Data Doctors: The facts on cash-back websites

Q: Are those cash-back websites a scam or are they safe to use?

A: The internet has become such a huge way to get scammed that the adage “If it sounds too good to be true, it probably is” has been ingrained into our collective psyche.

A good dose of skepticism will serve you well as it pertains to rewards-based websites, but the good news is that there are many legitimate resources you can use when you make online purchases.

Affiliate marketing

In most cases, you sign up for a free account that allows the site to track your purchases when you use their portal.

As long as you start from your portal whenever you make a purchase, the reward or cashback is tracked for you automatically.

They generally don’t sell you things directly; they have an affiliate relationship with thousands of online retailers — which is where the rewards come from.

The concept of affiliate marketing started in the mid 1990s and has become a common way for new products and retailers to generate sales.

When an affiliate sends a customer to the retailer’s website, and they make a purchase, the affiliate is paid a small commission.

This has become so popular because the retailer only pays the affiliate when a purchase is made, which means that marketing expenses can be directly correlated to sales.

Most cash-back websites are simply splitting the commission they get from the retailer with the buyer.

Past and present

One of the first big websites to use the “cash back” model was, which launched in 1999 and became popular with avid online shoppers.

In 2014, Ebates was acquired by Rakuten, which now claims to have more than 12 million members and more than 2,500 retailers in their system.

Rakuten also offers cashback for in-store purchases of items available via their mobile app.

Another popular shopping website called RetailMeNot began in 2006, focused on finding coupon codes for thousands of popular items. Coupon codes provided additional savings, but often they had expired, so you had to manually check to see whether they worked before checking out.

Today, just about every cash-back tool provides automatic lookups for valid coupon codes as well.

Another popular tool called Honey started out as a coupon-code finder and evolved into a rewards system as well. PayPal acquired it in 2020 for roughly $4 billion, which goes to show you how profitable this business model has become.

Other popular rewards websites include BeFrugal and MrRebates; if you want to save for college, there’s Upromise.

There are many how-to blogs online if you want to learn more about which resources to use, and other helpful tools such as Slickdeals, which can be used in conjunction with cashback sites.

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