How to earn money as you shop
Getting paid for shopping might sound like your dream job, but actually it’s relatively easy to earn money on items you were planning to buy anyway. When it comes to making big purchases, such as a holiday or new furniture, or your regular food and petrol shop, it makes sense to see if you could earn something back at the same time.
There are two main ways you can earn when spending; by paying with a cashback credit card or by buying via a cashback website.
In this article, Moneywise looks at the pros and cons of both options, and explains how you really can get paid for shopping.
Cashback credit cards
Using a cashback credit card couldn’t be easier – all you need to do is use it for purchases, and you’ll earn a percentage of what you've spent back as cash. So, spend £100 on a 1% cashback card and you'll be credited with a pound back.
While the earning potential may not sound that impressive, think about how much you spend on a weekly basis – when you take into account filling up your car, getting groceries in for the week, and the odd splurge on a new item for your wardrobe or the latest gadget, it can all add up.
Plus your spending will vary throughout the year.
According to research from Asda, the average family will spend £500 at Christmas on food and presents, but for many people this seasonal spend will be a lot higher. Then there are birthdays to consider, your annual holiday and big-ticket purchases such as a new TV or washing machine.
The first trick to making money from a cashback credit card is to use the cashback credit card for every purchase you make – within reason of course. The extra benefit of doing this is that all purchases you make between £100 and £3,000 will be covered by section 75 of the Consumer Credit Act – which means your card issuer is equally liable alongside the retailer if something goes wrong with your purchase.
The second trick is to make sure you are diligent and pay off your bill in full each month. If you don’t, then you’ll be hit with interest charges, which will cancel out any money you may have made.
The third – and, arguably, most important trick – is to make sure you choose the right cashback credit card for you. For a start, the earning potential can vary from deal to deal and many cards have a cap on how much you can potentially earn.
You should also consider how long the interest-free period is – the longer the better as this will give you time to pay your bill before interest kicks in.
A good way to make sure you don’t miss your payment date and end up paying interest is to set up a direct debit. This will ensure your gains are yours to keep, and aren’t eroded by interest charges. If you don’t know how much your monthly spend will be, then ask your bank whether it offers a ‘pay in full’ option.
Remember, it is never a good idea to withdraw cash using a credit card; even if you intend to pay off the bill straight away, you will still have to pay interest the moment the money leaves the cashpoint.
Many people claim that just by using a cashback website to buy things they were getting anyway, they have earned thousands of pounds.
Cashback sites link up with popular retailers to refund online shoppers a fraction of the price for goods and services. With online shopping set to hit £162 billion a year by 2020, according to YouGov, cashback sites that earn you money simply by buying online are growing fast.
While cashback websites do effectively offer you ‘free money’, it’s not as easy as some people make out. For a start, there are many different sites around, all offering different levels of cashback.
Then you have to take into account the fact that some sites charges membership fees and have differing payout requirements. Others will offer you the potential to earn more points if you sign up for premium membership.
Finally, you can earn extra cash by using sites that offer bonus points, or those that pay you for referring your friends and family.
When it comes to cashback websites, it’s important to understand how they work. The most popular sites – including Greasypalm, Mrs Cashback, Quidco, Rpoints, Freefivers and Topcashback – all work 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, it pays the cashback site a lead fee for generating your business.
Fee-based sites will normally pay you 100% of this money back, whereas free sites will take a slice for themselves and give you the rest.
In order to benefit, you will need to register with a site and log in each time you visit – this allows the site to track your movements so that some or all of the payment they receive from retailers can be paid back to you.
The amount of money you can earn is not only dependent on the site, but also the type of product and the retailer you buy from.
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 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.
The way a site will pay you is also worth considering – some sites will pay out once a month or when you reach a certain limit. Others allow you to access your cash as soon as you’ve earned it.
Provided 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.
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.