Cash-back rebates are about protecting sticker price

Dear Dave,

How do cash-back rebates work on electronics and other items?

Dan

Dear Dan,

I like this question. Most consumers don't think about how the process works. They only care that it's benefitting them from a financial standpoint.

Let's say you buy an item for $1,000, and you get a cash rebate for $100. Basically, you just paid $900 for that item, right? So, what the companies are trying to do is incentivize certain retailers to buy a particular product or amount of that product, yet sort of protect the sticker price in the minds of the consumers. To me, it's really a little ridiculous. Why not simply take off the money, and price it at $900?

That keeps retailers from jerking around with the margins. It purifies the process a little bit, but it adds to the hassle.

Good question, Dan!

-Dave

Dave Ramsey is America's trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover,EntreLeadership and Smart Money Smart Kids. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.