When every penny counts, cashback shows its charms

It seems almost every day more bad news emerges about the rising cost of living. Family finances are under pressure to a greater extent than at any time since the last recession, in the early 1990s. So people are getting accustomed once again to the idea of making ends meet and are looking for every way they can to do this. And an increasingly popular way to turn a quick buck is by using one of the plethora of cashback websites.

Andrea Gregson, the partnership manager at internetcashback.co.uk, explains the concept: "Retailers may pay to advertise on the sites. If someone clicks through to them and makes a purchase, or in some cases simply fills in an online survey, they will pay a commission. The sites then rebate this money – the proportion varies and can go as high as a full rebate – to the consumer making the purchase."

This rebate can be obtained by requesting a cheque be sent through the post. Some of the kickbacks available to the consumer are in the tens of pounds rather than pence.

A quick scan of the sites reveals the cashbacks available. Someone buying car insurance from Prudential can earn £37.50, while Dial- a-Phone gives £30 to anyone purchasing a mobile with a contract. Meanwhile, Marks & Spencer Finance offers £50 to those taking out a life insurance policy. And there is plenty of choice: Ms Gregson says she has 800 retailers signed up, and other websites offer a similar number, from auction houses to wedding shops.

Some sites charge a joining fee, usually around £5. Others, such as Topcashback and Quidco, let people join for free. And at internetcashback.co.uk, new joiners will be credited with £10. However, users can't ask for a cheque to be sent to them until they have at least £40 cashback built up.

There can also be delays, warns Ms Gregson. "Some products, like car insurance, have a long cooling-off period [the time allowed for consumers to change their mind about a deal]. So the cashback cheque can't be sent out until after this has expired. As a rule of thumb, people can expect to wait anything up to 120 days for their cashback cheque."

There is also another potential pitfall for the unwary consumer. "The idea of free money for going about your daily spending seems great, but consumers need to be careful that the goods and services on offer are actually a 'best buy' rather than a poor deal," says Jasmine Birtles from consumer advice website moneymagpie.co.uk.

She cites the example of car insurance: "There are lots of different providers out there and quotes vary wildly, and just because one features on a cashback site doesn't mean you should go for it. The danger is that you will pay far more for the product or service than you save with the cashback."

Ms Birtles adds: "Make sure you put the horse before the cart. Check one of the established price-comparison websites for that product or service, find out what is the best deal and then switch to a cashback site. If it features, go ahead and make the purchase. If not, click away and buy the best deal elsewhere."

But there is a way to make money from these schemes without ever spending a penny. Many of the sites operate a "refer a friend" initiative that gives consumers the chance to earn something called trail commission. In short, users who make an introduction re- ceive commission for each purchase their friend subsequently makes through that site.

"It is possible to earn up to 20 per cent of the cashback that the friend you have referred has earned," says Ms Gregson. "What's more, there is no limit to the number of friends you can refer. In some cases, users earn cashback worth several hundred pounds even if they have never made a purchase."