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How Do Rewards Malls Offer Discounts?

August 22, 2012
Shopping, Shopping News
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We adhere to strict standards of editorial integrity. Some of the products we feature are from our partners. Here’s how we make money.

On the surface, these rewards malls look too good to be true. Discounts on your online shopping, just for starting on one website then clicking through to another? Yup. Plus, it’s actually a good deal for everyone involved.

One quick note – when using rewards malls, there are a few terms you should know:

Rewards Mall: A website that gives you cash back, points, or miles at hundreds of participating retailers.

Shopping Portal: Another term for an online rewards mall.

Retailer: The actual seller of the product you want to buy. Retailers are also known as merchants. Examples include Target, Kohl’s, Office Depot, and Amazon.

Loyalty program: A membership-based incentive program run by credit card issuers, banks, or travel companies. Examples include Chase Ultimate Rewards, United MileagePlus, or Hilton HHonors.

Affiliate Network: A web service company, hired by a retailer, that finds cash back sites and bloggers to promote the retailer’s online store. Examples include Linkshare.

Third party site: A third company (not the retailer, not the owner of the loyalty program) that administers the loyalty program company’s online rewards mall. Examples include Cartera Commerce and FreeCause.

Revenue from Commissions

Rewards malls earn a commission from the retailer where you make your purchase. The rewards mall, in turn, offers part of that referral bonus to you.

A hypothetical: Target offers eBates.com a 20% commission every time the mall sends a customer to Target. If you make a purchase at Target through eBates, you and eBates split the 20% commission right down the middle, making 10% profit for eBates, and 10% savings for you. These savings come in points, miles, or straight cash back.

These numbers are for example purposes only, but generally cash back sites share about half their commission with you. It’s a delicate balance: rewards malls have to offer competitive rates to their customers, otherwise customers will leave for other malls. But the rewards mall has to make money too.

Role of Third Party E-commerce Sites

At most credit card issuer malls and travel malls, there’s one extra layer. Many rewards malls are run by a third-party e-commerce site, such as Cartera Commerce or FreeCause, that acts as a middleman between the retailer and the bank or loyalty program.

Here’s how it works:

  1. The third-party site buys points or miles from the loyalty program.
  2. The third-party site attracts consumers to its rewards mall with said points or miles.
  3. After your purchase, the retailer gives the third-party site commission.
  4. The third-party site gives you the promised amount of points or miles.

What makes it all work: The third-party site pays less for the points or miles than they receive back in retailer commission. Money in > money out.

 To be clear: when you shop at United Mileage Plus Shopping, United Airlines’ online shopping portal, you’re not shopping with United. You’re shopping with Cartera Commerce, the third-party e-commerce site that United outsources to.

Third-party sites connect retailers and cash back rewards malls as well. Affiliate networks like Linkshare are contracted by retailers to find the retailer suitable cash back rewards malls and bloggers who want to display banner ads for the retailer. The retailer gives the affiliate network part of the commission too for their services.

So, where to start?

As you can tell, there are a lot of rewards malls out there, all offering different discount rates at different stores.

Choosing where you want to shop isn’t just a matter of where the rate is highest – you have to consider whether you have the card issued by a certain creditor and how much you value miles against cash back. Check out our discount tool to start. We put everything in one place to make for a easy and fun online shopping experience. Happy discount hunting!