Click on to buy and make money

Hits on cashback shopping portals are soaring

The Observer
Sunday 27 July 2008

The notion of getting paid to shop sounds too good to be true, but as the credit crunch bites more and more people are registering with websites that offer cash back as you buy.

The likes of Quidco, Rpoints, Topcashback, GreasyPalm and Cashbackkings are among the names that have seen internet traffic soar over the past few months. But how do they work, what kind of deal is on offer, and can you really earn money while you spend?

First off, you need to sign up. Once you've done this, you use the cashback site as a portal when shopping online or signing up to insurance and banking products. If you decide to make a purchase, you click on the product you're interested in and are taken to the relevant website where your purchases are tracked. This then earns you a percentage of your purchase back in points or pounds, paid out in cash or vouchers.

Quidco celebrated its third birthday on 1 May, and in April alone recorded 360,000 transactions, a 109% increase compared with the same month last year. According to its figures, with a Quidco transaction completed every seven seconds during April, the site generated £10.7m for retailers that month.

'We collect referral commissions from online merchants and pass them on to all our members,' says Paul Nikkel, co-founder of Quidco. 'The cashback model enables the merchant to reach out to a large audience of enthusiastic, savvy shoppers and enables consumers to join an active community of like-minded shoppers - and make large savings on online purchases.'

That said, he is keen to distance the site from the notion of 'money for nothing' and to stress that it does not sell member details to any third parties. 'Members do need to spend money, but the site is about getting value for money,' he says. 'Our members are focused on chasing the best deal on their purchases.'

All the websites get commission for referring shoppers to retailers such as Currys and HMV and financial institutions such as HSBC and Nationwide. 'Once you've decided you want a particular item, it is worth checking the cashback sites to see if you can reduce the cost further,' says David Black from financial analyst Defaqto.

The amount of cash can vary and may be a percentage of your total purchase or a flat fee; most will pay out by PayPal, the online cash system, or bank transfer. Figures from consumer website MoneySavingExpert show typical payments range from 3% of the product's cost at Currys and 3% at Tesco Direct to 8% at Woolworths; take out an HSBC bank account, and you can get £50 back, rising to £80 for a home insurance policy with Nationwide. At the same time, sites such as Rpoints will pay out £5 if you can recommend a friend, while GreasyPalm will pay £7.

But Black warns consumers to watch out for the fees levied, as some have a charge which will be deducted from your cash back; Quidco, for example, requires an annual £5 fee.

'Plus, with GreasyPalm, the cash back is retained until the amount you have "earned" exceeds £25,' he says. 'Also bear in mind that tracking issues with cookies (a function on your computer to memorise which internet sites you have visited) not being stored might sometimes mean earnings will not be credited.' If this happens, you will need to contact the website and lodge an 'inquiry'.
That said, since April, Quidco members can benefit from SureShop, which pledges that in the case of missing transactions the site will have a resolution for you within 30 days.

While such websites are growing in popularity, not all financial experts are convinced. 'This is simply advertising by any other name,' says David Kuo, head of personal finance at money website 'Cashback sites are merely internet billboards that hook in customers, grab their details and direct them to preferred partners' sites. 'If you're happy to part with your personal information in exchange for a mere bagatelle, or, in some cases, a big bag of booty, cashback sites are for you. But you always need to ask if there are better deals elsewhere before clicking the "buy" button - often you will find that there are.'
Shoppers who are really savvy about getting cash back on their purchases may want to consider a cashback credit card too, as these give you a percentage of every pound you spend.

'With a cashback credit card, you can get even more cash back on the transaction,' says David Black from Defaqto. 'But you must pay your card off in full each month to ensure that you are not paying interest.'

The American Express Platinum Moneyback card, for example, offers new cardholders 5% cash back on up to £4,000 of spending during the first three months. At the end of this period its rates are tiered, paying a maximum 1.5% in cash back.

If you have a monthly spend of £1,000, you can get £247.50 back each year, according to Defaqto. Elsewhere, its figures show that the same £1,000 monthly spend would earn you £120 with the Egg Money Card.

'If you are a motorist, it's also worth noting that you can get 3% cash back on fuel purchases at Shell filling stations with the Shell MasterCard from Citibank,' says Black. 'You get this provided that you make at least one fuel purchase from a Shell station each month.'

David Lane, 38, from Dewsbury, West Yorkshire, a member of Quidco for about two years, has earned around £560 from the cashback site.

'I was not comfortable about giving out my bank details initially, and used PayPal for all my transactions,' says Lane, a senior lecturer in marketing at Leeds Metropolitan University. 'But as the payments came through, my confidence grew, and I'm now happy to have the money paid straight into my bank account.'

Quids in with Quidco

Lane now gets cash back on a range of online purchases, and recently earned £125 on his home insurance and £95 on his car insurance.

'I always shop around to find the cheapest deal first, then make the purchase through Quidco to benefit from the cash back,' he says. 'There is usually a one- or two-month wait before the money appears in my account, but I can now rely on a cash payment coming in each month; this is of far more use to me than the points and vouchers offered by some of the other sites.'

His experience has been 'generally straightforward', though he admits there have been times when large items have not 'tracked back' into his account.

'I have had to submit an inquiry on one or two occasions,' he says. 'But the vast majority of transactions have been fine, and I like the fact that these sites are putting cash back in my pocket when I buy items that I needed to buy anyway.'