As the owner of a cash back and rewards site, I am often asked by people how the whole shopping rebate thing works. It seems like it must be too good to be true. Alternatively, you must pay more for the items if you click through a cash back site, right? Wrong.
In its most simplistic terms, advertising on cash back sites is just one form of promotion for merchants. They pay for commercials, newspaper advertisements, radio ads, and website placement. They can pay a flat fee for those or pay on a commission basis. For rewards sites, they pay on a commission basis. If I put up an ad for Amazon and someone clicks through it and makes a purchase, I make a percentage of that purchase. Simple advertising.
The reward/rebate site model just takes that one step further and splits that commission with the person who made the purchase. With some cookie tracking on your computer, I can tell what link of mine you clicked on, when you clicked on it, and how much your total purchase was. I don’t look at what you bought or where you sent it or your credit card number. I just look at the total purchase price. I figure your portion of the commission and credit you for it.
Of course, there are a lot of things that can complicate the transaction. 1) You may use a coupon from another site or the merchant directly and because of that the merchant doesn’t owe me a commission, 2) you might not have your computer set up to accept the cookie that tracks the purchase, 3) you might have a toolbar that overrides the cookie, etc. Although these are not the norm, they do happen in a small percentage of transactions.
That’s the quick and dirty on how cash back sites work. There isn’t any kind of trick involved or increasing of prices. It’s simply another method of advertising that allows for purchasers to have an opportunity to get a little of their money back. You can check out Sunshine Rewards if you want to see it in action.
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