Cashback sites started in 2005, with the aim of rewarding customers with cash for shopping through their website. They’re fairly popular, and many people claim to make hundreds of pounds a year by using cashback sites. So, should you start using cashback to earn money on your shopping?

How does cashback work?

Cashback sites work by charging a retailer a small fee for directing you, as the customer, to their website. It’s the same way that loan comparison sites are able to compare your credit options for free: when you select a lender from the search results on a comparison website, the lender pays the comparison website for your click. The principle is used widely so that customers can access services for free, or in the case of cashback websites, can actually receive money back. The retailer pays the cashback site who then splits the profits with you.

Because cashback sites work by following your online journey, it’s important to make sure you shop using the links on the cashback website, and regularly clear your cookies so the pathway is determinable by the retailer. If they can’t confirm that you’ve come through the cashback website, they won’t pay the website and you won’t get your reward.

What are the benefits of cashback sites?

Obviously, the main advantage of cashback sites is that you save money on your purchase. While you still pay full-price for the items in your online shopping cart, you later receive a percentage of the order value as a cash amount. This can help keep the costs of your regular shopping low and can make mundane tasks (like shopping for toiletries and work clothes) a little more rewarding.

You may choose to save the cash you receive back on purchases into a separate account, so instead of using unsecured loans or credit cards to fund emergency expenses, you can use the savings you’ve built instead. Saving money this way also means you don’t necessarily notice the money missing from your usual budget as it’s only money you would have spent on that purchase anyway. Just make sure you’re not spending more than you usually would because of the cashback.

Part of keeping a balanced budget is practising different financial habits from time to time. Cashback might work really well for you, but that doesn’t mean there aren’t other ways to save money – even on a tight budget – that wouldn’t be more effective in your circumstances.

Things to look out for when using cashback sites

Discount codes and vouchers

While cashback sites can mean you earn monetary rewards on your everyday purchases, they’re not always the cheapest way to buy your shopping. Cashback rewards often rely on you paying full prices for all of the items in your cart, so if you have a discount code or a voucher, these can become invalidated by claiming cashback and you could end up losing out on a bigger discount. For example, if you receive 5% cashback on a purchase, but have a discount code for 20% off, then you would save more money by using the discount code. You would need to check the terms and conditions of each promotional code versus cashback, but generally you cannot use both on the same purchase.

Subscription costs

You also need to check whether the cashback site you intend to use will actually save you money in the long run. Some cashback reward sites require you to pay a monthly subscription: if you have a big disposable income and already spend a large portion of it online shopping, then you might find you still save money by using cashback sites. However, if you only use online shopping from time to time, then you might struggle to benefit from the reward if you’re using a fee-charging service. Most cashback sites do offer a basic membership for free, so make sure you’re subscribed to the right level to avoid paying unnecessary costs.

Ultimately, we all want to get a little more bang for our buck – this is truer than ever with bills seemingly rising in every corner at the moment. Cashback sites are an easy way to generate a little extra cash on your normal shopping, provided you’re relatively savvy and patient. You need to ensure a cashback transaction is executed properly, otherwise you won’t get any rewards for the purchase. Plus, it’s important to note that it can take a couple of months for the order to be verified and for funds to reach your bank account. Some cashback credit cards only pay out the rewards once a year! You also need to make sure you aren’t paying for the service if a free version is sufficient for your needs. Cashback is a great way to reduce your overall spending, as long as you put a little effort into setting it up and tracking your rewards!