Paid to shop: is that your idea of retail therapy?

You can already save by buying online, but a new breed of cashback sites offers even more

Like the idea of being rewarded for going shopping? Thanks to a host of online cashback sites, that's just what could happen.

For some time, savvy shoppers have made big savings by buying on the internet, but now they can hang on to even more of their money by logging on to websites that offer extra rebates - and more still, by playing their "cashback cards" right.

These websites have relationships with most of the big retailers and display their adverts. The sites get paid commission for referring people to the retailer, and some of this money can then be passed on in discounts to the shopper.

Cashback sites are booming and there has been a string of new launches, though some are more reliable and successful than others. Among the stalwarts are Rpoints.com, Quidco. com and Greasypalm.co.uk; smaller and newer sites include Topcashback.co.uk, Trolleycash.co.uk and Cashback-rewards.co.uk.

Those that give you points instead of money include Nectar.com - though it also has a cashback site - as well as Pigsback.com and Ipoints.co.uk.

GreasyPalm, Britain's first cashback site, which was founded in 2003, gives discounts of between 1 and 20 per cent at over 1,000 online stores, plus a £2.50 reward just for signing up, and £7 for recommending a friend. You receive the cash once the amount of money in your account reaches more than £25.

"We have seen the massive popularity of rebates first-hand," says Neil Durrant, founder of GreasyPalm. "We have reached the 750,000-member milestone, and have awarded over £4.5m in cashback."

So how do you get the most out of the websites?

The best way to buy is to find the cheapest store for a particular item by using a "shopbot" like Kelkoo.co.uk, Pricerunner.co.uk or uk.shopping.com. These shopping robots trawl thousands of sites seeking the best deals for your product.

When you have found the cheapest supplier, you can go to a cashback site and find it in the directory of participating retailers.

To complete the virtuous circle, most of the cashback sites also feature the shopbot sites. This means, for example, that you could get a small payment from Rpoints simply for using its link to Kelkoo, on top of the cashback on your purchase.

There are also "cashback" credit cards - such as Morgan Stanley's Platinum card, or American Express Blue - which will give you still more money.

When choosing which site to use, you should consider a number of points. See, for example, how many retailers are featured, and whether the rebate is paid out in cash or points. Also check on the reliability of the site, the size of the cashback available, and any other perks such as rewards for introducing a friend.

Quidco claims to pass on all its proceeds to customers, minus a yearly administration fee of £5. As with Rpoints, it credits accounts via electronic bank transfer or PayPal, the online cash system.

Elsewhere, Trolleycash pays you £3 to join and Cashback Rewards gives you £5 for signing up.

Some of the best cashback offers are available on financial products. On the GreasyPalm site, for example, you can get £60 off Lloyds TSB car insurance, £10 if you take out an American Express cashback card, £62.50 cashback on Barclays home insurance, and a £57.50 rebate on PruHealth's private health cover.

But don't buy on the discounts alone. If you do, you could end up wasting rather than saving money - on insurance, say, that doesn't provide enough cover for your needs.

The case of the cashback that's up in the air

Mark Dowling of Leicester is currently "in discussion" with GreasyPalm about cashback on two sets of flights he booked earlier this year.

"GreasyPalm offered £1.33 cashback per transaction, with no limit on the number of deals per individual," explains Mark.

"I decided to split my flights into six different transactions, including separate flights for both myself and my wife Ruth on both legs of one of the trips."

Instead of receiving just two lots of cashback for the two sets of flights, Mark planned to get an extra four for a total of £7.98 - although this sum was reduced due to the policy of the airline, bmibaby, which levied a £1 debit card charge per transaction.

"Everything went through the GreasyPalm site without problem, and the six lots of cashback were credited to my account," says Mark. "Yet the site later reversed the payment of five cashback transactions - without explanation.

"I've earnt more than £150 in cashback from GreasyPalm over the years, and am chasing the remaining amounts. But I will have to wait and see what happens."

Mr Durrant from GreasyPalm says: "There is nothing specifically in the terms and conditions that prevents multiple transactions, but a series of these on one day would be flagged up both by our systems and the retailer's."

He adds that while he cannot comment on specifics, the case is being looked into.

"We ask for proof of purchase to establish transactions are genuine," he explains. "That is something we cannot tell ourselves, as the transactions are actually undertaken on the retailer's site, not on ours."

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