Cashback on mobile phones explained

Using cashback sites is a great way of making savings on items or services that you buy everyday.  So how do they work, how much can you save and is there a catch?

Which sites are out there?

A number of cashback sites have grown up in the last few years, the largest of which are Quidco, Topcashback and Rpoints.  All of the cashback sites have different relationships, so as long as it is free to sign up it's worth using a couple to have a wider coverage of the online retailers giving cashback.

How do they work?

Although the majority of websites are free to access and use, websites owners often earn revenue from referring their visitors on to other websites and online retailers.  They do this by including a tracking code in the link that you click on to leave their site, known as an 'affiliate link'.   Then, if you buy anything from the site you've been sent to, the referring site earns a commission from the retailer.  unsecured loans

For example, if you see a Nike link on a website and you click through on it, chance are, when you buy a pair of trainers on the Nike website, the last site you visited beforehand will receive a percentage of the price of your trainers in commission from Nike, as a thank you for the business.  This does not cost you any more, it is just an agreement between the affiliate and the retailer.

Cashback sites are essentially a huge collection of these affiliate links.  The difference is that they pass 100% of the commission that they earn back to you, the customer.  Most of these sites are free to sign up to as well, meaning that there is no upfront risk for you.

How much can you make?  

That all depends on what you buy and how much you spend!  Obviously you want to avoid buying things that you wouldn't have bought without the promise of getting money back - it's not a bargain if you spent 30 GBP more on a jacket just to get the 5 GBP cashback. 

Quidco claims an average annual cashback haul of 262.36 GBP per member.  With Topcashback.co.uk, in addition to earning money back on purchases you can also earn 1 GBP a time for referring your friends to the site.  If you want to do something good with the money you save, you have the option to donate to charity.

So how do they make their money?

With a few exceptions, cashback sites tend not to use banner advertising on their sites, and instead will take the first 5 GBP that you earn as an 'administration fee' for the running of your account for the year.  This means that there are no costs for you upfront, although it does mean you need to commit to the site for several purchases in order to see a return.

What products can you make savings on?

The products and services on offer range from travel, to financial services and online gambling. The cashback is offered in one of two ways; as a percentage of the cost of the item or service, or as a set amount.   For example, Quidco offers up to 150 GBP for Vodafone contract phones, and at Tesco, 10% cashback on clothes.  Dell offers 25 GBP cashback at Rpoints.  Topcashback.co.uk would get you 21 GBP cashback on AA Breakdown cover.   bad credit loans

If you know that you need to purchase something anyway, it's worth having a look through the cashback sites to see whether any of them have a relationship with that retailer.  After all, the retailer wants your business and the cashback site wants new members, so there is nothing wrong with using both services to shop around for the best deal.

Cashback in 'real life'
As the number of consumers using cashback sites increases, the buying power of these sites also grows.  This means that many more shops and services could soon be signed up, and that you've got even more opportunity to save.   Although the majority of retailers only offer cashback online, there are some, including that allow you to register your credit card and generate cashback in store.

You can also use a cashback credit card for purchases both online and in person, giving you an additional way of receiving money off the store price.  Just remember that if you're going to use a cashback credit card to save, it's important to pay off the balance in full each month because otherwise the hefty credit card fees will quickly negate any saving you make.

What's the catch?

You'll probably not get a great cashback rate on popular items, because the retailer knows that these items are likely to sell well anyway.  On the other hand, if the cashback amount seems a bit too good to be true, it's likely that you'll be able to find a cheaper product elsewhere - this is particularly true of financial products.  unsecured loans

Payments are only made when the cashback site has been paid by the retailer, so it could take up to 3 months for this to happen. You cannot usually cash in the money you've made back up to a certain amount, often 20 GBP.  Therefore, you shouldn't consider a cashback site as a quick way of making money, but rather a convenient saving on goods and services that you would have bought anyway.