credit cards

Watch rules on prepaid cards for rebates

close up of a credit card
  • 83 percent of consumers look for rebates when they make purchases.
  • Rebate cards don't have the same protections as gift, credit or debit cards.
  • If you use the rebate card immediately, you won't worry about the fine print.

Everybody wants free money, so it's no surprise that 83 percent of consumers look for rebates -- a return for purchasing a product or service -- when they shop, according to incentive solution provider Parago. But with an increasing number of rebates arriving in the form of prepaid cards rather than checks, some consumers may easily miss out on the cards' full value if they don't pay attention to the fine print.

"We have been receiving some complaints about rebate cards," says Michelle Jun, a staff attorney with Consumers Union, the publisher of Consumer Reports. Some consumers wait awhile before using the card only to find that it has expired; others are surprised to find that they've racked up fees because they haven't used the cards soon enough.

At the heart of the complaints is the fact that rebate cards come with a range of terms, covering expiration dates, fees and steps to take if a rebate card is stolen. Some rebate cards are open-loop, meaning they can be used at any retailer, whereas others are closed-loop, meaning they can be used only at one retailer.

Adding to the confusion is that they resemble gift cards, which are governed by state laws and will be affected by a provision of the Credit CARD Act of 2009 that prohibits them from expiring before five years or levying fees for one year. But unlike gift cards, rebate cards don't carry those same protections. "A lot of people have the assumption that rebate cards have the same fees and expiration dates as a gift card because they look the same, and they come to find three months later that their cards are now valueless," Jun says.


Free money, different rules

The reason rebate cards don't have the same protections is that, unlike gift cards, rebate cards represent free money rather than an item a consumer has paid for, says Crystal Wright, a spokeswoman for the Network Branded Prepaid Card Association. "Rebate cards are great tools for consumers to access free money from merchants immediately with no hassles and costs of cashing a check," she says. There is no cost to the consumer, so any fees imposed or funds lost due to a missed expiration date don't directly impact the consumer's wallet.

Nevertheless, if you've received a rebate, you want to make the most of it. Follow these steps to avoid throwing away free money.


Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

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