NEW YORK — It’s only a rebate if you get the money back.
With the holiday shopping season around the corner, retailers will be dangling rebates to get shoppers to buy smart phones and other shiny new toys. But the offers can come with catches that limit your savings.
The premise of a rebate is simple enough: Pay the full price at the register and get money back after filling out some paperwork. A check is issued within weeks and everyone is happy.
Yet that’s not always how it plays out.
Shoppers often don’t bother to register online or mail in rebate forms. And even when they do, they might not cash the checks they receive. Rebates also are increasingly issued on prepaid cards, which opens a whole new set of issues.
If you’re considering an offer, here’s what you should know:
A little background
Before diving into the specifics, understanding the psychology behind rebates may help shape your buying decisions.
The offers have a twofold benefit for businesses; rebates mobilize shoppers to buy, yet companies don’t have to give everyone the advertised discount.
That’s because even in the best case scenarios, only about half of eligible consumers bother redeeming rebates, according to Hal Stinchfield, CEO of Promotional Marketing Insights in Minneapolis.
One of the biggest factors that influence whether shoppers redeem a rebate is the perceived value of the discount.
For example, few would bother mailing in a rebate form for $1 on a $100 purchase. But redemptions would likely go up substantially for a $1 rebate on a $2 purchase.
Customers are also more likely to mail in rebate forms if they’re handed the necessary materials at the register.
Ultimately, keep in mind that a rebate is a psychological pricing strategy to increase sales. The discount doesn’t reflect demand for the product; rebates are often offered as soon as a new item hits shelves.
Before you cash in
If a steep rebate offer catches your eye, it’s worth shopping around before you act.
Some discount chains such as Best Buy and Target don’t offer rebates, citing the inconvenience they pose for customers. Yet their prices may be as competitive.
So if a cell phone is selling for $150 after a rebate at one store, you might be able to get it for a similar price without having to go through the hoops of the rebate process, said Stephen Baker, who specializes in consumer electronics for the marketing firm NPD Group.
Also make sure there’s no chance you’ll want to return the item, since you won’t be able to once you start the rebate process. That’s because customers typically need to cut the bar code from the packaging and mail it in with their paperwork.
Using the rebate
Once you get a rebate, the next step is making sure you use it.
This is a little more complicated than it sounds now that more rebates come on prepaid cards. These cards have a Visa, MasterCard or American Express logo and can be used wherever those cards are accepted.
The card may even bear your name, but don’t be fooled into thinking it provides the same protections as a credit or debit card. The entire value of a rebate card could be lost unless a stolen card is reported to the issuer in as little as 24 hours.
The exact terms of a rebate card can vary significantly depending on the program, so carefully read any accompanying materials.
One way to avoid losing any value on a rebate card is to go to your bank and cash it or deposit it into a checking account. Visa says not all rebate cards can be cashed or deposited, but the materials that come with the card should note if that’s an option.
Cashing or depositing a rebate card also eliminates the possibility that you won’t use its entire value.
