Watch rules on prepaid cards for rebates

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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.

Use the card immediately. When it comes to rebate cards, the faster you use them the better. Though some complain that many rebate cards expire too quickly, they actually expire no sooner and in many cases later than a rebate check would, says Wright. “The average expiration date for a rebate card is about six months whereas checks expire in 90 days,” she says. No matter what the expiration date is, it’s stated clearly on the card. Make a note of the date as soon as you receive the card.

Identify fees you can control. While fees vary on different rebate cards, some can be avoided. Sometimes fees are attached to rebate cards with lengthier expiration dates, says Wright. The money collected is used to pay for the technology that tracks and verifies the card’s balance, she adds. However, in many cases, these fees are only applicable if a balance remains on the card after a set number of months. If you use the rebate card before the expiration date, you won’t be hit with the extra charge.

Take advantage of technology. Like debit cards, rebate cards let you spend as you go, so you can make one purchase that uses the entire amount or multiple smaller purchases. However, Consumers Union points out that some cashiers may have a difficult time processing “split tender transactions,” which are used to divide the bill if the funds on the rebate card don’t cover the entire purchase. To avoid the possible frustration, monitor your card’s balance (some cards let you do this via the Internet or the phone) so you always know what you have available to spend.

Act fast if a card is lost. The good thing about rebate cards is they can be tracked so merchants can cancel one if it’s lost or stolen, Wright says. But if a stolen rebate card has already been used, you’re not protected by the same rules that apply to debit and credit cards, limiting your liability or allowing you to recover your money. Again, the cash on a rebate card is not your money as with a debit card, nor is it money you’re liable for as with a credit card. Think of rebate cards as cash. It’s up to the merchant to issue another card or not. To improve your chances of getting a lost rebate card replaced, let the merchant know immediately if you’ve misplaced the card so the card can be deactivated and a new one issued, Wright suggests.