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By Herb Weisbaum ConsumerMan
msnbc.com contributor
updated 11/25/2009 1:10:44 PM ET 2009-11-25T18:10:44

Do you want paper or plastic? We’re not talking grocery bags here, we’re talking retail rebates.

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A growing number of companies have made the switch from paper checks to prepaid plastic rebate cards. Verizon Wireless, Sprint, Staples, Nordstrom, Toshiba, Nokia and Home Depot are just some of the big name companies that have made the switch.

Of course, the companies love it. But for consumers, it’s a mixed bag.

Rebate cards are like a gift card. They’re a debit card that comes loaded with the amount of the rebate. Some are limited to a specific store. Those with a credit card logo (Visa, MasterCard, American Express or Discover) can be used wherever that credit card is accepted.

Elizabeth Ebright of Bloomsburg, Pa. recently received her first rebate card after buying a refrigerator at Home Depot. Ebright says it was much easier to use than a check because she didn’t have to make a deposit. She could go shopping right away.

“Whenever we’ve gotten a rebate check it seems like you had to wait forever, but this came really fast,” she says.

Staples started using rebate cards in the summer of 2008. The company says customer feedback has been positive.

“Consumers appreciate the convenience, ability to immediately spend the rebate and the elimination of check cashing fees,” says Staples public relations manager Karen Pevenstein.

But not all consumers are thrilled with the switch.

Scott Clark owns a marketing company in Lexington, Ky., and buys a lot of products with rebates. Clark claims it’s often hard to get the full value out of the card.

“You always end up with $2 or $3 left of the card before you get fed up with it and throw it out. If you can’t spend the whole thing at once, trying to spend the remaining balance is going to be a hassle.”

Consumer Reports executive editor Greg Daugherty says he’d rather get his rebates in the form of a check.

“A check you put in the bank and use the money any way you want,” he says. ”A rebate card has all kinds of terms and conditions attached to it.”

Consumer advocate Edgar Dworsky, founder of ConsumerWorld.org, calls rebate cards “a complete pain in the neck” because you can have the value wiped out by maintenance fees and expiration dates.

“For years, manufacturers and retailers have made it difficult to obtain rebates,” Dworsky says. ”Now, they’ve found a clever way to keep you from spending the rebate you get.”

Industry representatives insist that’s simply not true. Kirsten Trusko, president of the Network Branded Prepaid Card Association, says retailers use rebate cards to help build a positive relationship with their customers.

“Everybody wins if we get the cards used,” she says.

I recently received a Visa prepaid rebate card. It came with a six-page “cardholder agreement.” I doubt most people would make it through six pages of fine print for an $18 card. I did because I was working on this column. Page six is where the fee schedule is listed. It shows that after six months, I will be billed a monthly “account maintenance fee” of $3 until the balance hits zero.

Trusko says rebate cards are designed to be used quickly, so most people don’t have to worry about fees or expiration dates. She also points out that most rebate cards are good for six to twelve months, while most rebate checks expire in 90 days. Plus, you can get the card replaced if it’s lost or stolen.

Another problem: Rebate cards can be difficult or impossible to use as partial payment for a purchase. To use the card for a purchase worth more than the card, you have to know the balance on the card. (To find out you must make a call or go online.) If you try to buy something for $10 and you have $9.99 left on the card, the transaction will be rejected.

If you do know how much is on the card, you should be able to make what’s called a “split tender transaction” where you use the rebate card and some other form of payment to come up with the total amount owed. But some clerks don’t know how to do a split tender and the registers at some stores are not programmed to accept two forms of payment for one transaction. The prepaid card association says it is working with merchants to deal with this problem.

My two cents
Checks are on their way out. Plastic is where it’s at, so there’s no stopping the trend toward rebate cards. These cards can be convenient. They can also be a royal pain.

Companies claim these cards are a way to build an ongoing relationship with their customers. If that’s truly the case, then the process for using these cards needs to become more customer-friendly.

Some companies have already figured this out. Get a rebate card from Verizon Wireless and you can take it to the bank and have the funds deposited into your account. If a rebate for a product purchased at Staples can be submitted online, the customer can request the money back via Visa prepaid card, check or Staples gift card. Both are great ideas. Customer choice is always good.

Last week, the Federal Reserve proposed rules for gift cards that would require any expiration date to be at least five years after the date of purchase. The rules would also prohibit inactivity or service fees for at least one year. I’d like to see Fed’s new rules apply to rebate cards, too.

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