Rebate

What Is A Rebate?

A rebate is a type of compensation or return provided to clients in exchange for completing a purchase. It serves as an incentive for the customer to finish the transaction. Rebates are a type of marketing approach that is used to encourage people to keep buying.

Deeper Definition

By definition, a rebate is a payment that is given to you. Most people have encountered it in the form of a tax rebate. This is a circumstance where you have overpaid tax and thus you are entitled to a refund. You may be eligible automatically, but you might be needed to go through the refund procedure. As a business, you may need to redefine the term “rebate.” This is mostly determined by your firm.

When it comes to stocks and shares, a rebate is defined as a percentage of the dividends received by the stockholder. It’s also a term used in short selling to indicate when a trader borrows stock and sells it to a purchaser, with the return going straight to the borrower. Individuals are not eligible for stock rebates; instead, big institutions and traders with broker or dealer credentials are.

Rebate may also be used in sales to refer to a certain sum that is returned to the customer in order to foster client loyalty. This differs from a discount in that it is offered after the transaction has been completed rather than at the time of sale.

When a firm offers a refund, it will contact the consumer and ask for personal information in order to process the reimbursement. Sales rebates are a good market research method in this way. Rebates might be in the form of cash, coupons, or vouchers.

Rebate Example

Assume that a store selling iPhones offers a fixed 5% rebate on the device’s purchase. A $10,000 iPhone is purchased by a customer. When he buys it, he receives a receipt with a 5 percent immediate rebate. The smartphone costs $10,000, but thanks to a 5% immediate discount, it only costs $9,500, giving the customer a $500 profit on his purchase.