Rebates are the Ultimate Insult to Customers

Rodney Johnson |


Ten years ago, an airline ran a television ad showing weary business travelers, asking the question: “Why do they do it?” Eventually, one of the travelers looks up and says: “For the miles!”

At the time, I was part of the bleary-eyed crowd of travelers. I racked up tons of miles, mostly on American Airlines, hopping from one speaking engagement to another, along with conferences and general business meetings.

I remember the first time I saw that ad. I thought: “That’s the stupidest thing I’ve ever heard.” The last thing I wanted after years of flying was… more flying!

I must admit, I enjoyed bumping up to first class on almost every flight. I liked the pre-flight pageantry of offering drinks and warmed, mixed nuts to those of us seated up front, and the chance to nab any overhead space I wanted. But I would’ve gladly traded all of it for less time away from home, fewer dashes to the airport, reduced rental-car travel in unfamiliar cities, and fewer hotel stays.

And yet, offering cheaper travel on future flights is exactly what airlines hold out as the ultimate gift.

Why not give us what we really want…cash!

Beyond the deluge of airline offers that arrive daily in the mail, I was reminded of the TV ad when I read about Volkswagen’soffer to diesel car owners.

The automaker, now famous for systematically defeating pollution tests on its diesel-powered cars, will give every owner of these vehicles a gift card worth $500. It’s a typical pre-loaded debit card, so the money is essentially cash.

But that’s not all. In addition to the gift card, Volkswagen ($VOW3) is generously giving each polluting-diesel owner a $500 voucher, good for three years. The catch is that the voucher can only be used on a new Volkswagen.

Someone must have calculated that it will take three years for the current owners to get over the car company lying, cheating, and leaving them with a car marked with a scarlet letter.

I get why American Airlines ($AAL) – and just about every other retailer – holds out more of their own service as a reward. It’s the cheapest thing they can offer. Cash doesn’t have a discount.

But for a company that lied and cheated, it’s the ultimate insult to suggest that current clients, the very ones that suffered, would have to do more business with the company to receive their full offer of restitution.

Of course, few companies – Volkswagen included – provide actual cash. The VW offer is a gift card. To benefit, the consumer must spend the money. Unspent funds remain on the card, presumably sitting in a bank account controlled by the car company. Consumers that don’t spend their full allotment are essentially handing the money back to VW, which is exactly why the offers are structured this way.

Like this settlement, many retailer rebate payments show up in the form of debit cards. Again, the hope is that consumers won’t spend all the funds, in which case the retailer can claim it fulfilled its obligation, and yet gets to keep some of the cash.

The Problem with Rebates in General

Anyone replacing a cell phone most likely has dealt with the tortured instructions of a rebate offer. The 9,000-digit code from the box must be transcribed perfectly into a half-inch space on a piece of receipt paper that smears – along with the address of your house, the store, the factory in China where the phone was made, and your 7th grade English teacher.

Once all of that is completed, the paper must be mailed to a non-descript address in Nebraska, where it will sit for six to eight weeks before anyone bothers to mess with it. If every digit is in place, and every word properly spelled, then the company might begrudgingly send out the prepaid debit card. But if anything is amiss, then your chance at the money is history!

Which is what retailers want. They can offer you “cash,” or “savings,” or whatever they want to call it, but it’s actually a program designed to make you give up before you complete all the steps.

How many people don’t take the time to fill out all the forms?

How many people fill them out wrong?

How many follow up if their rebate doesn’t appear in their mailbox?

The latest estimate I can find is that $500 million worth of rebates, or 40% of offers, go unclaimed every year. A zillion websites offer consumers advice such as “pay attention to the details of the offer,” and “don’t procrastinate in filling out the forms and mailing them.”

I’ve got a different solution.

As we get ready for the holidays, why don’t we instead tell the manufacturers and retailers what we really want – not a rebate, not a prepaid card, not a voucher. I’d like cash, please. Or better yet, simply lower the price in the first place.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
AAL American Airlines Group Inc. 39.90 -0.69 -1.70 9,981,485


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