Cashback-Whats the point?

  WhiteTruckMan 22:10 10 Aug 09
Locked

No, not the cashback you get offered at supermarket checkouts.

I've just renewed my car insurance over the weekend. Spent a while checking out the various price comparison websites and got it down to just over half of my renewal figure (no great surprise!) But the cheapest meant having to pay a full amount then getting cashback (well, a cheque actually) on the amount I pay. I paid online on sunday, was emailed a link today to a form which I dutifully printed out, filled in and will post in the morning. All the form asks me for is my name (which they know), address (ditto), phone number, email address & new policy number (all ditto).

For goodness sake, why all the faffing around? Why cant they simply knock it off the premium and be done with it?

Surely they cant be wanting an interest free loan for such a short period? And with interest rates at such a low level they arent going to get enough to make it worthwhile sticking it in a bank for a short while.

Truly a mystery!

WTM

  dagnammit 22:41 10 Aug 09

It's called a rebate in American terminology, and is very popular there.

click here_(marketing) for good old wiki. (look under rationale)

My own view is that they hope you balls up the form, miss the dead line or don't even bother applying for the refund.

  spuds 23:18 10 Aug 09

Over the last five car insurance deals, two offered cashback. One was with the Post Office and the other was with Barclays. The thing that I did notice that each cashback was completed by a third party company and not the actual policy company or agent. Both cashbacks were processed very quickly.

Refering to the old type warranty cashback deals, the third party company was hoping that no claims would be made, but some companies came unstuck, and ended up going bust, because people had followed the rules to the exact words of the agreement.

I had a cashback warranty from the old Comet, and the company running that scheme changed hands without notifying their clients. Fair dues to the old Comet, I was given an address plus the promise that Comet would honour the agreement if the third party would not honour the agreement. The only stumbling block, was the address Comet gave me, the third party company had changed hands and address again, but the Royal Mail was able to redirect the claims form, which arrived within the given 'allowed' time span. So in all, a good savings, because I received all the warranty premium back, I think something like £190.00. Hate to think though, on how many had lost out on that deal, or similar deals being run at that time.

  Forum Editor 23:26 10 Aug 09

figures - there they are, all those cashback orders showing in full as revenue. You may not think that the money is of any use for the short while that the company has it, but you're wrong - the company doesn't have it, the company's bank does, and it can certainly make money on it in the very short term by lending it for the few days or weeks between receipt and repayment.

The cashback payments are effectively a discount, but you get it as a payment, rather than having it removed from the selling price. The reason you need to provide all the information with the cashback claim is because the company you bought from doesn't make the repayment - that's handled by a third-party company acting as an agent.

  Stuartli 23:43 10 Aug 09

Similar scenario.

In the 1970s, the Telegraph petrol stations group was the only one in the country that didn't have to pay for fuel supplies on delivery.

It enabled the company to offer cut price fuel at its outlets and, in the meantime, the mainly northern based business invested the £1m or more sum it would have paid for fuel on delivery with the banks.

As a result, motorists got cut price fuel and the company made the difference up, plus a bit more, from its investment.

As far as I can recall, the government brought the practice to an end after quite a considerable period of time. Motorists were the real losers.

  lofty29 10:29 11 Aug 09

As has been said when you consider the many millions of pounds that can be lent between banks sometimes only for hours at a time, the money that can be made soon mounts up.I seem to remember one of the most succesful frauds of all times involved taking half a cent from all accounts over $10,000, and transfering it to an overseas account, the results was many millions of dollars, and I believe went on for years before it was discovered.

  sunnystaines 11:50 11 Aug 09

you would pay less VAT if they knocked off the price at the till.

  WhiteTruckMan 20:32 11 Aug 09

its a pointless waste of time-from the point of view of the consumer (me). In my case there was no third party company involved as the mailing address was to the marketing department of the companies head office (in manchester).

Additionally, I'm less than impressed at having to spend money to save money. But what can you do?

WTM

  kev d 22:35 11 Aug 09

It worked with you WTM so maybe that's the point?

  Forum Editor 22:41 11 Aug 09

It obviously worked as far as you were concerned - it provided you with the cheapest solution. It also worked for the company concerned, so it seems to have been a win/win situation.

  WhiteTruckMan 22:57 11 Aug 09

was an irritation at best. Had the next nearest price been within a pound or two I would have taken that rather than have to deal with this unwanted complication. So its fairer to say that I took the deal in spite of the cashback, not because of it. In fact I was luckier than some because I could afford to save that money.

Also, some of the accounting reasons given in the wiki link strike me as being at least morally fraudulent. And just because thats the way modern finance and accounting work doesnt make it right.

WTM

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