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Stay Away From Rebates

Retailers, desperate to boost sales this holiday season, are resorting to more and more sales gimmicks, including the ever-tempting rebate offer. But like most sales gimmicks, this one may prove to be more flash than cash back to the customer. Before you fall for a rebate offer, make sure you know a whole lot more than just the after-rebate price.

Why do retailers offer rebates?
Rebates are a win-win proposition for retailers. The special offers lure you into the store and entice you to make a purchase at close to full price for the time being. What's more, there's a good chance that they'll get to keep the full amount, since many of us never get around to claiming our rebate offers.

How does the rebate industry make money?
The rebate industry (retailers typically hire special rebate clearinghouses to process claims) makes its money counting on your procrastination, forgetfulness, and inattention to detail. By all accounts, business is booming. Why? Rebate offers often require the customer to take multiple steps in order to receive a rebate check. Typically, the offer is time-sensitive (the item must be purchased within a certain time frame, and then the rebate documentation must be received within a set period after purchase -- often 30 days). The rebate clearinghouses may require several types of documentation -- the UPC from the packaging, the receipt, and a rebate claim form -- all which must be filled out according to their standards.

Then there's the danger that your claim may be "lost in the mail," in which case you'd have to provide the above information all over again. Ahhh, but did you keep copies? Are you still within the window of eligibility? Since many companies don't even process rebate claims for several months (well beyond the standard 30-day time limit post-purchase), good luck getting a second chance.

Gathering all this information, filling out the forms correctly, and getting them in on time may not sound all that onerous at first blush, but the plain truth is that few of us actually follow through to completion. That can spell a big boon to both the retailer and the rebate clearinghouse whose profits go up, up, up, the more we humans behave as humans do. Take the example of a 2005 rebate offer extended to 100,000 new TiVo (Nasdaq: TIVO  ) subscribers. An estimated half of the eligible households reportedly never claimed their $100 rebate, spelling an additional $5 million in profit to the company. That's no small potatoes.

So how can you beat them at their own game?

  • Shop for the lowest price outright, rather than looking for rebate offers.
  • If you do go for the rebate offer, make a rule for yourself that you can't use the item (other than to check that it works) until you've completed the paperwork.
  • Always keep copies of all the paperwork, including the UPC. Should you have a problem with the item and need to return it, you may need this information.
  • Read and re-read the fine print. You don't want your claim denied because you only enclosed one copy of the receipt, not two, or some other small requirement.
  • Do a quick online search regarding the retailer you're considering and its history with rebates. Some companies are notoriously bad at honoring rebates in a timely way, if at all. Others offer an online claims process that can expedite your rebate.
  • If something goes awry with your rebate and you feel the company is in the wrong, put your protest in writing.

This article is adapted from theMotley Fool Green Light Money Answers archive, which features more than 100 articles on personal-finance topics such as taxes, credit, and beginning investing, organized by subject and life stage. For access to this content -- plus the current newsletter, back issues, members-only discussion boards, and advisor blogs -- take a free 30-day trial today!  

Fool contributor Elizabeth Brokamp is a licensed professional counselor who regularly talks money with her honey, Robert Brokamp, editor of The Motley Fool'sRule Your Retirement newsletter and co-advisor of Motley Fool Green Light. The Fool has a disclosure policy.


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