Inside the Murky World of Rebate Scams

The three types of rebate scams -- and how to avoid them: Internet Scambusters #310

Today we focus on rebate scams. They come in a variety of guises:

We've previously covered tax rebate scams in depth. This week, we look at the first two sorts of tricks and show you how to avoid them.

First, we urge you to take a look at these top articles from our other websites:

Answers to 7 of the Biggest Questions About Food Photography: An Interview With Ron Goldman: Food photography just got easier with Ron Goldman's in-depth interview.

Deconstructing Four Classic Thanksgiving Myths: Common and persistent Thanksgiving myths and their origins.

Balance Transfer Credit Card Mistakes To Avoid: Three things you should say no to when deciding to choose a balance transfer credit card offer.

Holiday articles:

What You Need to Know if an Amazon Kindle is on Your Gift List: If you're planning on giving the Amazon Kindle as a gift, read this first.

Christmas Gift Ideas for Best Friends: These special Christmas gift ideas for best friends will make your Christmas to-do list easy.

Make Free Christmas Crafts from Paper Towel Tubes: Save money with these fresh, new ideas on using paper towel tubes in your Christmas crafts projects.

And now for the main feature...

Inside the Murky World of Rebate Scams

The business of refunding money to customers -- whether it's a check from the IRS, a payback for something you bought or a job processing the payments themselves -- is a magnet for the criminal or disreputable practices we call rebate scams.

We've dealt extensively with tax rebate scams (and more general IRS tax scams) in past articles, so this week we're concentrating on the other two types of rebate scams -- refunds for purchases and phony work-at-home processing jobs.

Tax Scams: What You Really Need to Watch Out for

Taxing Times: Steer Clear of the New IRS Scams

By now, we're all familiar with both of these "come-ons":

Rebate scam #1: A maze of tricks and hurdles to fool you

Wow, what a bargain! You see that computer program or piece of equipment you want for just a fraction of the price you thought you'd have to pay.

But, hold on. On closer inspection, the ad says something like "after rebate." So you have to pay the full price, complete a rebate form and only then will you make your savings -- if you're lucky.

In fact, manufacturers and retailers offer to pay back an estimated $4 billion a year to customers this way. But what they don't tell you is that hundreds of millions of that amount -- perhaps up to 40% of it -- is never paid.


Because some of them have used every trick in the book, from simply ignoring the rebate claims to making it darn near impossible to qualify. Several big names on Main Street and the Internet have been scolded or even punished by the Federal Trade Commission for doing this.

But rebates are such a clever marketing tool that they're too attractive a deal for manufacturers, retailers and even buyers to ignore. That's why they've quadrupled in notional value in the past 8 years.

Of course, it's true to say that most rebate schemes are legitimate. And in many cases (more so with manufacturers than with retailers) they operate fairly and do pay out.

But, when you think about, the underlying idea is to avoid paying at least some of the purchasers.

Here's a simple case: You must have seen ads advertising a product as "free after rebate." Well, if everyone got their rebate, there'd be nothing for the manufacturer or the store, would there? They'd lose out -- and that's not usually the plan.

They count on customers either not claiming or disqualifying themselves from getting the rebate. There are lots of ways this happens. For example:

These obstacles vary in terms of whether or not they are truly scams. Some are clearly perfectly lawful. And we recognize that companies need to put limits on rebates. However, when companies offer rebates as lure with no intention of paying out, then they are rebate scams.

With all these pitfalls, many people may think it's not worth buying on the basis of getting a rebate. And they may be right. But there are plenty of people who do use them and do get their money.

Here are 8 simple tips to follow to reduce the risk of falling victim to rebate scams:

Rebate scam #2: Become a claim processor. Or not.

You've seen the ads. Now learn the lie. We believe work-at-home rebate processing jobs are scams. Period.

It's true that manufacturers and retailers who offer rebates to their customers use third party firms to process the claims.

Here's how it works: You make the claim and send it to the processor; the processor approves it or not and notifies the original rebate offerer, who then either sends you the money direct or sends it to the processor to forward to you.

But we can find no example of any of the major processors employing people at home to do this work for them. In the main, they are huge operations staffed by full-time, trained and experienced clerks (the ones who know how, when necessary, to disqualify your claim!).

The ads you see offering rebate processing work-at-home jobs imply this is what you'll be doing and they often charge a hefty fee (usually about $200) for "training." But what they're really selling is, well, selling.

When you've paid, you get a guide telling you how to set yourself up as an affiliate or agent for products being sold on the Internet. Then, you're supposed to offer a rebate for these products to encourage people to buy through you.

Here's the first catch:

The purchase payment goes to the actual retailer, not you, but you have to pay the rebate and then wait for your commission.

For example, you offer a product for $40 with a $10 rebate using a certain code. The customer goes to the actual seller's site, pays $40 but keys in your code to get the rebate. The seller sends the information to you and you send the customer their 10 bucks.

So far, you're $10 out. The seller than pays you a commission, which, hopefully, is more than that $10!

This all might work in theory except for one expensive problem: How do you let people know about you and your rebate offer? Answer: advertise it. And that usually costs money.

At the end of this process, it's easy to see how most people who fall for these rebate scams finish up out of pocket. In truth, very few manage to sell anything.

The Internet is full of blogs and other websites full of tales of woe from people who've fallen for the trick.

To make things worse, some of these very same sites, while purporting to highlight rebate scams, then go on to offer their readers a technique that "really works." But it's just a variation of the same trick.

Strictly speaking, these scheme promoters are usually not breaking the law. If you do what they say and if it works (highly unlikely!) you will actually be processing rebates! But, it's highly misleading.

There are many more work-at-home scams. We highlighted the biggest ones in these articles.

Top 10 Work At Home and Home Based Business Scams

Work At Home Jobs: How to Avoid Getting Scammed

Most Work-At-Home Job Offers Are Not What They Seem

There are also plenty of legitimate programs -- things that really work. But the bottom line, even for the legit programs, is that none of them will make an easy fortune for you. So stay clear of the ones that make promises that are too good to be true.

That's all we have for today, but we'll be back next week with another issue. See you then!


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