Rebate spending spree not expected

By SHAWN PIATEK
The Tribune-Democrat

May 03, 2008 11:07 pm

— Federal tax-rebate checks began showing up in taxpayers’ accounts last week, but the jury is out on how those funds will be spent.
Depending upon which group is asked, a different answer is supplied on how Americans will spend the $105.7 billion rebate.
Justin Davis, 24, of Conemaugh Borough, expected to have his funds deposited into his account Friday.
Davis scoffed at the notion of saving “free money.” He said he does plan to pay off a couple of bills but intends to use what’s left to buy tickets for an upcoming Pittsburgh Penguins playoff game.
“Everything’s going up but my paycheck,” Davis said. “I figure this is one of the few chances I’ll have to spend some money on myself.”
Davis isn’t alone in using the refund to improve his personal financial situation. According to a Reuters/University of Michigan study released Friday, only 30 percent of Americans receiving rebates plan to spend the money this year.
The survey showed that 70 percent are looking at the windfall as an opportunity to pay off debt or repair their savings.
The results of that study contrast only slightly with the expectations of those in the retail industry.
TNS Retail Forward, a retail consulting group based in Columbus, Ohio, estimates that $42 billion, or 39 percent, of the refunded money will be handed over to retailers this year. Some in the industry are even less optimistic.
Last week, Karen Hoguet, chief financial officer of Macy’s Inc., said she did not expect the rebate would have much of an impact. She believes the cost of food and gas will eat up most of the money.
Whether those projections and feelings are accurate or not, many retailers are taking extra steps to encourage consumers to spend.
Home Depot is offering special deals on many of its energy-saving products. Halogen light bulbs and more efficient appliances will be priced down to encourage customers to make their rebates go even further with future savings.
Sears is offering to swap a gift card for customers’ rebate checks and give them an extra card valued at 10 percent of their rebate. In other words, a $600 rebate check would earn a $660 in Sears gift cards that can be used at Sears, K-Mart and Land’s End.
The only drawback to the promotion is that customers must present a paper check – meaning that taxpayers receiving rebates electronically don’t qualify.
“So far, obviously, no has gotten a check, so no one had been able to cash one,” said Kirsten Whipple, spokeswoman for Sears. “We’ll have to wait and see what the response is once people start to get paper checks.”
Whipple said the company isn’t making any estimations on how much sales the promotion might generate. Some of that ambiguity is due to not knowing how much enthusiasm the public will have to part with the funds.
“It’s difficult to predict because it’s very unclear as to how many people are receiving a paper check,” she said.
“Plus we have no way of knowing how many people plan to spend the money let alone how many play to use it at one of our stores.”