Cashback apps have earned users like Viona hundreds of dollars in lifetime earnings. But are they really worth it?

Cashback apps have earned users like Viona hundreds of dollars in lifetime earnings. But are they really worth it?
  • PublishedMarch 25, 2024

Viona Agung didn’t get the appeal of cashback apps at first.

Online retailers only offered a 2 or 3 per cent cashback on purchases and it took several weeks for the cashback to be confirmed before she could even withdraw it from the app into her bank account.

For the busy mother of three young children, it wasn’t worth all the extra steps she needed to take to purchase something with it.

“It didn’t really motivate me — until my lifetime earnings started to increase,” the 37-year-old says.

Viona is one of the millions of cashback app users in Australia who has netted hundreds of dollars in “lifetime earnings” on the apps.

The most popular cashback apps in Australia, ShopBack and Cashrewards, boast more than 2 million users, according to their websites.

Spend to save — to spend

This is how they typically work: a user makes a purchase via the app, the app earns a commission on the sale from the retailer, then the app shares some of that commission with the consumer — or gives the user cash back.

Each purchase may only return a small amount of money to your cashback wallet, but it accumulates to an amount (usually a minimum of $10) that you can withdraw into your bank account — it becomes actual cash.

Professor of Marketing at UNSW Business School, Valentyna Melnyk, explains why using a cashback app can feel good at a biological level: it’s a hit of dopamine generated by immediate gratification.

Headshot of Marketing Professor Valentyna Melnyk, sitting at a table wearing glasses, a pink spotted shirt and black jacket
Marketing Professor Valentyna Melnyk says cashback apps may offer ‘free’ money — but it comes at a price.(Supplied: UNSW)

“On the surface, it feels like you are getting a ‘free’ reward in a form of free cash for something you would have bought otherwise,” she explains.

“In the current times, with high financial pressures, it is understandable that consumers are attracted to such propositions.

“Because they also feel rewarded for spending money, that could also help them to internally justify an expensive — or unnecessary — purchase.”

The hidden price of cashback

But Professor Melnyk warns, “the only free cheese is in the mousetrap”.

With cashback apps, the free cheese is the cash, and the mousetrap is personalised marketing.

According to ShopBack’s Privacy Policy, the company “does not sell or trade personal data … with third parties” but it will use users’ personal data to “personalise or otherwise improve the products and services we offer you” and “deliver relevant advertising”.

Cashrewards has something similar in their privacy policy too: “We collect, hold, use and disclose your personal information primarily to … personalise your experience with Cashrewards, including our offers, surveys and interest-based ads.”

These “personalised” experiences and “relevant” advertisements may be used “to nudge consumers in a direction not necessarily to their benefit”, Professor Melnyk says.

For example, a cashback app could serve you an advertisement or promotion from a retailer that offers products you’re likely to buy based on your shopping history.

This may mean that you end up buying something you weren’t planning on buying — and ultimately spending more than you intended, which can cancel out the savings made via cashback.

Senior campaigns and policy adviser at consumer advocacy group CHOICE, Rafi Alam, understands the appeal of cashback apps with Australians contending with cost-of-living pressures.

“Products across supermarkets are going up and it’s not surprising consumers are looking for any way possible to get money back from their shopping,” he says.

“It must be a good feeling to see that money is accumulating in their account — quite similar to accumulating points on loyalty cards.”

Headshot of Rafi Alam, wearing a brown shirt
Rafi Alam says cashback apps are collecting your data — and privacy legislation needs to be updated to better protect consumers.(Supplied: CHOICE)

But he says cashback app users should be aware of the privacy risks.

“Cashback sites are able to collect a great deal of data about customers,” he says, “from personal information – what you enter when you sign up to social media behaviour, contact information, shopping behaviour and insights into that.”

“[These] are very valuable to every business that is able to collect data now, and it’s also valuable to their affiliate partners in the networks they work within.”

Privacy laws to protect consumers are also out of date. A recent Privacy Act Review including 116 proposals to “strengthen and modernise” these laws, including “several proposals to address potential harms arising from direct marketing, targeted advertising and online content, and entities trading in personal information”.

The collection of data and information by online sites can feel like it’s “gone to the point of no return,” says Mr Alam.

And while there’s no way to take data back once it’s collected, there are ways to minimise and mitigate risks through legislation.

“We think it’s urgent that regulations are put in place so that the amount of data collected is minimised — so that we can slow down or stop the rate of data collection,” he explains.

Gaming the apps for more cash

Finance content creator Michael Ko describes himself as an “avid user” of cashback apps — his lifetime earnings are in the thousands across the two biggest apps in Australia.

“I wouldn’t really buy anything online without at least checking if I can get cashback from one of the two apps I primarily use at the moment — ShopBack and Cashrewards,” he says.

Michael also purchases things for his parents using the cashback apps.

“If my parents are buying something, they don’t want to fiddle around with this sort of stuff,” he explains, “so I can get it for them — and get the cash back.”

He’s not too concerned about data collection and says “it’s not much more information than a retailer, if you’re shopping online, could get anyway”.

But he does think there are some drawbacks: you have to wait a long time for cashback to be approved, then you have to wait again to accumulate the minimum withdrawal amount. Click tracking is also unreliable.

“There’s always a chance it won’t track and you won’t get the cashback,” he explains. “I always think of it more as a bonus, not as a sure thing.”

Michael also recommends reading the fine print because there are often exclusions of brands or items, or conditions around the use of coupons and vouchers.

Viona was caught out by a cashback app’s terms around returns. She’s purchased a few items of clothing from an online retailer using a cashback app and ended up returning one of the items.

“They reject the whole transaction rather than deducting the cashback from only the returned item,” Viona explains.

However, she’s fond of the “upsized” or “boosted” cashback promotions, which typically have a time limit to encourage users to make their purchase during the promotional period.

Viona gets an alert on her phone when one of her favourite beauty retailers is offering an upsized cashback and she’s formed a habit of waiting for these promotions — which often coincide with sales and discounts on the retailer’s website — and purchasing items in bulk.

“I’d go to the app, get a discount from Sephora and cashback, so it’s like double the discount in a way,” she says.

“I end up getting $20 to $30 back and saving quite a lot.”

Some of the apps also offer cashback for in-store purchases so she’s pleasantly surprised when a café or restaurant she already frequents has a ShopBack sign.

“It’s just an added bonus,” she says.

SOURCE: ABCNEWS

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