Understanding Cashback deals and terminology

For those new to the concept of cash back websites, then understandably they may seem a little bit confusing to begin with. Essentially cash back sites are a step-up from ‘Price Comparison websites’ which literally search the internet for you and provide those retailers with the best value-for-money offers on the particular product you’re searching for. One thing to be wary of with price comparison sites is that they earn their revenue from retail marketing, i.e., the retailer pays the website to list its brand alongside the other competitors – depending on the quality of the site, there are few regulations to vet the content so be sure to shop around to ensure you are getting the best deals available.

Cashback sites - the key difference
The cash back sites are also a form of advertising for retailers but differ in that they return a large proportion of their commission back to the customer as an incentive to make more purchases and build up credit. A member of a cash back website is by no means restricted to one retailer and can build up cash back over a number of purchases from a wide variety of retailers. Cashback Club for example, links to over a thousand retailers.

Getting to grips with the website’s terminology should be relatively simple; it will clearly list what the discount or proportion of cash back available is next to the name of the retailer, along with the conditions of any purchases made. For example, a travel insurance company might offer up to 7.5% cash back, but the customer should also look at any conditions that may apply to this – further inspection will clarify that the application needs to be completed wholly on line for this to apply built there are no catches, all travel insurance comes with 7.5% cash back when booked through the cashback website.

Theoretically it tends to be the more finance-related items that offer the best cash back deals, but likewise appear to be more complex in how they work. It is important not to feel overwhelmed by numbers, particularly for those not too confident with their maths – it really is easy once you try. With credit cards for example, the flat rate issued on the cashback website usually refers to the amount of cash back the member will receive simply by completing a successful application for the credit card online, and the ‘APR’ numbers and levels of interest simply refer to the percentage of the total balance on a card that will be added as interest by the credit card provider.

It is important to remember that some retailers will try to make a package sound as attractive as possible by offering low charges and high rewards early on, but once committed, the customer may find these competitive deals reverting to a less-attractive deal, so be sure to read the small print. The Cashback Club gives a general breakdown of how long the competitive rates will last so members could consider this as a general guide as they shop.

Building cashback value
Cash back that is redeemed from a percentage of the customer’s total spend tends to be worthwhile specifically in the cases where the purchase price is likely to be higher. For those everyday items that generally cost less such as DVD’s or books, then a percentage redeemed to the customer won’t necessarily be as great as a one-off cash back payment or ‘flat rate’, but they are still value-for-money and worth doing if they are items that are bought frequently so that the cash back starts to build.

Some sites will ask that a customer places a specific ‘code’ into their payment details when making a purchase from the retailer’s website. For example, a large supermarket chain offers deals on Mother’s Day Gifts and requests that the on-line customer enters the code ‘mum’ when making their purchase. These codes are essentially the key to unlocking a greater discount exclusively for the cash back website members as a bid to compete against other retailers who might also be advertising on the internet.

Referral Earnings may sound a little complicated but is actually very simple to understand. Though not all cash back websites have this, some have an added incentive for existing members in the form of an added cash back bonus for every family member or friend that they introduce to the cash back website. Cashback Club offers £5 cash to every member when their friend qualifies for their first cash back payment. There is no limit the number of friends that can be introduced so as long as they become active members, the rewards can be high simply for the person who introduced them.

Cashback payments
Payments of cash back can vary from site to site but the common practise is for a cash back website to initiate a specific period of time in which the member collects a number of points or pounds and then redeems (cash in) in one go. Some websites prefer to establish a three month period in which the customer’s cash back is stored and added up and then released after this time. One of the main reasons for this is that the retailers may have quarterly turnovers when they release their commission to the cash back website i.e. the cash back site needs to wait up to a maximum of three months before they get the commission back from the retailer so can’t forward on the money to the customer until then. The other option is for a cash back site to establish a threshold of, say, £20 or £50 and when the customer’s cash back credit hits this mark, the customer can claim this in one lump sum.

When earnings have reached a set amount or come to the agreed time period set, the customer can request payment directly from the cash back website. Payment is usually made in the form of a BACS payment: ‘Banks Automated Clearing System’, which is a simple electronic transfer, ideal for making regular automated payments to repeat customers. Some cash back websites also offer the option of being paid in gift vouchers which are sent via e-mail to the customer and include a code of numbers and letters which, when entered onto certain online stores, can make even bigger savings.

Whilst there are clearly a few technical terms to digest, cash back websites are essentially designed to help shoppers find the right packages to suit them with an added bonus of discounts and cash back. Though they can offer a general breakdown of retailers, every customer will have different needs so members should be mindful of making commitments.

Filed under: Cashback Guides