The pros and cons of cashback and discount sites
Cashback sites offer extra discounts on purchases of everything from fridges to car insurance: but is all as it seems?
We all love a bargain, but clipping coupons and saving Green Shield stamps used to be strictly for housewives.
Money-off vouchers were rarely seen at the tills during the credit boom before the crunch. What a difference a recession makes.
Now discount offers and the details of websites that provide them are traded like magic beans between shoppers of all ages and pockets. Better still, some specialist sites and services even provide buyers with money back deals on certain purchases.
So are we really getting something for nothing or is there a catch?
Cashback sites - the pros and cons
The idea is simple. You choose one of the many sites offering cashback and register. When you're next shopping online, you visit your favourite retailers through links on the cashback site and it then splits the commission with you when you make a purchase.
The amount of cashback varies between the site you choose what retailers are prepared to pay, but returns are typically between 1% and 10%. The commission on a couple of a CDs and a new ironing board might not be much but you could fare much better with more expensive purchases such as a holiday or electrical goods.
You can get cashback on just about anything, including financial products such as insurance policies.
Some of the sites pay the money directly into your bank account and others via PayPal. As always when dealing with money, make sure the site you join is reputable. Some sites also give you the option of having the cashback paid to charity instead.
MSN Money user Sacha, says she received just under £250 in cashback last year. But she points out that it can be addictive: "You need to make sure you're not just making purchases for the commission," she explained.
Because there are several sites to choose from and the percentages tend to vary from one product to another, it can also be hard to compare different cashback deals. Of course, some retailers are not signed up to the cashback system. These currently include John Lewis and Amazon.
When you're choosing your cashback site, consider:
- How quickly you will be paid. Some sites only pass the money on when they have been paid by the retailer and this can take up to three months.
- The amount you need to 'earn' before you can get your mitts on it. Some sites have a minimum you need to accumulate, which could be around £20.
- How much is being kept by the site. Most are free to join but keep the first £5 you earn each year as an administration fee.
Discount sites - the pros and cons
Buying online is almost always cheaper as firms save money on overheads. In recent years there has been an explosion of sites specialising in extra online discounts.
Some work in the same way as the cashback sites. You find your retailer through the discount site, but instead of cash, you get a discount on whatever you're buying. You don't usually need to register and the sites are free to use.
Specialist discount sites include Groupola, which lets groups of friends or even strangers harness collective buying power and secure discounts for theatre or spa visits.
Dangers of using the sites
It's worth remembering that discounts can come and go pretty quickly, you may discover the codes you find are out of date or don't work. But far more worrying is the new breed of sites and offers that require you to sign up and pay a monthly fee.
You probably won't even realise you're subscribing, which happens when you take up the discount. These are offered as '£x off your next purchase' when you buy online with several well-known companies including Ryanair, Interflora, Ticketmaster, TheTrainLine and Pizza Hut.
The small print says that when you click on this offer and re-enter your email address you're signing up to become a member of a shopping discount scheme with a fee. Incredibly, the money is then deducted from the card you used on the initial website.
One of the biggest companies that operates this type of scheme is Shopper Discounts & Rewards. This site is also active in the US where complaints from customers led to a report from the Senate and card issuer Visa telling the retailers it would no longer allow third parties to charge a customer's card without the card owner re-entering credit card information.
In Britain, however, there is nothing to prevent this type of third-party charge. Some retailers have pulled out of the scheme though. These include B&Q, easyJet, Expedia and Debenhams.
These recurring payments are completely legal and the owners of the sites that promote them say that shoppers get several emails from the discount scheme to confirm they have joined and been charged. Surely it would be better if they were much clearer about that beforehand, so that shoppers could decide not to sign-up?
How to get out of a discount membership scheme:
- Contact the customer service department of the company operating the scheme and ask for your membership to be cancelled and for payments to be stopped immediately. For Shopper Discounts & Rewards, call: 0800 731 9935
- As with all recurring payments, if you have problems cancelling through the retailer, you should write to your bank or card company and explain that you wish to dispute the unauthorised transactions. Ask how soon it will take action.
- If both the company and your bank fail to help, contact the Financial Ombudsman Service.
Please note that articles on MSN Money do not constitute regulated financial advice, which recommends a course of action based upon the specifics of your personal circumstances. The articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances. You can search for an IFA in your local area. Any statement regarding financial services products and tax liability is based on legislation and tax practices as at 6 April 2011, which is, of course, subject to change. The value of any tax benefits or reliefs depends upon the individual circumstances of the investor. When investment performance is mentioned you should remember that past performance is no guarantee of future performance. Where products have an underlying investment content, in many cases the value of the investment can fall as well as rise. For with-profit based investments, there is no guarantee as to the level of bonuses that will be declared, if any. Where mortgages or secured loans are explained do remember that your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. All mortgages are subject to underwriting, status and are not available to people under the age of 18.
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