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Why retailers use rebate cards instead of checks?

The two last gadgets I bought were from Staples and Radio Shack. Both had mail-in rebates and both came in a form of a Rebate debit card issued by Visa. This is a move from rebate checks that the companies used in the past and I should add a move I don’t like.

In case of a check I would simply deposit it into my account and life goes as normal. In case of a debit card, I can’t just withdraw the funds. According to the instructions I have to use it as a credit card which raises a couple problems. First, I have to keep track of the remaining balance and make sure I don’t overcharge. Second, if I need to charge more than it is left on the card then I have to use partial charge - something online stores don’t do.

The overcharging is a bigger issue that it may seem. No, you don’t get slapped with a fee. Instead the retailer attempts to put a hold on the funds and you can’t use the card until the hold is released (a few days in my case).

So why retailers move to debit cards? Since using cards is not convenient for the customers it has to be done because it is convenient for the retailers. Here are a few things that cards enable retailers to do:

  • They have your money until you use it - the balance on the card is in the retailers’ account until you actually use the card to buy something, and every bit helps the business especially in the kind of economy we are right now
  • They make money off of your purchases - Visa typically charges a fee each time you use the card for a purchase. The company issuing the card may well get some charge backs. Even if they don’t, I am sure Visa will gladly cover the expenses for issuing and mailing out these cards, something retailers have to pay for themselves if they use checks
  • They keep the remainder of the balance - If you discard or lose the card w/o completely using it then the issuer keeps the remainder of the balance. Why would you not use it all? Because of all the difficulties associated with calculating the remaining balance.

All of the above is a speculation based on my experience and common sense, so don’t take things for granted. The explanation however seems very plausible to me and I would really like to find out if I am right, so if you have any insider knowledge on how things work in the marketing department of these companies, please leave a comment.

Photo courtesy of licokao @ Flickr

Rebates suck!

Unopened rebates tossedEver wondered why you ain’t getting that rebate check in the mail? This might enlighten you a bit. This pile of envelopes is more than 1300 unopened mail-in rebate forms a Mercury News reports found in a dumpster near Vastech, a small tech company selling USB hub products. All of these rebates came from customers who bought Vastech products at Fry’s Electronics stores.

An employee of nearby Dominion Enterprises found the letters, along with hundreds of others addressed to Vastech, at his company’s dumpster. He turned them over to his boss, Joel Schwartz, who gave them to me. All of the letters were addressed to UR-04 Rebate or some variation of the product name at the Vastech address.

When I read news like this, I start to believe that folks at Antirebate have very promising marketing strategy. ;-) The entire system of rebates is clearly crippled and it is not surprising that some companies who value customer satisfaction wow to totally eliminate rebates from their store shelves. Here it comes from OfficeMax and from BestBuy. Not that they really can do anything in practice (both companies still have rebate programs alive and kicking). With competitors offering rebates, it would be hard to stay in business should OfficeMax and BestBuy really decide and abandon rebates altogether.

Do you buy products with mail-in rebates? What is your success rate in receiving the check?

Update: More thoughts on rebates and price-matching: MIR, PM, AC, YMMV - Is it worth the hassle?

MIR, PM, AC, YMMV – Is it worth the hassle?

Forums at FatWallet and SlickDeals are full of shopping techniques that sometimes allow you to bring the product price into the negative territory. That is right – how strange this could sound – the store ends up owing you! The most elaborate ones I have seen require use of price matching, mail-in rebates, and stacked in promotional coupons – all at the same time.

While price matching sounds like a good idea when you need that warm feeling that you don’t overpay (and to get on deals like this) – it sometimes can end up costing you a lot of time and effort. I will confess, I myself took this route not once. It often turns into a challenge: “Will I be able to pull it off?” I am sure the “boasting rights to the best price” play certain role in it as well. But let’s face it. There are so many better things to do than arguing with the store manager over the price for that DVD.

Due to overall customer dissatisfaction with mail-in rebates some retailers are bailing out of the program altogether. The whole concept of mail-in rebate is so unpopular that certain web sites have used it to their advantage by offering only no-rebate bargains while others have been monetizing on the challenges you will face should you get on the MIR hook.

If you are still not convinced here is some must read material to get you started. In any case it is up to you to decide what you want to do with your time.




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