Websites promising money for online purchases might sound too good to be true but a few clicks can be surprisingly profitable
Among the credit card bills beginning to land on doormats demanding payment for the excesses of Christmas, some consumers will actually be receiving payments for the shopping they have done. An increasing number of UK shoppers last year signed up to one of the many cashback sites promising buyers money when they shop online. But many of us are still sceptical or confused about the sites that seem to be offering something for nothing.
The idea of cashback sites is relatively simple. You register with one of the many sites out there and when you buy online you visit the same retailers as usual, but via a link on your chosen cashback site. When you make a purchase, the retailer pays a commission to your cashback site, who in turn gives you a cut of the money.
In practice, however, with an astonishing number of sites all offering different amounts of commission on various products, it can become confusing to work out if you are actually getting a good deal.
The cashback sites claim that regular users are earning on average around £450 a year, but earnings will depend on the amount of shopping you do online and the types of retailer you use. Retailers typically offer returns of between 1% and 10% on purchases.
With many retailers only offering deals at the lower end of the spectrum, it might not seem worthwhile. But some cashback sites offer discounts on big ticket items such as holidays and electricals, meaning a few clicks could become surprisingly profitable.
According to Andrew Hagger, of comparison site moneynet, some of the best rewards come from signing up to financial products through the sites. “You can earn £20 to £30 when you take out insurance policies,” says Hagger. “But you need to make sure you are not just buying products for the cashback and that they are good deals to start with. Something with £20 cashback is not good value if it is £30 more expensive to start with.”
How much can you get?
Comparing different cashback sites can be tricky, even with the help of tools such as the Cashback Sites-Maximiser tool on moneysavingexpert.com. The site compares the rates of cashback offered by retailers. However, many shops vary the level of cashback by type of product, and the savings are not immediately clear.
Cash checked the cashback deals being offered for a list of the most visited online retailers in December compiled by Hitwise. Most of the shops offered discounts between 3% and 5% on some of their products, but a couple of the top online stores were not listed on any of the sites.
The most popular online shopping site, eBay, had a cashback rate of up to 40%. However, this was only on the commission charged to sellers by the site. So, if you bid £60 on a camera, but eBay only made £2 from the listing fee, you would only get 40%–80p of the £2 in cashback.
For most of the stores, the best rates were only available for certain products. Give or Take, which gives users the choice of donating the cashback to charity, gave an 8% cashback rate on flowers and wine bought at Next, but only 2% on the line most associated with the store, clothing.
The best cashback offers for Tesco were on entertainment products with a rate of 3% at Cashback Kings. But the only discounts available for groceries were rewards of between £5 and £10 for new sign-ups to online shopping on their first purchase. Many of the rates offered by the most popular sites, Quidco and Top CashBack, were similar, but there was variance on the rate paid on DVDs bought on Play.com. Quidco had the best rate of 4%, while Top Cashback gave 3% and Cashback Kings 2%.
Amazon, the second most popular shopping website in the UK (which accounted for more than 7% of visits in December), was not listed on any of the sites though, but customers can collect Nectar points.
John Lewis does not currently use cashback sites either. Jonathon Brown, head of online selling, said: “John Lewis has a long tradition of treating all customers equally, regardless of the circumstances in which they chose to shop and cashback initiatives cannot be applied consistently across a multi-channel business.”
How to choose the right site
Considerations to bear in mind when choosing between cashback sites include how much they take in administration fees, how quickly they pay and whether they have a minimum you have to earn.
The majority of sites keep the first £5 you earn each year as an administration fee, although Top Cashback is one of the sites that does not charge a fee.
Several sites will not let you cash in your rewards until you have accumulated a certain amount, sometimes as much as £20. This means it may not be profitable to use different sites for each transaction as you never get to the threshold to claim your money. Quidco has no minimum amount, but payments will be made only after the site has received them from the retailer, and this can take up to three months.
Hagger says retailers will continue to use the sites as long as they represent value for money in terms of promotion. “Using cashback sites drives business to the retailers with little effort on their part and without having to pay too much.”
He added: “For consumers, if you are determined and regularly use the sites you will be able to bring in a little bit of extra cash, but it is not going to be life-changing amounts.”