How do cash-back apps work and are they worth it?

Woman sitting in an office at her desk, holding a cell phone and looking excited and happy

The site or app you choose records your purchases, and you earn money once your transactions are approved

(Image credit: sturti / Getty Images)

published 11 October 2024

You have likely heard about credit cards that offer cash back on purchases as part of their rewards program — but you may not be as familiar with another easy way to earn money while shopping: cash-back apps and websites. Like credit cards, these offer to put a percentage of the amount you spend back in your pocket and work on a range of purchases, including online shopping, groceries and gas.

As an added bonus, some of these sites and apps also provide additional money-saving tools, such as "price tracking, price comparisons and the ability to quickly scan the web for coupons," said Bankrate. While the potential upsides may seem clear, it is important to first understand how these platforms work and get a sense of any possible drawbacks.

How do cash-back apps work?

Cash-back sites usually operate as follows: "First, you download the app or extension and sign up for a free membership," then "you sign into the cash-back site, use a link for the store you want to shop in, and start shopping," said Investopedia. The site or app you are using (there are a variety to choose from) then "records your purchases, and you earn money after your transactions are approved and go through."

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You will often receive the funds once "your cash back earnings hit a certain amount," at which point you are "able to withdraw the money into a bank account or have your payout sent to a financial service like PayPal," said Bankrate. Additionally, said NerdWallet, "some apps offer points that can be redeemed as a price break on subsequent purchases."

Usually, you will use the cash-back site or mobile app to browse available products and deals, though if you prefer, "you can install a desktop app or browser extension that notifies you of potential deals as you shop," said Bankrate.

And where exactly does the money you are getting — simply for shopping — come from? Put simply, said Bankrate, through referrals. Since "every time you use a cash back app to make a purchase, a retailer gets paid," that means retailers "are more than happy to pay cash back sites in exchange for sending shoppers their way."

Why use a cash-back app?

"Rewards apps are an easy way to earn money and get cash back for everyday purchases," said The Ascent, especially given that many of the top cash back apps are free. Although the rewards and amount of cash back you can earn will vary, downloading a cash-back app or website is a passive method of getting some extra pocket change.

Even better, some of the cash-back apps and websites can help you ensure you are getting the best deal possible when you shop. For example, with one popular cash-back app, Honey, "you can look through the top coupons to determine the best deals," said CNBC Select. Plus, "if you shop on the website of a retailer on the app, there will be a toolbar at the bottom to show you any available promo codes." Some apps may even let you know if you can get a better price elsewhere.

Are there any risks or downsides to cash-back apps?

If you are hoping to quickly get some cash in hand, cash-back apps might not be your best bet. One downside is that these "apps and websites don’t always issue your cash back in a timely manner," said Investopedia. Further, "there may be a cap on how much cash you can earn back."

Taking maximum advantage of cash-back apps can also require some strategizing. "Some cash back sites are better suited for certain purchases than others," said Bankrate, so you will need to do your research to figure out which one best aligns with your shopping habits.

Further, while cash-back apps are generally "free to download" with no "monthly subscription or a one-time fee" involved, "some may charge inactivity fees, so make sure you read the fine print before you choose the right app for you," said The Ascent.

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Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.