How to play the cash-back game

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This is one of the few times when "If it sounds too good to be true, it probably is" doesn't apply.

Ben Rose saved about $100 on law textbooks. Jenny Chien paid 43% less for contact lenses. Nellie Whittlesey scored $175 worth of kitchen hardware for $115.

They aren't just smart shoppers. They're smart shoppers getting cash back.

"Cash-back" sites such as Mr. Rebates, Ebates, Bing and are affiliate marketers, which means they get paid for sending customers to online merchants. Then they share a slice of that fee with us, the customers. You're still buying from Sears, Old Navy or whomever — you're just adding a step to the process by clicking through the cash-back site. Additional perks such as coupon codes, free shipping and rebates can make the deals even better.

We're not talking just cute shoes and sports memorabilia. Think tires, computers, cell phones, socks, pet food and furniture. You can get cash back for booking travel, opening an online bank account, sending flowers, filing your taxes online, reading magazines, getting sports or concert tickets and even buying something on eBay or QVC.

Rose, who's going to law school in Boston, will get back at least $200 from Bing even though he buys relatively few items. "I'm only 26, but I'm pretty adamant about getting the best deal on everything," he says. (Note: Bing is owned by Microsoft, which publishes MSN Money.)

That brings me to an essential fact: Cash-back rebates are not a license to overspend. They are simply another way to stretch money, like a manufacturer's coupon or a clearance sale. Play the game right, though, and you'll come out ahead. Here's how the game works, plus a few tips from those already saving hundreds.

Sweetening the deal

Rates tend to range from 2% to 7% but can be considerably higher, especially around the holidays. Becky Ford used Bing to get 25% cash back and free delivery on play equipment from Wal-Mart last Christmas. Ford runs a site called, a primer on cash-back and other rewards programs.

Any "holiday" will do. Mr. Rebates promoted 17% cash back on certain items around St. Patrick's Day. During "March Cash Back Madness" at FatWallet, a number of merchants doubled their percentages.

Here are three of my recent cash-back purchases:

  • When I bought a laptop computer, not only did I get cash back and free shipping, I was also offered a printer-scanner-copier free after rebate. The cash back was $37.87 and the rebate $79.99.

  • I bought two domain names because I'm starting my own site — isn't everybody? — and scored a $10 discount offered to cash-back buyers plus a temporarily higher cash-back rate that added up to $4.50.

  • I ordered new walking shoes for $5 less than the ones I bought in a Seattle store — and paid no sales tax. Because I would otherwise have needed to take a bus to the shoe store, I saved an additional $4 plus a couple of hours of my life.

In a nutshell, here's how it works: You register with a cash-back site, or several. Say that during the course of your online shopping, you see a deal you like. You log in to the cash-back site featuring the deal you want and click on the item. That will take you to the merchant's site as a cash-back shopper. Once you check out, a portion of the item's price shows up in your cash-back account.

The loss of sales taxes and traffic at local stores comes up time and again. I will not address these topics. Let the merchants and the lawmakers sort out the sales-tax dilemma.

Warehouse prices but no membership fees

The shoppers I interviewed have gotten anywhere from $100 to $750 back per year. Ebates CEO Kevin Johnson says the biggest single check his company ever cut was for $45,000, to a buyer who purchased huge quantities of computer equipment.

If you're a business owner or even just the person who orders workplace supplies, you could be looking at serious money. Cash-back sites partner with merchants that offer furniture, paper, ink, cleaning supplies, computer services and online file backup.

Craig Cassata, the CEO of Mr. Rebates, says a number of small businesses use his site as a discount program "like a Costco or Sam's Club" — and there's no membership fee.

Individuals and families use warehouse clubs, too, so it's no surprise that people have taken to cash-back shopping in a big way. That is, once they get past the idea that it's some kind of scam. When friends told Jenny Chien about cash-back shopping, her initial response was "How would that be possible?"

Then this Los Angeles lawyer had a baby and stayed home to care for him. Now she's sold on Ebates for products as varied as diapers, photo reprints and makeup.

"Now I rethink buying things in the traditional store," Chien says, "because I don't want to pay 10% tax and then have to lug it home."

Some merchants will let you do "local pickup" — that is, order online for the cash-back reward but pick it up at your neighborhood store. Not only can you avoid a delivery charge, but you don't have to stay home waiting for a UPS truck.

Of course, some shoppers prefer delivery, especially on oversized items. Whittlesey, a Mr. Rebates fan, has bought a rain barrel and "a lot of furniture" from because of that company's $1 delivery policy.

Ford is currently eyeing patio sets because Home Depot is offering free shipping along with cash back. "I don't have a truck," she says. "How am I going to get a patio set to my home?"

Spend or save?

You should always have a plan for found money.

Cash-back rebates are a great way to build an emergency fund on a shoestring — again, as long as you're buying things you'd buy anyway and at prices better than what you'd get locally.

You could also "snowflake" a debt, donate to charity, pay for summer camp or music lessons, start a college savings fund for your baby or set up an account for next year's vacation (which, of course, you would book through a cash-back site).

For some people, "found" money simply becomes part of the family budget. FatWallet devotee Michael Vitale plans "something special" for his family whenever a check arrives. "We look at it as 'Let's go to dinner on FatWallet,'" he says.

Others use cash-back programs to stretch existing funds. For Sherri Hagymas, a New England mother of two who blogs at Luv a Bargain, the rebates are one more tool in her frugal arsenal. "I save everywhere I can," says Hagymas, who compares rates among several sites but favors Ebates.

Rose McBride says discounts and cash back at Bing help her family "to stay afloat and save for the things that we do want," such as a laptop computer and outerwear for her sons.

The Michigan resident says her friends don't understand sites like Bing and think she's "jumping through hoops" to save money.

"But (my husband and I) are the first ones to retire in our group," says McBride, "so I really don't care what they think."

Watch the fine print

No matter what you decide to do with your rebates, be prepared to wait, because payout policies vary widely. Some sites send checks on demand, and others send them every three months. Often there is a minimum check amount, usually $5 or $10.

Complicating matters is the fact that merchants often wait 30 days or more to report a sale, in case you decide to return an item — and if that means you just miss the deadline to request a quarterly check, you might have to wait an additional three months.

Here are 10 more tips from the cash-back pros:

  • Compare prices first. Make sure you're actually saving money by shopping this way. "You wouldn't want to spend (an extra) $7 to save $4," says Tricia Meyer of Sunshine Rewards.

  • Then compare rebates. Sites like Cashback Comparison Tool or show side-by-side comparisons from some of the better-known cash-back sites. Ford notes that rates can change suddenly and "drastically." Unless a cash-back aggregator site is updated daily, Ford says, you should double-check the posted rates.

  • Make sure the cash back applies. One shopper I interviewed coveted a sale item from an online jewelry site. Sale + cash back = great deal, right? Nope. The fine print said, "Cashback not available on all items." Naturally, that included the on-sale ice she wanted. So before you submit your order, make sure it's eligible for cash back.

  • Talk to other shoppers. Many cash-back sites host forums in which shoppers discuss the merits of specific brands, flag the superhot deals and help newcomers learn the ropes. These communities are a great place to get advice.

  • Don't forget to log in! If you don't go through the site, you won't get the cash back -- no exceptions. Post a note on your computer to remind yourself.

  • Watch for sales. You'll get weekly e-mails, so take a moment to read them. That's how I found out about the $10 bonus and higher-than-usual cash back on domain names. I'd planned to do this; the special deal made it worth doing right away.

  • Buy gift cards. Some sites offer them at face value with cash back, and some at discounted rates with no cash back. Use them as gifts or for your own shopping. Meyer says Sunshine Rewards members will buy $1,000 worth of Home Depot gift cards for remodeling projects and collect a 2% cash back. However, using gift cards reduces cash back. The portion of your online order paid for with a gift card won't be eligible for a rebate, Ford says.

  • Don't use the wrong coupon. Coupon codes are specific to each site. Using a code you found elsewhere may void the cash back altogether. However, it may be possible to use a coupon code that the merchant mailed to you; ask on the cash-back site's forum.

  • Be wary of toolbars. Certain downloadable toolbars will interfere with cash-back sites, often redirecting you. Ford cautions against downloading any toolbar. If you're not sure, do an Internet search using the name of the toolbar plus terms such as "spyware" or "cookie overwriting."

  • Refer others. Get a friend or family member to join and, depending on the site, you'll get either a cash bonus or a percentage of that person's future purchases. That is, once you convince them that it's not a scam.

Save money today

Smart price? Interested in a souped-up cellular experience? "4 smart phones for beginners" offers tips for newbies on a budget.

Sprucing up: The vernal equinox has come and gone, so it's time to clean house. A Smart Spending message board thread called "Spring cleaning! Your tips?" offers suggestions ranging from vinegar to old toothbrushes to diluted Mr. Clean.

Read up: Need expert advice on matters financial? MSN Money's Liz Pulliam Weston offers up "5 money books worth every penny." Then take the "frugalist" route by asking your local library to order them.

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