Millions of consumers intent on grabbing holiday deals by way of mail-in rebates are likely to see fewer checks this year and more plastic designed to lure them back into the store, retail experts say.
The switch from paper checks to plastic rebate cards isn’t new, but the captive marketing it provides to retailers and manufacturers is growing, especially in a down economy, according to those who track the industry.
Industry estimates put the amount of rebates paid in plastic at $4.2 billion in 2008, up by more than 50 percent from the year before, a number that’s expected to grow by even more this year.
The cards work simply: Instead of a rebate check that is deposited into a bank account, the prepaid card is branded either with a store name, known as a closed-loop card, or a major credit-card logo, such as Visa or MasterCard, known as open-loop cards.
The only way to redeem the funds is to buy something else, although a few rebates allow you the cash at an ATM.
“The future of rebate cards is tremendous, not just for the captive marketing where consumers come back into the store for purchases, but the ability to track and manage that data,” said Brian Riley, research director for bank cards at TowerGroup, a research firm that tracks consumer credit-card spending.
In a day where as many as 60 percent of consumers eligible for a rebate never bother with the paperwork or online process, retailers are vying for whatever money they can.
“Retailers are trying to find any way possible to get consumers into the store, especially in this economy,” said Christopher Howes, president of the Colorado Retail Council. “In this way it urges a little more spending.”
The attraction of paper rebate checks was that much of the unclaimed funds remained as a stream of pure profit for manufacturers and retailers.
They also profit from the savings of producing a rebate card — about 6 cents — as opposed to the expense of a rebate check — about $1.85, Riley said.
“That alone is worth millions to retailers and manufacturers,” he said.
The plastic cards, though they encourage spending, can also leave money on the table, shortchanging consumers.
If consumers don’t use the entire amount, leaving perhaps a few dollars or cents as a balance, it’s nearly impossible to use the remainder, consumer advocate Edgar Dworsky said.
“It’s not like a store gift card where you can easily check a balance,” said Dworsky, who runs the website ConsumerWorld.org. “It’s the gift that keeps taking. I see no redeeming value in these cards.”
In the end, consumers need to know what they’re really getting if they’re buying with a rebate in mind.
“Rebate cards were never really intended to be a savings on a product,” Riley said. “The challenge isn’t really in spending it. Actually getting the rebate money still remains toughest.”
David Migoya: 303-954-1506 or dmigoya@denverpost.com
