Save 5% everytime you shop
In the run-up to Christmas we all end up handing over a lot of our hard-earned cash. But are you paying more than you need to? Do you know there's a way to save 5% on everything you spend?
It sounds impossible but it is totally doable if you make the most of cashback deals. There are an increasing number of ways you can earn cashback when you spend, from websites to credit cards.
Here we look at the best ways to make money as you work your way through that Christmas list.
The effortless way to earn rewards for spending is with a cashback credit card. These cards simply give you back a proportion of what you spend on them. Many offer introductory rates of around 5% for the first three months, which is very appealing with the big Christmas shop and January sales looming.
If you use your card regularly, it can be a great money-saving tool for building up rewards on your everyday spending. In addition, you can take out multiple cards for family members on the same account to increase your cashback further.
However, it's important not to base your decision on just the tempting introductory rate. In many cases, cashback payouts are capped during the introductory period and after that rates drop substantially. For example, the American Express Platinum cashback credit card offers 5% for the first three months but the rate drops to 1.25% after that and the amount you can earn is capped at £100.
"Cashback cards are becoming more popular among consumers, which in turn is being recognised by card providers. This year, there are 19 cashback credit cards on the market compared to 13 last year," says Nerys Lewis, head of credit cards at comparison site confused.com.
When picking the right one for you, Lewis advises you to first figure out where you spend your money, then choose a card that will reward you for your habits. For example, if you spend a lot on travel the Santander 123 card pays 3% cashback on petrol and rail travel, capped at £300 a month. You also get 2% when you shop in department stores and 1% on all of your supermarket shopping. The only drawback is that the account carries a £24 yearly fee.
If you are just looking for a card to help with your Christmas shopping, go for the American Express Platinum Cashback card or Capital One's Aspire World card, both of which offer a 5% introductory bonus up to £100 for the first three months.
Finally, only consider a cashback card, if you pay off your monthly bill in full and on time as these cards tend to have fairly hefty interest charges, which could wipe out any gains you made by using them.
If you don't want a new credit card, or your application isn't accepted, you can still earn cashback. Around four million people now use one of the many cashback websites that reward shoppers for spending.
"With the fierce level of competition in the market at the moment shops are increasingly looking for new ways to incentivise consumers, and as a result cashback has proved to be extremely popular," says Adam Bullock, head of operations at topcashback.co.uk.
Cashback websites work by earning a commission from retailers for directing shoppers to their websites. They then pass on a chunk of this commission to you the shopper, so you effectively get paid to shop.
You simply sign up, then hunt for what you want to buy, and if you see a cashback deal you want to take advantage of, click on it and you'll be taken to the retailer's website where your purchase will be tracked. The money will then make its way into your cashback account.
For the biggest range of retailers and deals visit the cashback behemoths that are topcashback.co.uk (3,500 retailers), quidco.com (3,300) and fatcheese.co.uk (800). These sites offer cashback at shops such as Boots and Marks & Spencer at about 5%, but you can also receive cashback on services too. For example, earn up to £217 for upgrading your Sky package at Topcashback, or £85 when you take out RAC Breakdown cover from Quidco.
Topcashback and Quidco both offer downloadable toolbars that alert you to where cashback is available. They also have mobile apps to access your account, make purchases on the go and download vouchers to use on the high street. And it's worth noting though that Quidco and Fatcheese take your first £5 of cashback every year as a fee, while Topcashback is completely free.
Finally, there is one thing to be aware of with these three websites - the money you earn back is not paid to you instantly, it can take months depending on the site you use and the retailer you are buying from.
You can also earn regular cashback on your mobile phone contract with e2save.co.uk. The site is run by Carphone Warehouse, offering the same choice of products, but more cheaply. You buy your contract or phone as usual and then receive fixed cashback payouts that reduce your monthly contract bill.
When Moneywise looked, we found a 3 Mobile deal on a Samsung Galaxy S3 with 500 minutes, 5,000 texts and unlimited data for £28 a month - £7 cheaper than the same deal on three.co.uk.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
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.
Cashback credit cards
These reward you with a small percentage of cash back on your total spend on the card, either each month or annually. Cashback cards carry high APRs and ONLY work if you pay your balance off in full every month. If you miss payments and have existing credit card debts, leave these well alone.