Lending Club Blog

Overvaluing Rebates

We’ve all been lured into a store with the promise of an unbelievably low price, only to find out that a mail-in rebate was involved. In many cases, the rebate makes the offer seem so good that we decide to make the purchase, but we really shouldn’t count on that discounted price until our rebate check is actually in our hands.

Rebates are similar to gift cards in that manufacturers expect a certain portion of them to go unused. Even out of those that do get returned, some will have incorrect or incomplete information rendering them ineligible for a payout. Rebates may also get you to spend more, since your reduced price on the rebated item may lead you to believe that you have some extra money to spend.

It sounds obvious, but reading and complying with the rules of a rebate will make it much more likely that you actually get paid. I take rebates into consideration when making purchasing decisions, but I consider it both ways. First, I look at the price assuming that I’ll never see a dime from the rebate. Then I look at it as though I will certainly get the rebate. In the past, I’ve passed up a slightly lower price, including a rebate, for an alternative that wouldn’t entail the hassle and risk of the rebate. I feel okay doing this for, say, a $5 difference on a $100 item, but would be more inclined to go with the rebated item if the difference were greater.

Rebates offer a price incentive, but it comes at a cost. While the work of getting a rebate is usually fairly simple, waiting for your money can be a pain. If you are too busy to handle a rebate in a timely manner, or if there’s some other factor that may prevent you from receiving your money, comparison-shop as if the rebate didn’t exist. That way, if you do end up getting the rebate, it will be like a little bonus that you could use to treat yourself to a small indulgence or apply in an even better way such as debt reduction or another investment.

Wednesday, August 20th, 2008 at 9:12 am

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