Are Rebates Scams?

With holiday shopping ramping up, 'tis the season for rebates, but there's usually a lot involved in actually receiving them - so much so that people sometimes ask if rebates are all just one big scam.

They're not, says CBS News Business and Economics Correspondent Rebecca Jarvis, despite the detailed, lengthy process.

On "The Early Show," she explained how you can make sure you actually receive what you're entitled to:

The offers can certainly be enticing, but frequently come with catches that cut into your savings.

Rebates move merchandise and promote new products, so manufacturers like them -- especially because they so seldom have to pay out: Four-of-ten people who qualify for a manufacturer's rebate never collect.

One of the biggest factors that influence whether shoppers redeem a rebate is the perceived value of the discount. Keep in mind that a rebate is really a psychological pricing tactic to try to increase sales. The discount doesn't reflect demand for the product; rebates are often offered as soon as a new item hits shelves.

Claiming a rebate can be lots of work -- gathering the serial number, sticker or label, original receipt, UPC code and box top; filling out (letter-perfectly) an official rebate form, all by a tight deadline. The last requirement is patience. And after all that, it can take eight-to-12 weeks to get the refund. Companies say fraud is a big reason they make you jump through hoops - and NOT to try to make it less likely you'll seek to collect!

It used to be you'd pay the full price at the register and get money back after filling out some paperwork. A check would be issued within weeks. But now, rebates are increasingly issued on prepaid cards, so you need to ask what form the refund will come in.

Prepaid cards have a Visa, MasterCard or American Express logo and can be used wherever those cards are accepted. However, they don't offer the same protections as a credit or debit card. The entire value of a rebate card could be lost unless a stolen card is reported to the issuer in as little as 24 hours Rebate cards also aren't subject to the new federal regulations on gift cards that ban inactivity fees in the first year and expiration dates for at least five years after the card is issued. So, the expiration date on a rebate card could be much sooner -- sometime expiring after just one year.

Rebates can also come on store gift cards, which may not appeal to some people. Retailers like them because they bring shoppers back to the store to buy more.

Also, make sure there's no chance you'll want to return the item, since you won't be able to once you start the rebate process. That's because customers typically need to cut the bar code from the packaging and mail it in with their paperwork.

It's a good idea to mail in rebate forms sooner rather than later. If a company says something's missing, you'll need time to get it. The redemption deadline is usually within 90 days or so. But the number of buyers mailing in redemptions starts falling off after about six weeks, suggesting that procrastination makes it less and less likely you'll get around to it.

One way to avoid losing any value on a rebate card is to go to your bank and cash it or deposit it into a checking account. Visa says not all rebate cards can be cashed or deposited, but the materials that come with the card should note if that's an option. This comes with a couple of benefits. To start, you earn interest on the money by putting it into a savings account. Or you could earn rewards by spending the money through a credit or debit card.

Cashing in or depositing a rebate card also eliminates the possibility that you won't use its entire value. As with gift cards, there's the chance you could tuck it away into a drawer somewhere and forget that there's still money on it.