What is Cashback with Mobile Phone Deals?
What’s this Cashback all about?
Unless you’ve always purchased your new phone contracts direct from your network, you may not have come across cashback deals offered by the retailers before.
You might have seen deals with just £10 or £50 cashback right up to £400 or even £500 being advertised online.
So what is it?
To understand what cashback is we need to understand how the retailers work.
The retailers buy phones direct from the manufacturers and import wholesalers and then connect them to your chosen network (ie: O2, EE, Vodafone etc), usually at far lower prices than the networks offer directly.
The retailer is paid a commission from your chosen network which is a different amount for each monthly plan.
The cashback can be viewed as any extra profit margin after the cost of the phone has been deducted from the commission paid by the network.
eg:
EE pays the retailer £500 commission to connect your phone to your chosen plan for you.
The retailer managed to buy your new phone at a cost of £300 and let’s say they work to a £50 profit margin.
£500 – £300 – £50 = £150
Rather than bank this extra commission as profit, the retailer offers it to you, the customer, which you can claim back at different stages throughout your contract period.
Why not just bank the profit?
The retailers offer cashback with selected deals as both an incentive and a marketing tool…
From a consumer’s point of view, it’s an added incentive and a further saving.
From a retailer’s point of view, it allows them to beat their competitors by offering a larger amount of cashback. (This really comes into play on price comparison websites like ours).
So it reduces my monthly cost?
Yes and No, this is a point that we have a bit of an issue with.
Many of the retailers show a discounted monthly price where cashback is being offered, whereas we show you the exact price you’ll pay each month regardless of any cashback.
It’s a sticky point as we don’t agree with the way the retailers show the reduced monthly cost on their websites.
Basically, they show you an amount that equates to how much you will have effectively paid, IF and WHEN you have claimed all of your cashback.
If you miss just one claim then the figure is incorrect.
eg: £30 a month deal offered with £48 cashback
£30 x 24 months = £720 – £48 = £672 divided by 24 months = £28 a month
We always show you the exact amount (inc. VAT) that you will pay to the network each month on our website
What is Automatic / Instant Cashback?
The retailers we feature on our price comparison website offer two types of cashback:
1) Automatic Cashback
2) Redeemable Cashback
Automatic cashback is paid directly into your bank account or via a cheque from the retailer after a set period of connection. (Usually up to 90 days).
You’ll find full details of any cashback when you click through to the retailers website to place your order.
Redeemable cashback is great for those that are organised. It is usually a higher amount than ‘automatic’ but has to be claimed at different intervals throughout your contract period.
All of the retailers we feature have their own terms and conditions for claiming your cashback.
Typically, they will split the total amount into 5 or 6 equal payments
You’ll need to send copies of your monthly bills within a set window to claim each amount at stated times during your contract period.
eg: Months 9, 12, 15, 18 and 21
The retailer will send you full details of how to claim with your new phone.
Are Cashback deals worth it?
Our advice is, if you are confident that you are organised enough to remember to claim all of the cashback amounts, then you’ll make some great savings …
For the rest of us, we recommend choosing the lowest priced monthly plan that offers your required data allowance with the smallest (if any) cashback amount.
You can sit back in the knowledge that you bagged the cheapest deal without having to worry about sending copies of bills half way through next year!
Of course our advice is different for those that have enough to afford an upfront cost who probably won’t be reading this cashback article …
Get your calculator out and work out the cheapest overall cost over 24 months.
You’ll find that 9 times out of 10, if you pay an upfront cost for your chosen plan, you’ll make substantial savings over the contract term!
