How to cash in on cashback
When something seems too good to be true, Moneywise would normally recommend you trust your gut instinct and steer clear. But with cashback, you really can get money for nothing.
It’s easy to be confused by the term ‘cashback’. For years, it meant (and still does) asking the supermarket cashier to add money to your checkout total in exchange for some notes. But, gradually, over the past few years it has become the smart shopper’s trick to get more for less.
You can shop online and get money back. You can pay by credit cards and get money back. You can pay your bills and – you guessed it – get money back. It’s not without pitfalls, but learn how the different systems work and you could find yourself hundreds of pounds better off each year.
The leading way to get cashback, and probably the most profitable, is through a cashback website that pays you to shop. Rather than heading directly to an online retailer, going via cashback middlemen can net you a tidy return.
To get your money, you search within these specialist websites for the retailer you’re after. The cashback rate will be displayed, usually as a percentage. You then click to be redirected to the online shop. Then simply buy as normal, and a few months down the line your cashback account will be credited with the money.
Quidco and TopCashback are the leading cashback websites with 6.5 million and 7 million users respectively. Both say their members receive an average annual return of around £320.
There are a lot of brands signed up to these sites. TopCashback is the largest with 4,700, and Quidco is only slightly behind with 4,500. You can shop with most big retailers, though some notable exceptions include John Lewis and Amazon.
You can enhance your cashback if you choose to receive gift vouchers or digital codes (an electronic gift voucher) instead of money.
Surely there’s a catch? TV presenter Kate Thornton felt the same until she really looked into it. “I had always thought cashback must come with some kind of catch until I started to research it and my mind went into overdrive!” she says. “I reviewed what I had spent online for the month and realised I could have had money back on about 95% of what I bought – a total no-brainer.”
Her response was to set up TBSeen, a challenger cashback website offering a slightly different experience. The site is aimed at women, and Ms Thornton says it has been “curated to bring... carefully selected brands while also offering a lifestyle experience”. This approach does mean there are fewer retailers on the site – just over 500.
All three cashback sites are free to use, though both Quidco and TopCashback have premium top-ups you can opt into for a small fee. So where does the money come from? There is no magic involved. It all comes direct from the retailers, which see it as a type of advertising spending.
Cathal Wogan, head of communications at Quidco, explains: “When our members buy from a brand through our links, that company pays us for referring you to them. That’s where your cashback comes from – we give you back 100% of that referral fee on every transaction you make.” The sites themselves then make money from retailer bonuses or additional advertising.
Our research into five popular retailers (see table below) showed little difference between TopCashback and Quidco, which both promise to pay 100% of commission to the user. TBSeen tended to offer less money back, especially on the BT Broadband.
Some retailers are also only on one platform – for example, eBay can only be claimed via TopCashback, while Quidco didn’t have cashback for existing Waitrose customers.
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However, all three cashback websites run special promotions with retailers that temporarily lift the cashback amount, so each could be the best bet depending on the timing. The only way to really know which is best for you is to compare the rates each time you shop.
What to watch out for
Sadly, receiving cashback on purchases can be complicated. There are a few rules to follow to ensure you get your cashback, with ‘tracking’ the most common issue. Transactions made online are tracked by third party organisations called affi liate networks, which do so using cookies (small pieces of data dropped by a website into a user’s browser).
Adam Bullock, a director at TopCashback, explains: “Cashback usually tracks with no problem, but there are certain things that can upset the system. Members should not click to any other sites before making their purchase. They should also check their computer is set up to record cookies in their internet browser and clear their cookies.”
There also might be a problem with using voucher codes that you find elsewhere on the net that aren’t listed on the cashback site.
Get any of these wrong and there’s a good chance you’ll miss out on the money. Plus some retailers don’t pay cashback on the VAT amount of your purchase.
If that could be an issue, then only buy something you can afford without the saving. But get it right and you should see a fair amount of money coming back to you.
Four more ways to get cashback
1. Cashback on your credit and debit cards
One of the easiest ways to earn cashback is through specialist credit cards. Each time you pay, you can earn up to 1% on each full pound spent. But that cash is wiped out if you don’t pay off the money you borrowed in full each month.
The American Express Platinum Cashback Everyday Card has an introductory offer of 5% cashback on spending up to £100 for the first three months. After that, cardholders will earn 1% cashback on spending over £5,001 and 0.5% if you spend below this amount. You’ll need to bear in mind that American Express is less widely accepted than other types of credit card. You can view the best credit cards for rewards and cashback on our best buy page, which are updated every week.
Some current accounts also give you money back on debit card purchases.
New customers with TSB’s Classic Plus current account can earn £5 cashback every month for having two direct debits, plus another £5 cashback if you spend with your debit card 20 times a month. This cashback offer ends 30 June 2018.
The Co-operative Bank Current Account offers up to £5.50 a month in cashback, but you must have four active direct debits each month.
Wherever you bank, it’s worth checking your online banking for additional cashback promotions you can ‘activate’ for one off bonuses.
2. Cashback on your bills
You can get up to 3% back on your council tax, and most phone, energy and TV direct debits with both the Santander 123 and NatWest Reward accounts (although the NatWest cashback will fall to 2% from 26 June for new and existing customers).
There is a monthly fee, so it’s worth adding up the expected refund to check it more than covers the cost. Do check your supplier is listed.
3. Cashback on your supermarket shop
Fancy 30p off your milk? How about a free box of a fancy new cereal? If you download apps such as CheckoutSmart, Green Jinn, TopCashback and Shopmium, you’ll see dozens of offers such as these to use when you visit the supermarket.
Unlike the other cashback methods, here you claim the money back after purchasing. With most you need to scan the product you’ve purchased and then upload a photo of the receipt. It can be a little fiddly, but you soon get used to it.
However, watch out for minimum payouts on some apps which restrict when you can claim the money.
4. Cashback when you switch energy
You know the switching drill already, but what you might not have realised is you can often maximise your savings by using comparison sites that also offer cashback.
The top pick is Cheap Energy Club from Money Saving Expert which offers £30 back on most dual fuel moves.
How cashback earned me £1,000 in 12 months
Andy Webb (above) tells us his story: My biggest earner was broadband. I claimed £110 for moving to BT with Quidco, and that’s on top of the £200 voucher any new customer got. My other clicks to shopping sites such as Argos, Gap and White Company added another £115.
With TopCashback, I pulled in £318.30. A big chunk of that is down to holidays with flight operators, hotels and airport parking companies all offering money back. I was also able to boost my return when switching bank and mobile phone provider.
Whenever I could, I’ve also used one of my cashback debit or credit cards for spending. I earned £18.68 in six months on my TSB credit card, £35.40 on my TSB current account and £317.57 on my American Express – £200 of which was from add-on offers for spending with places such as Eurostar, Jessops and Amazon.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
Also known as discount codes, promotional vouchers or promotional codes, online coupons or discount vouchers, are codes that can be entered at the checkout of many online UK retailers that gives you a discount against the item/s you are purchasing. The codes are generated by retailers and sent to certain members of the public to encourage sales.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
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.