Get cash back when you spend money

The Momentum UK Team 3 January 2014

Here we take a look at cashback credit cards and their distant, and very different cousins, cashback sites, to help you get to grips with the pros and cons of the money-back breed of discount:

Cashback cards:

There’s a handful of credit cards that currently offer cashback on purchases as an incentive. These cashback cards typically offer anything between 0.25% and 5% cashback on your purchases. When you buy something with a cashback card, the card provider gets paid a commision. Some of this commission is then passed on to the card-holder as a percentage of what they’ve spent that month. Each card is different, and some have different cashback rates for different purchases, or only offer a rate of cashback for a fixed period.

These cashback cards offer money-back for certain types of day-to-day spending- if you’re responsible with them they can sometimes provide a nifty way of making something back when you spend, but as with all financial products you should read the terms and conditions thoroughly before you take one out.

There are some things to bear in mind with cashback credit cards:

  • The cashback is usually reimbursed yearly
  • The interest rate on cashback credit cards tends to be higher than on other credit cards and if you don’t pay off the full amount each month you could face heavy charges
  • If you leave money outstanding each month, the interest owed could easily outweigh the cashback benefit of the card
  • Cash withdrawals will usually come at a cost too
  • Some cashback cards have an additional annual fee
  • There is usually a limit on the amount of money cashback can be redeemed on each month or across a fixed period of time
  • The initial cashback rate is often an introductory offer and goes down to a lower rate after the first few months

It’s important to bear in mind all the pros and cons before committing to a cashback card, and if you don’t pay off the balance each month, or the annual fee is high, and you don’t plan on regularly using the card, then this type of card could cost you more than the cashback you’ll earn. Each card is different, so it’s important to make sure you consider all the small print.

Cashback sites:

Cashback sites work in a very different way to cashback credit cards, but the principle of claiming to offer you the opportunity to earn while you spend- the cashback element is similar.

When you buy a specific product through a cashback site they will typically reimburse you with a cash ‘reward’ at a later date. Although it can take several months for this cash to be approved, and for you to be able to put it in your bank account, in effect they offer money back on the product price.

Examples of cashback sites include TopCashback, and Quidco which claims to have up to 3.5 million Brits signed up. Cashback sites receive a commision for making a sale, which they then share with the customer. Cashback sites typically offer between 1% and 10% cashback on certain products.

Such sites also often offer cashback for other activities, including filling out surveys or for checking into shops using a specific app. Some sites also offer cashback on your online grocery shopping, and even in person, if you upload a copy of your receipt within 7 days.

There are some things to watch out for with cashback sites, including:

  • Minimum payment thresholds- in order to get the cashback, sites usually have a minimum amount you have to have ‘earn’ first, which can be as much as £20
  • Compulsory charges- some sites charge an annual fee, taken from your cashback earnings, usually if you don’t receive any cashback then you don’t receive a charge
  • Timing- it can take as long as six months to have the money deposited in your account
  • Expired offers- make sure the offer is still valid at your time of purchase
  • Payment method- whether it’s Paypal or via your bank account, the method the sites use to give the cashback will vary
  • Beware of scams- make sure you are visiting a genuine cashback site before entering any payment details
  • Cookies- if you visit various cashback sites then you could confuse your browser, so make sure you clear your cookies before selecting an offer from a cashback site
  • Problems- sometimes cashback offers aren’t approved, and these sites can have limited customer service, so it can be difficult to get in touch with them if this does happen

When using cashback sites, it’s also important that you take into account the overall cost of products you’re buying, and make sure you don’t just focus on the cashback itself, as the deals offered aren’t always the best out there.

Although there are a string of potential problems with cashback sites, a savvy shopper can still save money if they consider each offer carefully.