5 Reasons to Avoid Cash Back Rebate Cards

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Last updated on July 25, 2019 Comments: 17

Not too long ago, I took advantage of a sale on some photography equipment. I thought it was a good deal. I thought about it for a long time, and then I decided to go ahead. The seller, though, had manipulated the sale price by offering a manufacturer’s mail-in rebate of $300 in addition to the retailer’s discount.

This isn’t uncommon. When manufacturer’s want to move their products more quickly, they often offer mail in rebates. Or, more often these days, rebates that you can claim online at the manufacturer’s website. These rebates come directly from the manufacturer, so they often stack with discounts directly from the retailer.

With this particular rebate in question, I waited a long time before completing the paperwork. It was one of those things I just kept putting off, thinking I’d get to it shortly. I almost missed the deadline and forfeited that $300.

That’s just one of the ways manufacturer rebates can get you. Then they almost got me again. A few weeks later–after I’d nearly forgotten about the whole thing–a prepaid American Express card arrived in a nondescript envelope I almost tossed as junk mail.

Since I got it, I’ve used the rebate card a few times. But now it has $13.74 on it. And I keep forgetting to use it to spend the balance down to zero.

These days rebates in the form of prepaid cards are pretty common–probably more common that check-based rebates. And these cards work just like they should, giving you money in exchange for buying a particular product or service. However, there are a few gotchas that should make you think twice before making a purchase that involves a cash-back rebate, especially one that involves a rebate card. Here are a few:

1. You have to spend to see your savings

With a rebate check, you can put your cash back right back in the bank account from which you paid for your discounted item. All it takes is a deposit, and you’ve effectively received the product for the discounted price.

With a rebate card, you have to actually spend the money. If you spend it on something everyday like groceries, this may not be a problem. But sometimes having that rebate card makes you think of it as “extra” money, and you wind up spending it irresponsibly. Branded rebate cards might make this even more likely if you feel compelled to spend the rebate card on more of the company’s products or services.

The Fix: One way to get around this issue is to reserve the rebate card specifically for an everyday expense like groceries or gas. Just be sure that you enter those transactions into your budget tracker so it doesn’t look like you suddenly spent a couple hundred bucks less on groceries this month.

Another option is to use the rebate card to buy something like an Amazon gift card or a gift card from your typical grocery retailer. This will restrict your spending to specific places, making it less likely that you blow the money. (Though I’m as likely–if not more likely–to blow money on Amazon as anywhere else.)

2. You may be charged a fee

When you get the rebate card, check the back. It’ll most likely tell you there, if you’ll be assessed a fee. Some cost a couple of dollars a month against the card’s balance if you don’t use them within a set amount of time.

The Fix: Again, you can sidestep this particular issue by making a point to spend down the card quickly on everyday items. Or you can transfer the balance to another gift card or prepaid card that doesn’t have any fees. You can even buy no-fee gift cards well ahead of time for holiday and birthday gifts if you really can’t think of another way to spend that money.

3. You may leave a balance on the card

If you’re anything like me, you’ve left balances on gift cards for years without even realizing it. Maybe they sit in a basket at home or in your wallet. You might think they’re empty, but they have a few bucks left on them. Then you can run into the problem of fees, which can eat up that remaining balance pretty quickly once they kick in.

The Fix: You guessed it! Your best bet is to spend that rebate card quickly on purchases you would have made anyway. Or you can spend down the balance by using it in a transaction that’s worth more than the balance of the card. This is easy to do with $20 rebates. And that way you get rid of the full balance in one fell swoop. Of course, that’s harder if you have a $300 rebate card sitting around.

But you can keep track of the card’s balance pretty easily. Keep a Sharpie in your car’s center console. And then write on the card its balance and the date after each transaction. You should be able to find the balance on your receipt. That way you don’t lose track and suddenly find five years later that you still have $15.85 to spend on that random rebate card you got for who-knows-what.

4. The card can be stolen or lost easily

Rebate checks definitely have an advantage here. You’re more likely to cash them right away, where they’ll be safe in your bank account. But rebate cards can easily be lost or stolen, and then you’ll be up the proverbial creek. If you find the card later but someone else has spent the balance, you’re also out of luck.

The Fix: The easiest fix for this issue is to turn the rebate card into a digital gift card. You can do this by buying an Amazon gift card with it and then transferring the balance to your Amazon account. As long as your Amazon account is secure, the money will be available when you’re ready to make your Amazon purchase. (Which if you’re anything like me right now will be in approximately 2.54 days.)

5. Cashiers may not know how to use the card

One potential problem with these cards, especially if you’re trying to get rid of the rest of a balance, is that employees may not know how to use them. This seems to be a more common issue at restaurants. You’ll have to split the purchase into two payments, and you may need to know the exact balance of the rebate card to do that.

Some point-of-sale systems make this a hassle. And it can be frustrating if you’re planning to spend down the rest of your card in a larger transaction but can’t because the cashier can’t figure it out.

The Fix: I’ve found that restaurants usually have a set process for split-payment transactions that involve their own gift cards. So if you want to spend the rebate on dining out, consider using it to buy a gift card from your favorite restaurant, and then use that card to pay. It’s kind of a hassle, but it can work.

Despite these drawbacks, receiving a rebate for a purchase is better than not receiving a rebate for the same purchase. It would be great if retailers offered a choice, but that’s not how the rebate system works most efficiently for the retailers. For many people, a rebate check is a better choice than a prepaid rebate card. But if you don’t have that choice, just understand the potential pitfalls of rebate cards and use our tips and tricks for overcoming them.

Article comments

justbill1931 says:

Rebate cards are a good way for the companies to track when and where you spend that money. Your information is a valuable commodity. They will then sell this info to their “third party partners” (i.e. marketing firms), effectively offsetting the rebate. Then the marketing firms just spam you with more stuff from that category. Example: when I use a card at Red Lobster, I get more offers for restaurants in my mail box and email since they now know I like to go out to eat occasionally. Not only do I get the usual spam from the retailer that offered the rebate, now I get it from Cheesecake Factory and Olive Garden. These cards were a boon for marketing departments, but a major pain for the consumer. BTW, in case you’re wondering, that’s also the reason why you can’t just walk up to an ATM and just cash out. No marketing info. The best way to avoid this is to just respend it back at the retailer. An example of this: I got a rebate card from Discount Tires. When the card showed up, I just used the card to pay part of my Discount Tire credit card bill. They can sell that info if they want but the net effect for me is that I just get the same ads as before. And the best advice from the article above, spend it all in one shot. The more places you spend it, the more info they have about your spending habits, and the more stuff you’ll get in the mail…

RMCook says:

Thank you VERY MUCH for useful information! I just got one in the mail today and was very unsure.

Anonymous says:

Really… American Express charges $2.00 per month after 7 months of non-use of a rebate card. So, what is the point of the expiration since they will suck the balance down to nothing quickly. And they do this because it costs them money to not process anything on the card?

Anonymous says:

I usually spend it right away, if the rebates less than $20, on a gift card from cashstar. I got at least 8 different cards from 2017 Macy’s black Friday and once I got it, I cashed them by buying gift cards such as dunkin donuts cards which has no expiration date on the app, gap, and other restaurants. I never try it with groceries though. The key is to spend it right away since it has an expiration date and if you spend it little by little, you will forget the leftover balance there.

Anonymous says:

So with that, they make it seem that you are having a good deal when all you have are extra fees.

Anonymous says:

Some stores have a payment system that will use the remaining balance of a pre-paid card. We have 2 different Kroger store brands in this area. One and only one of the two has a payment system that will use the remaining balance. So if you have $14.50 on a pre-paid card and spend $15 it will automatically take the $14.50 and ask for payment of the remaining $0.50. This is real hit and miss but if you know of a store that will do it works well.

Donna Freedman says:

A tip for anyone wanting to take advantage of those manufacturer rebates: Make it an ironclad rule that you cannot use whatever you bought — you can’t even put it together — until you’ve filled out the rebate form and mailed/e-mailed it off.
Sort of like “You can’t play with the toy Aunt Martha sent until you write the thank-you note.”
You’ll thank YOURSELF later when you don’t miss out on the $300.
Wow. That’s a big rebate. But I, too, would have preferred a check.

Anonymous says:

I love rebate cards just as much as I love rebate checks. Why? Because there are ZERO hassles if you know about one simple trick – Amazon Payments. If you don’t have an account, open one with Amazon and then you can send up to $1,000 free using credit cards and it works for prepaid cards too. When I get a prepaid card it takes just a few minutes to transfer the full balance to my wife’s Amazon Payments account and then immediately to our joint banking account. If you have existing cards with low balances like $8.25 you can transfer the exact amount and cut up the card. So get yourself and your significant other a free Amazon Payments account and all these rebate cards become good as cash!

Anonymous says:

Great tip. I hadn’t thought of using Amazon payments.

Anonymous says:

I wrote up a post on how Amazon Payments can be used to eliminate this issue and described other potential benefits here: http://insourcelife.com/why-you-should-open-an-amazon-payments-account/

Anonymous says:

Another Amazon option is to use it to buy an Amazon gift-card. It is useful to have Amazon credit if you use Subscribe and Save. Your monthly toilet paper shipment will use Amazon credit balance first then charge the rest.

Anonymous says:

You forget the “float”. They write a check and the money is gone from them right away. If you take “only” a month to use the rebate card they get to use your money for that month. This is how insurance companies make money, so why wouldn’t consumer goods companies be happy to get the same deal?

Luke Landes says:

Great ideas, Jim, Jim, and David. An Amazon.com gift card is easier to keep track of. Personally, I still have a $50 Amazon.com gift card balance left over from around the same time — apparently I haven’t been buying much from Amazon.com. But that’s a good idea. And the grocery store gift card forces spending for (mostly) necessities, so that’s a good choice as well.

Anonymous says:

I just go buy a grocery store gift card with it and use it to buy my groceries for however long it lasts. It’s easy to do, there aren’t any fees tied to the card, and I’m not tempted to spend any differently than I normally do.

Anonymous says:

Debit cards are definitely not as nice of a way to get a rebate as a simple check.

When I get these things I try to immediately convert them to a gift card that I know I can use. That makes it more convenient.
1. Use the entire balance to buy a Amazon gift card on Amazon.com. Most people can use Amazon credit for something useful. But annoyingly some prepaid cards won’t work on Amazon.
2. Go to the grocery store and use the debit card to buy a gift card of your choice.

Anonymous says:

While I agree that rebate checks are generally better and make more sense for people who want to bank the rebate, one of the simplest ways to use your full rebate card amount is to buy yourself an Amazon (or other retailer you often shop at) gift card. You can buy these in any amount (e.g. $13.74 if that’s your remaining balance) and Amazon will simply apply your gift card balance to any future order before charging your credit card.

No fees. No worrying about misplacing the card. And no leftover balance.

Anonymous says:

Exactly what we do. Sometimes we buy the amazon gift card at the grocery store as they often have double rewards points, sometimes 4x.