How do cashback sites work?

Set up a free account (don’t use any that require payment) with cashback sites such as Topcashback, Quidco* or Cashbackkings*, log-in and then click on the product you’re interested in. When you make a transaction such as buying something or signing up to a new credit or insurance policy, it’s recorded and you’re paid cash for doing so.

Cashback Sites: Typical Payments

Currys	3% of product's cost	Tesco Direct	3% of product's cost
Aviva Home Insurance	£70 per policy	HMV	5% of product's cost
HSBC Bank Account	£20 per account	Marks & Spencers	5% of product's cost

Why do they pay out?

Cashback sites take advantage of the way commercial payments from one website to another work. They simply list product providers and retailers, and when you click through to these websites, they get paid for ‘providing leads’; in a similar, but not identical way to how most web-adverts usually work.
Yet with a cashback site, when you’re logged in, the revenue raised from your click is attributed to you so the site can pay you some or all of the money it receives.
The technology’s rather simple: ready-made paying links are available from ‘links warehouses’ such as Trade Doubler or Affiliate Network, which primarily allow normal website owners to pick the adverts they put on their sites. These do all the liaison with the product providers; though the big cashback sites also have their own direct relationships, so they can offer a wider range of providers or earn more.

Cashback on the high street

It’s very likely that the next stage in cashback sites' development is cashback when you shop on the high-street. Cashback sites Quidco* and Greasy Palm* are already doing this. Here you register your debit or credit card and when it's used in store that generates cashback; the list of retailers is currently limited with only a few big names such as Superdrug, Halfords and JJB Sports. Yet this is likely to grow.

Use a cashback credit card too

To further increase your gain, you can earn up to 5% on top every time you spend by using a cashback credit card, although always ensure you pay it off in full so you’re not charged interest.
There’s no conflict between cashback sites and cashback cards, as when you spend money, whomever it’s spent with, the cashback credit card gives you some of it back.

Cashback’s great, but only with the right deal

It’s easy to be seduced by £50 cashback for signing up to an insurance provider or credit card, or an extra 5% discount when shopping. Yet don’t let the tail wag the dog e.g.

• Deirdre Deal wants a telly. A cashback site brings up Asteroid Electricals, offering 5% cashback; meaning a £20 discount off a £399 TV. Yet two minutes using a shopbot would’ve found her the same TV on sale at £299.
• Borris Bargain wants car insurance. Borris Bargain spots the Suffolk Mutual’s £100 cashback offer, so grabs its £540 policy. Yet using car insurance comparison websites he’d have found Hippo Insurance at £370, and then could’ve returned to the cashback site and got a further £25 off.

Plus, just as importantly, you need to understand that these deals don't work like cashback from a retailer.

Never count the cash as yours until it’s in your bank account; things can & do go wrong.

The reason for this is simple. The cashback sites can only pay you if they get the money from the retailers or product providers, but disputes in this area are common, so sometimes they're not paid. Even if they are there can be problems with tracking. Thankfully, most times, it's fine, but it's why cashback should be seen as a useful added extra not a core. 

How to make £1,000s & get the best products

A few MoneySavers have reported being over £1,000 a year better off just from using cashback sites and they’re using the right products.
Yet it’s using them in isolation I worry about; especially with financial products like credit cards and bank accounts, where if you’re trapped into the wrong product it costs you much more over the long run. So follow these four simple steps.

• Step 1: Ensure you've found the right product
  
  Read the detailed articles or look in the Forum for things including Best Balance Transfers, Online Shopping Cost Cutting, Best Bank Account, Cheapest Car Insurance, Cheapest Home Insurance, Best Cashback Cards
• Step 2: See if cashback’s available.
  
  Then nip to a cashback site(s) to see if you can go through it, and get the top product and cashback. If you can ... hoopla! It’s a double whammy. Yet never count the cashback as your money until it's in your bank account; many things can go wrong, either with the cashback site itself or if the advertiser refuses to pay it.
  
• Step 3: Clear your cookies.
  
  If you've clicked through to several different sites that collect cookies, which will often include the product site itself, through a comparison site, this site, or another cashback site, it may not track unless you clear your computer's cookies first. Further information on deleting or controlling cookies is available at AboutCookies.
  
  
• Step 4: Can you finesse the deal with better cashback?
  
  For some things a big cashback pay-out may make another product cheaper (this is often true with home insurance). Yet if you’re not sure, err on the safety of getting the right product, rather than the biggest cashback. 

Overall winner: Topcashback

TopCashBack is one of a number of sites paying out 100% of the cashback it receives. It’s top because most of the other 100% payers keep the first £5 you earn a year; it doesn’t.
This, of course, raises the ‘how does it make any money?’ question. My assumption is it works in two ways; firstly because it’s likely to receive bonus payouts, which can’t be assigned to any individuals, when it hits sales target amounts of specific products. Secondly it's building a big, well visited, reputable website and that in itself accrues value.
Yet just because it pays 100% doesn’t mean it always wins. Others may beat it because they include different suppliers or have negotiated themselves larger commissions.