Cash-strapped Australians could save money this Christmas by doing their shopping on apps that give back a portion of the sale price to consumers.

These retail cash-back schemes are rapidly gaining popularity as retailers vie for attention and consumers seek ways to stretch their dollars further.

More than 800,000 Australians have signed up to major provider Cashrewards, which has just gone public. And Singapore-based ShopBack claimed it had one million active Australian users in February.

The overall industry has grown so rapidly in the six years since Cashrewards was created that 3 per cent of online purchases in Australia now start on cash-back apps.

So, how do they work? And are they good for consumers?

Sounds too good to be true? Here’s how it works

Retailers pay the cash-back providers a commission of between 2 and 20 per cent for referring customers – with the largest providers servicing more than 1500 local and international brands.

The providers then pay consumers a percentage of this commission fee – in the form of a delayed rebate – when they buy the retailers’ goods via the provider’s app or website.

The percentage varies between retailers and is often affected by the cost of the purchase.

Canstar’s editor-at-large Effie Zahos told The New Daily shoppers hoping to capitalise on the trend should sign up to all the major players on the market.

And that’s because these competitors, who have significant overlaps in their list of retail partners, often have vastly different offers.

“You can actually get a fair bit of coin back. Exactly how much varies between retailers and they may sometimes have minimum purchasing limits,” Ms Zahos said.

“When I last looked at them, some of the more lucrative deals could be found on items like clothing and footwear, but the bigger items such as fridges don’t have as large a cashback offer.

“But it’s important to find out when you actually get your money, and the biggest gripe consumers have is the speed of the refund, because you might need to have $10 in credit before you can cash it out.”

As with anything, there is a catch

Most cash-back providers will generally pay customers their rebates between 60 and 90 days after they bought their products, to account for retailers’ refund periods.

Ms Zahos said this is bad news for consumers who want a timely spending boost.

If you’re looking for some fast cash, I’m afraid it’s highly unlikely you’ll be seeing it before Christmas,” she said.

And like other retail websites, cash-back apps – which store details on customers’ spending behaviour to inform their partners and their targeted advertising – are also vulnerable to the risk of data breaches.

ShopBack suffered one such breach in September, with hackers receiving unauthorised access to non-credit card details the app held on users.

Ms Zahos also emphasised that shoppers should not solely rely on the apps to inform their spending behaviour, as they may unintentionally overlook larger discounts available in bricks-and-mortar stores.

Tips when using cash-back apps

• Compare all offers and discounts on the market (both within the apps and through retailers’ sites) before settling on a deal
• Don’t let a cash-back app affect your purchasing habits – only use them when you actually plan on shopping
• Read the terms and conditions to see what consumer data and other details the app will store
• Check how long a cash-back app takes to deliver credits, as rebates do not hit accounts straight away
• Check the terms and conditions to ensure your privacy is protected from data breaches.