.
Disclaimer: This article is for educational purposes only and does not provide financial or investment advice. Forex trading involves significant risk and may not be suitable for all investors. Always do your own research and apply proper risk management, such as using stop-loss and managing position size. Past results or cost comparisons do not guarantee future performance.