5 Reasons to Avoid Cash Back Rebate Cards

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.