Shop and earn at the same time
Just by using a cashback website to buy things he was getting anyway, Roland Greenstreet, from Kent, has earned over £1,000 since October. Not the hardest money he’s ever made. "I stumbled upon Quidco and now I use it for all my personal spending," says Roland, 38, who runs his own computer systems consultancy business. "My girlfriend and I bought all our Christmas presents through the site, from retailers like Debenhams. We spent about £1,000 and received £200 in cashback."
Roland also uses Quidco for his business spending. "We used a company called UK2 for hosting our website, which paid 25% cashback, and companies like Viking Direct for office supplies," he adds. Roland’s impressive cashback earnings have built up from around 150 transactions. "I shop online anyway, so it makes sense to earn cashback where possible."
Many sites like Quidco combine with popular retailers to refund online shoppers a fraction of the price for goods and services. With online shopping bursting through the £40 billion barrier in 2007 and set to quadruple to £162 billion by 2020, according to YouGov, cashback sites that earn you money from simply buying online are growing fast.
Moneywise decided to investigate what these sites offer – and whether you really can get paid to shop.
How they work
Cashback websites have been around for about five years and there are now about 20 in the UK. Popular sites include Greasypalm, Mrs Cashback, Quidco, Rpoints, Freefivers and Topcashback. Each works in a slightly different way, but they are all based on the same concept - they are essentially advertising sites and list hundreds of retailers and product providers in categories, such as electricals, fashion, finance and travel. When you click through to a retailer’s website to purchase something, whether a TV, home insurance or mobile phone, it pays the cashback site a lead fee for generating your business - the same way that many other adverts on the internet work.
Cashback sites require you to open an account and log in each time you visit, in order to track your movements so that some or all of the payment they receive from retailers can be paid back to you. "At first, many consumers are sceptical and assume there must be a catch," says Paul Nikkel, founder of Quidco. "But once people understand how it works and try it out, they realise we are genuinely giving something back to the consumer."
Show me the money
The amount of cashback on offer varies between retailers and product providers, and the sites themselves. At Quidco, for example, purchasing from Apple will give you 3% cashback, while buying from Millets will earn you 8%. Of course, the real value of the cashback depends on how much you spend. Purchasing the new Apple MacBook Air through Quidco for £1,199 would give you £35.97 cashback, while buying an £80 tent from Millets would earn you £6.40.
Individually, some cashback earnings don’t seem like much, but they can build up, depending on how often you shop online and how much you spend. "We see people who buy all their furniture and financial products online and rack up a few hundred pounds in a month," says Mike Tomkins, director of Topcashback. "The earning potential for cashback depends on your shopping habits."
Financial products appear to offer the most impressive returns. David Lane, 38, from Dewsbury in Yorkshire, shopped around for his home insurance and found that Barclays offered the best deal. "I purchased it through Quidco and received £125 cashback, which was genuine free money because I knew I already had the cheapest deal," says David, a senior lecturer in marketing at Leeds
But don't be hoodwinked into thinking that cashback on a product or service means you’ve got the cheapest or best deal for you. Buying products you would not otherwise buy, just to get cashback, is a quick way to lose money, not make it. The real savings come if, like Roland and David, you buy products you would otherwise buy directly from a retailer’s or product provider’s website.
Shop around first, as you would for any purchase, using price comparison sites and shopbots, like Kelkoo or Pricerunner, to find the cheapest deal, before factoring in the potential savings from purchasing through a cashback site. With financial services, such as insurance or savings accounts, it’s especially important to establish your requirements to ensure you don’t sign up to an unsuitable deal just to get cashback.
The cost of cash
While some sites are free to join and pay you 100% of the cashback, others charge either a fee to join or an annual fee, or pay just a portion of the cashback and keep a slice for themselves. Topcashback appears to offer the best service as it’s completely free and claims to pay 100% of the cashback earned on each purchase. "We aim to pass the full savings onto our customers," says Mike Tomkins. "The site just earns revenue from sponsored advertising."
Quidco, which is a co-operative, also aims to pay 100% of the cashback earned by customers, but takes the first £5 from your cashback each year. "This is our primary income, but if you don’t earn any cashback you don’t pay the fee," says Nikkel.
With Mrs Cashback, it’s free to join as a standard member, but you’ll only receive around half of the cashback available. To receive 100% you need to upgrade to its gold membership, which costs £29.95 a year. This is a big commitment, especially if you’re new to the whole concept and just want to try it out.
The ease and speed with which you can actually get your cash also varies. At Mrs Cashback you need to build up £30 of cashback before you can access your money, and it deducts a £3 administration fee for the cheque it sends when you request the money.
Other sites pay out automatically, every month or when you reach a certain limit, while Topcashback allows you to access your money as soon as the retailer pays and will pay you without charge via PayPal or BACS. Some sites, such as Rpoints, pay your cashback in points, and you can either cash in your points - 100 points equals £1 - or use them to buy discount goods or vouchers.
How soon you receive your money can also depend on what you buy and where you buy from. Topcashback rates each retailer on the speed and reliability of paying cashback and gives an opportunity for users to leave feedback. Alliance & Leicester, for example, takes an average 10 weeks and six days to pay out, while Comet pays out in about four weeks. "Pay-out times tend to be pretty much the same across the all the sites," adds Tomkins.
While it can be tempting to sign up to bank accounts or take out credit cards with no intention of using them, just to receive cashback, Martin Lewis, founder of Moneysavingexpert.com, warns against this. "These applications can diminish your credit score, and cashback sites have their own rules and may ban you if they think you’re abusing the scheme," he says.
So, providing you play the game and shop around to find the best deal, cashback sites do pay you for buying online. The earning potential depends on how much you spend and how often you shop online. But as more of us shun the high street for the comfort of shopping from home, cashback sites could be a handy source of free money for some time to come.
|Membership fee||£5 annual fee||Free||Free||Free||
|Sign-up bonus||Not offered||Not offered||£5||£2.50||£10 (Standard)|
|Referal bonus||Not offered||Not offered||£5||£7||10% of your friend's cashback|
|Cheque (free)||Cheque (£3)|
|Notes: * Standard cashback is around half of what the Gold membership offers. Figures correct at 17/01/08|
Your credit score is a three-digit number (ranging from a low of 300 to a high of 850) calculated from the information in your credit report. Your credit score enables lenders to determine how much of a credit risk you are. Basically, a low credit score indicates you present a higher risk of defaulting on your debt obligations than someone with a high score. If you have a low credit score, any products you successfully apply for will carry a higher rate of interest commensurate with this risk.
Rather than shopping online directly with a retailer, if you go to the retailer via a cashback website (you have to register as a member), when you make a purchase the cashback site gets a commission and rebates some – or all – of this back to you. The cash being paid back to you will vary wildly from site to site and even from product to product, so check you’re getting the best deal before you buy.
Created in 1968, BACS is a not-for-profit industry body, owned by 16 of the leading banks and building societies in the UK and Europe. All direct debits, standing orders, credit card payments, personal loans and the vast majority of salary cheques are processed through BACS. In 2010, 5.7 billion UK payments with a total value of £4.06 trillion were processed through the system.