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Cashback websites profiting from payday loans

John Fitzsimons
by Lovemoney Staff John Fitzsimons on 30 May 2012  |  Comments 8 comments

Cashback websites like Quidco and TopCashBack offer money back if you take out a payday loan. Isn't that a little irresponsible?

Cashback websites profiting from payday loans

We’ve written before about why payday loans suck. That sadly hasn’t stopped them creeping ever more into everyday life in the UK though. They have even become part of a storyline on EastEnders!

However, one area I wasn’t expecting to see them was on cashback websites.

I like cashback websites

It’s worth stating off the bat that I have a lot of time for cashback websites. I’ve used Quidco for three years and really don’t have a bad word to say about my experiences. Before that I used GreasyPalm, which was pretty good too.

I’m a big advocate of using the sites wherever possible. When I was ordering flowers for Valentine’s Day, part of the decision-making process was to check which sites offered cashback on my order (and they say romance is dead). It’s an easy way of making a few quid back on money you are going to spend anyway.

But when it comes to advertising payday loans, I feel a little let down.

Earning cashback on a payday loan

It’s one thing to offer cashback on money spent at Interflora. It’s quite another to offer cashback on a loan carrying an APR of 1,700% plus.

If you’re a little short of cash, the idea of getting a loan AND pocketing some free money in the form of cashback can be more than a little tempting. I know that if I was really struggling to get by at the end of the month and saw the offer of £50 cashback from Payday UK on Quidco that it would take a lot of restraint to ignore it.

Here are the payday loan cashback deals currently featuring on three of the top cashback sites in the UK, and how much you can expect to get back if you go for a loan:

Quidco

  • PaydayUK, £50 cashback
  • Payday Bank UK, £45 cashback
  • Payday Express, £30 cashback
  • Cash Bob, £30 cashback
  • Pay Day First, £21 cashback
  • Everything Payday, up to £17 cashback
  • Lending Stream, £17 cashback
  • Safe Loans, £12 cashback
  • Payday Direct, £15 cashback
  • Wonga, £15 cashback
  • UK Payday Loans, £6 cashback

TopCashBack

  • PaydayUK, £45.45 cashback
  • Payday Bank, £45.45 cashback
  • Cash Bob, £30.30 cashback
  • Payday Express, up to £30,30 cashback
  • 62days.com, £25.25 cashback
  • Instant Loans Arranged, up to £20.20 cashback
  • Quidtilpayday, £17.17 cashback
  • Thames Financial Payday Loans, £17.17 cashback
  • Everything Payday, Up to £17.17 cashback
  • Payday Direct, £15.15 cashback
  • Wonga, £15.15 cashback
  • Quid24, £2.52 cashback

GreasyPalm

  • PaydayUK, £40 cashback
  • Payday Bank, £30 cashback
  • Quick Quid, £20 cashback
  • Payday Express, £17.50 cashback
  • Payday Direct, £10.50 cashback
  • Wonga, £7.50 cashback
  • Payday Wedge, £7 cashback
  • Payday Now, £5 cashback
  • Cash Sorted, £4.50 cashback
  • Speed-e-loans, £3-£6.25 cashback

As you can see, some of the top offers here are serious amounts of money. PaydayUK is clearly very keen on going down the cashback route, offering the top rate on each of the three sites I’ve looked at.

I asked Payday UK why it had taken this approach. It responded: "We are committed to lending only when suitable and do not believe cashback offers encourage people to take out inappropriate loans. Rather they ensure we continue to offer our customers the most competitive deals and the best service available.”

Why cashback isn't the way to an interest-free loan

With offers of up to £50, it might be tempting to think of cashback as a way to get part or all of the interest and charges on a payday loan paid for free. After all, borrow £100 from PaydayUK today, repay it within 31 days and you'll pay £29 in interest and fees. But you could earn £50 cashback via Quidco.

However, the Quidco money won't come through for up to 180 days so it won't be available to pay off the loan. If you can't find the money, the interest and charges will soon start mounting up.

And, anyway, most cashback offers won't come anywhere close to covering the high fees and charges you'll pay for taking out a payday loan.

Why the cashback sites do it

I asked Quidco about why the site carries links to payday loan providers. Here’s what it had to say: “We are all about providing the best deal on a range of products consumers are looking to purchase. For some, this is the take up of a payday loan. For those looking for such a product, we want to be sure that they can secure something (in addition to the loan) in the form of cashback.”

It also emphasised that Quidco never actively promotes or pushes these products like it does with other deals on the site.

This last point is certainly true. I get emails on a virtually daily basis from Quidco trumpeting this deal or that, including cashback on financial products. Yet I’ve never seen a mention of a payday lender.

It's a similar story from TopCashBack. The firm explained that it actively considers the ethics of each merchant it deals with, but is not in the business of telling its users what they should or should not be doing.

It added: "We have an unofficial policy not to promote payday loan companies prominently on our home page or in any other highlighted position on the site.  We have turned down offers of payment for such positions on our site from companies in this sector and never proactively promote the earning of cashback with these companies to the media. We do not wish to encourage our members to use them, simply make it effectively cheaper for them if they feel that is their best option."

I’m not sure that excuses these cashback sites though. They are still cashing in on a product which is essentially legal loan sharking. Cashback websites are able to influence our behaviour – just look at the way I shopped around for florists – and so they need to be more responsible about the firms they link to.

Cleaning up payday loans

As we highlighted last week, the Government has launched a clean-up of the payday loans industry, having coerced four trade associations representing lenders in the market to improve their Codes of Practice.

The trouble is that these rules are still only voluntary, so can only have a limited impact. Until we get serious about regulating these firms, and capping the rates of interest they charge, borrowers will continue to get a raw deal.

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Comments (8)

  • BGM
    Love rating 6
    BGM said

    interesting... although if you do have the £30 (as 99% of people would do) to take out the loan and pay it off seems like a fairly risk-free method of getting some beer money for the weekend.

    maybe that's just wha't they want though!! :D

    Report on 30 May 2012  |  Love thisLove  0 loves
  • The Bank Manager
    Love rating 72
    The Bank Manager said

    There's always bound to be a catch somewhere, since even if someone borrowed the minimum sum required to get the highest level of cashback, there is every likelihood that a clause in the agreement would allow for the loan company to charge a sum that would make the cashback of limited value.

    If they did lend you £100 that you repay within say a week and you get £50 cashback in 180 days from Quidco, there would be few people who are able to get involved in such a deal simply to 'scam' the payday loan company. I certainly wouldn't.

    Report on 30 May 2012  |  Love thisLove  0 loves
  • electricblue
    Love rating 643
    electricblue said

    Better things to do with my time than give credence to scumbag loan companies - and that's final straw reason my TopCashBack account closed for good too. I used TopCashBack a couple of times for car insurance, but at renewal time on those and several other policies they were so uncompetitive it was a joke. These parasite loan companies do need to be stopped to protect people from themselves. I live on a very mixed street of mostly working people, but from a range of backgrounds and incomes. Cars parked range from average bangers to brand new minis and Passats and a couple of new BMW's, but every single household is leafleted incessantly by doorstep lenders and loan companies. When some of these creeps knock on the door and I tell them 'I'm not interested, why would I need to borrow at your stupid interest rates anyway?', they look at me as if I'm the one missing an opportunity!

    Report on 30 May 2012  |  Love thisLove  0 loves
  • jonnie2thumbs
    Love rating 90
    jonnie2thumbs said

    http://www.lovemoney.com/creditcards/

    Some important information about this page

    Some of the products featured here are advertisements where the providers pay us for custom our site generates for them. If you have any questions about the products featured please contact us.

    Pot. Kettle. Black?

    Report on 31 May 2012  |  Love thisLove  0 loves
  • hopefultom
    Love rating 43
    hopefultom said

    So I borrow £100, then repay it, plus £29 interest + fees within 31 days and, in return I receive £50 in 180 days time.

    So, in effect my (notional) £100 is earning 42.6% interest for me plus a little more for the 31 days that I borrow it.

    Sorry but I do not buy it. There has to be a catch.

    Report on 01 June 2012  |  Love thisLove  0 loves
  • poppasmurf
    Love rating 31
    poppasmurf said

    hopefultom:

    For the £29 interest you pay on the £100. You make £21 profit (minus the loan set up fee if there is one).

    I couldn't find anything about a minimum limit on when this pays out.

    Is this limited to only new customers or too one loan through quidco only?

    I personally wouldn't get involved with payday loans myself to many horror stories.

    Report on 04 June 2012  |  Love thisLove  0 loves
  • hopefultom
    Love rating 43
    hopefultom said

    poppasmurf

    thanks for your comments

    The points you raise about possible set-up fee, minimum limit & availability criteria should have been covered by the article's author.

    It sounds too much like a free lunch to me, and we know there is no such thing so, like yourself I will be giving giving it a swerve.

    Report on 06 June 2012  |  Love thisLove  0 loves
  • kunks
    Love rating 1
    kunks said

    Although there probably isn't a specific catch to these cash back offers and fees are usually set - so you borrow £100 pay back £129 or £125 or whatever the company has set it at.

    Thing is, people rarely just take out one payday loan and most people will borrow more than £100 if they can. So in a few cases they may lose £21, but in the majority of cases they will make a lot more than the £50 cashback.

    The other factor is, that approval rates are not as good as they make out and in fact they are very selective about who they give loans to. I run a payday site http://paytopocket.com and although I get quite a few applications everyday, not many get approved.

    Report on 07 August 2012  |  Love thisLove  0 loves

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