When a rebate isn't a rebate -- it's a ripoff

Visa
Visa

They call them "rebate" cards. But they're hardly a rebate. Instead, they are a mechanism to take millions of dollars due to consumers and give them back to the companies.

"Rebate cards are a colossal ripoff because sellers who long ago figured out how to make rebates difficult to obtain have now found a clever way to make them difficult to spend too," said consumer advocate Edgar Dworsky, who runs the web site ConsumerWorld.org. "These are just inherently deceptive the way they are advertised."

They are considered so deceptive that Canada recently issued guidelines to stop companies from using the word rebate when issuing consumers a card instead of a check.

Use of rebate cards is growing rapidly. In 2008, more than $4 billion worth were issued -- up more than 50 percent over 2007, according to CreditCards.com.

Not only are these cards not actual rebates -- although a handful of companies allow consumers to draw cash from them at ATMs -- they come with hurdles that will keep all but the most industrious users from spending the full amount.

"The consumer has to go to the web site of the issuer and put in the password and find out how much money is left. If you go to the retailer without knowing the exact amount on the card they can't take the card," said Barbara Anthony, undersecretary of the Massachusetts Office of Consumer Affairs and Business Regulation.. "We are leaving money on the table that belongs to us because some retailers make it very difficult to find out what's left on the cards. Millions of people across the country have these cards."

Little government action has been taken so far about the cards in the U.S. partly because of how silently the money is drained away from the consumer and back to the company.