Like government benefits and payroll, consumer rebates put on plastic are becoming increasingly popular. But a debate has arisen about the pros and cons of rebate cards. Proponents of rebate cards say the product is a convenient and safe substitute for rebate checks, while detractors warn of fees and expiration dates that can reduce the card's value to consumers.
Consumers Union, the nonprofit publisher of Consumer Reports, warned consumers that rebate cards can include fees such as dormancy and balance inquiry fees. Additionally, the Consumers Union said cardholders can experience problems with rebate cards when split-tender transactions are initiated, and when cards are lost or stolen.
According to Michelle Jun, Staff Attorney at Consumers Union, rebate cards often come with dormancy fees: if a card has not been used for a certain period of months, that card is hit with a fee. She said dormancy fees can kick in after "as early as a three-month period." Monthly maintenance fees can "quickly whittle down" balances on cards, she added.
Consumers Union advises consumers to know balances on rebate cards to avoid problems at checkout. If cards have balances that are smaller than items purchased, split-tender transactions are in order; consumers make up the difference with secondary cards, such as debit cards. But the nonprofit said clerks often do not know how to perform split-tender transactions or the POS equipment is not set up to accept such payments.
Finally, Consumers Union said rebate cards do not come with the same protections afforded debit cards. Debit cardholders' liability is $50 if lost or stolen cards are reported within two business days, the nonprofit said. But that is not the case for rebate cards, where cardholders may only have "voluntary protections that could be revised or rescinded at any time for any reason," the consumer advocacy added.
Overall, Consumers Union argues that the old-fashioned rebate check is superior to rebate cards because consumers are not subject to fees and other constraints when they cash out or deposit rebate checks into bank accounts.
But Kirsten Trusko, President of the Network Branded Prepaid Card Association, said one of the main benefits of rebate cards is that they free cardholders from having to handle checks. Furthermore, if rebate check recipients do not have access to bank accounts, they have to utilize check cashing businesses and pay fees to have their checks cashed, she noted.
Contrary to Consumers Union's information, rebate checks are the products that generally come with 90-day expiration dates, with rebate cards having expiration dates of nothing less than six months, according to Trusko. (An NBPCA statement said most rebate cards do not expire for at least 12 months.)
Additionally, the split-tender transaction issue is not specifically a rebate or prepaid card problem, but a card issue in general, Trusko said. As for consumer protections on rebate cards, Trusko argued that rebate cards are more customer friendly than rebate checks. Customer service programs for rebate cards are specifically set up to resolve such problems as lost or stolen cards, she said.
"And they want that card back in your hand because they want you to spend the money," Trusko added. "So it's set up to replace lost and stolen very efficiently. If you lose your rebate check, good luck."
Furthermore, an NBPCA fact sheet said, "Funds underlying prepaid rebate cards are backed by American Express, Discover, MasterCard or Visa fraud protection and accounts are FDIC insured."
Trusko emphasized that one job of the NBPCA is to police its members' practices in order to maintain ethical standards and not give the industry a "black eye." When the NBPCA investigated reports that certain rebate cards came with activation fees, the association could not find evidence of the practice, Trusko said.
The Consumers Union agrees with that conclusion. "We aren't aware of any rebate cards with activation fees, although it could be possible that there may be some that do have them," Jun said 
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