Cashback: Can you really save money while you shop?

Australian households may be continuing to rein in their spending as a result of rising living costs, but that doesn't mean that they're not spending at all.

Retailers across the country turned over just shy of $36.5 billion during September, the latest figures from the Australian Bureau of Statistics show, with $5.8 billion spent on the likes of household goods and $3 billion on clothing and footwear.

As has been the case for the past two years, retail turnover is expected to spike again during November as Australians look to take advantage of the potential savings on offer during the Black Friday sales.

While sales shoppers will be looking to snag a Black Friday bargain, what they might not know is that it could be possible to boost their savings even further with a little thing called cashback.

What is cashback and how does it work?

Simply put, cashback is money that you can earn back on your purchases.

It's not a new concept though. There are lenders that offer thousands of dollars in cashback as an incentive for people to refinance their home loans, while some banks have credit and debit cards on which customers can earn money back on their transactions.

In the last decade, the emergence of a handful of retail-focused cashback platforms has also made it possible for Australian shoppers to earn money back on their purchases.

"At the beginning I was actually pretty suspicious. I was like, what's the catch here? Why are you just going to be given money back on your purchases? But I've been using them for a few years now, and I have been able to save quite a lot of money," says Queenie Tan, licenced finance content creator.

So why are shoppers given money back at all? As Tan explains, retailers essentially give cashback platforms a cut of the sales, which then flows through to customers.

"The way that it works is that a lot of these cashback websites - whether it's ShopBack, Cashrewards, TopCashback, or whichever one you choose - have relationships with brands.

"And because these cashback apps refer customers to these brands, the brands share commission from the revenue with them, and some of it is then passed down to consumers."

Who are the major cashback players in Australia?

Shoppers have a growing list of players to choose from, but as Tan mentions, among the largest are dedicated cashback platforms like Cashrewards and ShopBack.

Both Cashrewards and ShopBack allow users to earn cashback via their websites and their apps, or with the help of browser extensions.

Then there are cashback offerings from existing financial institutions. One of the more prominent is from micro-investing platform Raiz, which allows users to earn cashback through purchases made with partnering brands which is then directed back into their investing accounts.

Banks are also getting into the cashback game. For example, the Commonwealth Bank allows customers to access cashback offers through its CommBank Yello program, while ANZ and Westpac have exclusive deals with Cashrewards and ShopBack respectively.

What kind of purchases are eligible for cashback?

Some might associate shopping cashback with clothing purchases in particular, but it has expanded out to almost every conceivable part of the retail world.

Shoppers can now score cashback when purchasing everything from their weekly groceries to a new pair of headphones or even on flights and accommodation for a holiday abroad.

People who are looking to save on their energy, telco or insurance bills may even be able to receive cashback when switching to a new provider.

How much cashback can shoppers earn?

The amount of cashback on offer differs across the various platforms and the brands they have partnerships with, plus the offers tend to fluctuate over time.

Typically, cashback is offered as a percentage of the total amount spent. For example, a shoppers might receive 5% cashback on a purchase with a specific clothing brand. Some cashback offers will be fixed amounts though (e.g. $20).

It really does vary, but it's common for cashback offers to be in the single figures, though they can sometimes be 10%, 20% or even higher.

How can cashback be used?

So you've signed up to a cashback platform and used it to purchase a new pair of jeans and some t-shirts from a well-known fashion marketplace. Thanks to the 7% cashback offer, you've also been able to score $12 back. What next though?

Again, it depends on the platform, but once that cashback hits your account - which may take some time - you will likely have a couple of options.

The first is to transfer the cashback to a linked bank account. It's worth noting that you may have to hit a minimum withdrawal threshold (e.g. $10) before being able to take it out though.

You may also have the option of putting accumulated cashback towards future purchases. Tan, for instance, says that one of her favourite methods is to use her earned cashback to purchase gift cards.

"One of the ways I love using the cashback in my account is to buy gift cards. A lot of these gift cards also have cashback on them when you buy them, so I'll use cashback to buy the gift cards and then I'll get cashback on the gift cards."

Are there any drawbacks to using cashback platforms?

While earning cashback on purchases that shoppers were already planning to make can be one way to reduce their overall spend, there are a few things worth knowing about cashback before jumping in.

• Cashback can expire: Depending on the platform, shoppers will want to use or withdraw their cashback so it doesn't expire. For example, with both Cashrewards and ShopBack, cashback held in an inactive account (when it hasn't been used in 12 months) will expire.
• It can take months to arrive: Cashback won't necessarily hit your account instantly. In fact, Cashrewards states that cashback generally takes up to 100 days to be approved by the participating partner.
• Earnings can be capped: It's worth reading the fine print, because some offers have a limit on how much cashback can be earned per customer or with each transaction.
• It may not work with other offers: It's certainly possible to earn cashback with retailers who are also holding sales on their products, but it won't always be possible to use a separate coupon code in conjunction with cashback. That's why it's always worth comparing the savings possible with cashback against any other offers available.

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