Cashback: what is it, how can you get it and why do you want it?
Cashback comes in many forms, but is basically money back on shopping and services from either your credit card provider or bank, or from your preferred cashback site — but more on that later. This guide will tell you all about cashback, how you can get some, and why it is a reward worth trying.
What is cashback?
You can earn cashback in the UK in a number of ways, from cashback credit and debit cards to shopping online. Ultimately it is a way of making some money back from purchases.
When you make a purchase with a cashback credit card, your card provider will give you a small percentage of the purchase cost back to you as a reward. Think of it as an incentive to use a particular card to buy fuel, pay bills, or just everyday shopping.
Cashback sites are different, as they work with stores and service providers to give you cashback via a commercial agreement with the retailers. Basically, when you buy something through a cashback site, the cashback sites give retailers and service providers valuable information — like your spending habits, personal information, etc. — for which they are paid, which the cashback site then gives back to you.
How does cashback work?
It all comes down to commission, for both cashback bank cards and cashback websites like Quidco or TopCashback.
Simply put, when you purchase something on a credit card, the merchant pays a small percentage of the transaction to the card provider, which they can then give back to you. Most cards offer a flat rate of between 1% and 5% for purchases made with a particular card.
However, they will probably also have a limit on how much you can make back at a high rate. A cashback cap of £150 for the first at 5%, for example, which then goes down to 1% thereafter.
Cashback deals sites work slightly differently, in that retailers pay the cashback sites when you make a purchase through the site. The retailers are basically paying for information, like your shopping habits and browsing history.
Cashback sites and apps use affiliate links which track your movements online using small files called cookies. When you make a purchase, it is tracked, and the cashback website gets paid a commission, some of which is then forwarded on to you.
Cashback credit cards
As mentioned above, cashback credit and debit cards are a way for banks and card providers to ensure that you use their cards to make purchases, either online or instore.
Money they get back from retailers and service providers for the transactions allows them to give money or points back to you as a reward.
This is great, but it cannot be seen as free money as you need to spend money to gain a small percentage back. And often, if you don’t pay your credit card back in full each month, the cashback will not amount to much compared to the interest you are paying on the purchase.
Most banks and card providers will offer a cashback card, so it is worth looking around to find the best one to suit your needs.
This has been covered in detail in the cashback site guide, but in a nutshell cashback websites like Quidco or TopCashback in the UK offer money back on purchases when you purchase things via their website rather than directly with the merchant.
This is because, as mentioned above, the cashback site has an arrangement in place which utilises tracking links so the retailer gains essential business information, like spending patterns and consumer trends, along with your personal details.
The cashback site is paid a commission, of which a certain percentage is given back to you as a cashback discount.
What are the different ways of making cashback?
The most obvious way of making a bit of cashback is from shopping online, using sites like Quidco and TopCashback, among others. Each purchase is tracked via an affiliate link and then when your purchase is confirmed by the retailer, the cashback site gives you the commission it earnt for your visit.
Buying washing machines and other white goods is always a sure fire win, as are electronics like TVs and computers - due to their high value nature. Summer holidays are also good earners, for the same reason.
Switching providers (energy, mobile, insurance, and so on)
When you want to earn some serious cashback, then you need to look further than mere purchases and look to contracts for services.
It is best to find the cheapest quotes first, perhaps via a comparison site (or two) and then search again through the cashback site, to see if they offer the same deals with the cashback on top.
It isn’t a good idea to be led by the cashback if you can find it cheaper elsewhere without the bonus cashback.
That said, you can earn hundreds of pounds through new broadband or phone contracts, by switching energy providers, even by signing up to an insurance policy — car, home, life, or travel — they all offer the chance of decent cashback when you go through the correct cashback site.
Credit cards and bank accounts
When shopping for anything online, you can earn cashback by paying with a cashback credit card or even current account, depending on who you bank with.
Paying for goods with a credit card will offer a cash back percentage of what you spend on it, often with the proviso that you must pay off your balance in full at the end of the month.
The bonus here is that you don’t need to go through a specific cashback site, the card provider tracks the cashback for you.
Surveys, comparisons and competitions
These ones are not big money makers, but will stack up over time and are very easy to complete. You can just sign up for things too, or compare deals to make cashback, both Quidco, TopCashback and SwagBucks offer ways of making “free” cashback.
Filling in surveys is simple, and you can earn gift cards, vouchers and cold hard cash during a break at work or on the commute home. As John Connor said at the start of Terminator 2: Judgement Day — “easy money”.
You can trade in your old laptops, phones, computers, appliances, and so on, for either cash or a gift voucher to use in specific stores. A lot of stores even take damaged and non-working devices off your hands, albeit for less cashback, because they may be able to refurbish them.
Obviously, reputable stores will wipe all devices and reset them to factory settings (a government standard) so you don’t need to worry about any risqué photos popping up on the internet.
Cashback deals on mobile phones
Often, mobile phone stores will offer cashback for signing up to a contract, with money back at certain points - as a reward for keeping the contract going.
Phone cashback normally comes in two forms, automatic and manual. Automatic cash back is normally paid back to you using your billing details within a set period, usually 90 days into the contract. This is managed by the seller, and not the mobile network.
Manual redemption usually involves submitting digital or even physical copies of your bills to the cashback provider in set increments over the term of the contract. The schedule varies by seller and is dependent on the term of your contract (12 months,18 months, etc.).
Therefore, it is always recommended to double check the agreed schedule, and set reminders for yourself accordingly, as missing a payment claim could invalidate any future claims. This is a bit of a grey area as the cashback provider could go bust, or just refute your claims altogether, leaving you with an expensive contract.
How do cashbacks work?
Think of it as a bonus or an additional discount, whereby the cashback card provider or cashback site gets a commission from the retailer, which it can then give back to you as cash or a voucher.
Try not to be influenced by the cashback as you may be able to find a better deal without the cashback.
Can you get cashback with contactless?
With a contactless credit or debit card, yes, but not through a cashback site app. Contactless transactions pay similar rates to the card provider, so the card provider can still give you cashback on purchases made with certain cards.
Is cashback taxable?
No, because the commission arrangement is between the card provider/cashback site and the retailer, so just think of it as a cashback discount for you. You don’t need to pay tax on it because you’ve already paid tax on the purchase.
Can I get cashback with Apple Pay?
Not in the UK at the moment, as paying through your iPhone or Apple Watch uses tokenization to make the transaction more secure for your card provider/bank. This means the transactions are not actually through your card provider but through Apple, which lends you the money for a very short period, then asks the bank to repay - this happens almost instantly, but because the cashback card isn’t technically used, there can’t be any cashback awarded.
Which shops do cashback?
There are many shops and stores that offer cash back, too many to list on here, so better to check on the cashback website or app directly. Quidco has a long list, as does TopCashback - in the thousands.