A Guide To Free Money

Posted on: 19 January 2009 by Gareth Hargreaves

We look at the banks, insurers and cashback websites that pay you cash just for using them.

At a time when money is tight, it’s worth checking out offers of free cash. Banks, insurance companies and shopping websites all offer “cashback” deals. But are they as generous as they sound, or just too good to be true?

Which? researchers found that you could make £100 just by opening a bank account, and a shopping basket of three electrical items would have earned over £75 if they were bought via cashback websites.

A Bribe From The Bank

Banks regularly pay you to switch to their accounts. First Direct offers £100 if you open a current account and is so confident you’ll want to stay that it offers another £100 if you decide to move after six months. This “free” money, though is only available to those who can pay in a minimum of £1,500 a month.

The One account - combined mortgage and current account - pays current account holders £125 for each friend they recommend, plus a further £125 to the new account holder.

Money Saver Tip: Open a First Direct current account and get £100. First Direct scores highly for customer satisfaction in a recent Which? survey.

Cashback Cards

A number of credit cards offer you ‘cash back’ each time you spend. With normal spending, the amount is quite small, but if you are paying for a holiday or other major purchase, using a cashback card could give you an extra £200.

It’s important to pay off the full balance each month, however, or the interest charges will wipe out any gain – making these cards an expensive choice.

The American Express Platinum Cashback Credit Card offers 5% in the first three months, to a limit of £200. To get this, you have to spend £4,000 in this opening period.

After that, the card pays 0.5% cashback for annual purchases of up to £3,500, 1% for purchases between £3,500 and £10,000 and 1.5% for purchase balances over £10,000.

Money Saver Tip: Get £300 on your Amex card if you spend £4,000 in the first three months and pay it off straightaway.

Abbey has recently launched a ‘cashback for essentials’ card, which pays 3% cashback on purchases at supermarkets and filling stations for the first six months. It is capped at £75, for which you would have to spend £2,500.

Incentives From Insurers

Insurance companies offer cash incentives to persuade you to switch. Halifax pays £50 when you take out buildings and contents insurance, and a further £50 each year you renew.

Barclays home insurance offers £55 cashback if you buy buildings and contents insurance together, while Sainsbury’s offers a £20 voucher to new buildings and contents customers. The Post Office will pay £20 cashback if you take out life insurance.

Insurance cashback is worth considering, but needs to be carefully weighed against how competitive the company’s quote is.

Earn While You Shop

There are now over 120 websites offering you cash just for shopping at your favourite online retailers by clicking through them. The process is simple:

  1. Sign up to the cashback site as a member. You will need to add bank account details which gives you access to deals for anywhere between 600 and more than 2,000 retailers, insurers and travel sites.
  2. Click through to the retailer via the cashback site and buy what you want as usual.
  3. The purchase will be tracked by the cashback website and, once you have accumulated enough cashback from your various purchases, you will be paid by the site, usually once a month.

Passing On Rewards

Cashback websites typically make money through charging retailers advertising fees for including them in their comprehensive range of offers.

It seems to be a win – win situation. The retailer gets more visits because they featured on the cashback website, and the cashback site gets money from featured retailers. Members get either a percentage or all the cash made from advertising fees.

The downside is that it often takes retailers at least a month and sometimes up to 60 days to process the cashback to the site. While it’s a nice way to make extra cash, it’s worth thinking of the cashback as a bonus and only use it for things you would be buying anyway.

The Small Print

Looking at the terms and conditions of 10 of the most well-known cashback sites Which? found three potential pitfalls:

  • Administration fees.
  • Charges for claiming your cashback.
  • Minimum rates for getting your cashback paid.

On the plus side, some sites offer extra benefits, including:

  • Bonus cash for registering.
  • An option to donate to charity.
  • Referral schemes that pay you extra to direct friends and family to using the site.

What Do You Get?

Buying an iPod, digital camera and TV from each a few featured cashback websites would have earned you worthwhile sums of money. But we found differences in the levels of cashback offered.

For example, on Topcashback.co.uk, buying from well-known retailers Pixmania.com at 6% cashback and Littlewoodsdirect.com at 8% cashback could have earned you £80.82 after spending £1,051. Take off the £5 administration fee and that still leaves just over £75.

However, buying from the same retailers at the same price on Myshoppingrewards.com would have earned you just £37.97 – even accounting for the £3.50 joining bonus, that’s still £39 less than Topcashback.co.uk because the cashback offers for Littlewoodsdirect.com and Pixmania.com were 4% and 1.5% respectively. So it’s worth shopping around for the best cashback deals.

Web Links

Which? - www.which.co.uk

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