Mobile Phone Buzz

What is redemption cashback?

Competition in the mobile phone industry is fierce. While retailers like Carphone Warehouse and Phones4u are battling networks like O2, T-Mobile and Vodafone, niche online retailers are trying to undercut them all. In times of great strife, also comes great desperation, and unfortunately the redemption cashback deal is probably the biggest act of desperation by mobile phone companies large and small. And it is the consumers that are suffering.

Redemption cashback (or chequeback) offers are horrendously complicated, with large amounts of small print. They allows companies to offer a cheap upfront price on a high-end phone, on the basis that a
number of customers will not ever pay that cheap price, but will pay something much more expensive. Lets see how they work…

A redemption cashback example

So lets look at an example. We’ll pick on e2Save in this case - an online division of The Carphone Warehouse - but its worth noting that they’re not the only ones who do it. Lets say you buy a redemption cashback deal like the HTC Touch on the top right. Its a great offer - you pay a very low cost for a limited period of time, and therefore its almost like you’re getting a deal for £35 per month when it would normally be £45 per month! You also get a great phone free with the bargain!

The redemption cashback trap

But what’s the catch? Unfortunately, depending on how organised you are, it can be quite a big one. To get this deal, you actually pay the full monthly amount (£45 per month) and then at regular intervals send your statement to e2Save and they’ll send you a cheque for the amount you’re due. Lets have a look at the installment schedule from the e2Save website:

Installment 1 - You will need to claim by sending the bill dated 6 calendar months from the month that you received your handset and you have 60 days from this date to submit your claim. Send us your claim form and monthly bill showing your name, address, mobile number and tariff you are connected to. (this bill must be no older than 60 days from when we receive it and have no balance brought forward.)

i.e. If you purchased on the 1st of April 2008, you need to send in a bill that is dated within September 2008, your claim window is 60 days from the date of that bill.

Installment 2 - You will need to claim by sending the bill dated 9 calendar months from the month that you received your handset and you have 60 days from this date to submit your claim. Send us your claim form and monthly bill showing your name, address, mobile number and tariff you are connected to. (this bill must be no older than 60 days from when we receive it and have no balance brought forward.)

Installment 3 - You will need to claim by sending the bill dated 12 calendar months from the month that you received your handset and you have 60 days from this date to submit your claim. Send us your claim form and monthly bill showing your name, address, mobile number and tariff you are connected to. (this bill must be no older than 60 days from when we receive it and have no balance brought forward.)

Installment 4 - You will need to claim by sending the bill dated 15 calendar months from the month that you received your handset and you have 60 days from this date to submit your claim. Send us your claim form and monthly bill showing your name, address, mobile number and tariff you are connected to. (this bill must be no older than 60 days from when we receive it and have no balance brought forward.)

Installment 5 - You will need to claim by sending the bill dated 18 calendar months from the month that you received your handset and you have 60 days from this date to submit your claim. Send us your claim form and monthly bill showing your name, address, mobile number and tariff you are connected to. (this bill must be no older than 60 days from when we receive it and have no balance brought forward.)

Complicated, yes? As you can see from the terms above, there are quite a few conditions to your cashback claim. Firstly, you have to remember to send in your bill five times during the course of the contract, secondly it has to be 60 days from the date each bill was received and thirdly there can be no outstanding balance. If you miss one claim, some retailers will not let you make any subsequent claims either.

What’s in it for the retailer?

So why is this so complicated? Well many mobile phone companies that offer cashback deals measure what they call a “redemption rate”. This redemption rate is the percentage of customers that actually succeed in claiming back the full discount that they are due. The mobile phone retailers can create these deals on the basis that the redemption rate is low - the more complex it can be within the law the better, as on many cases they won’t have to pay out. This allows them to sell phones with a very cheap upfront cost, knowing that most customers will pay more than the advertised price. And of course it is all legal.

Its also worth mentioning that redemption cashback deals are usually supported by the retailer, not the network. If you buy a redemption cashback deal from the retailer and they go bankrupt, you are unlikely to receive any of your cashback, but you will still be in contract with the network for the full amount.

So should you buy redemption cashback deals?

The safest answer is no, don’t. There are some people out there who are organised enough to take up a redemption cashback deal and regularly claim back what is due to them, but the deals are based on the fact that these people are in the small minority.