Stores make rebates easy to spend

Retailers are banking on consumers to turn their tax rebates into sales at the register.

Industry giants like Wal-Mart, Home Depot and Lowe’s are offering cash-checking services to make the decision a little easier — a gimmick that worked two years ago when consumers received the Bush administration’s first tax rebate.

Retailers are advertising the free cash-checking service in hopes shoppers will spend the money in their stores.

“The public knows exactly what’s going on,” says John Simley, a spokesman for Home Depot. “If they are going to use the money on a home-improvement project, we’ll save them the trip to the bank.”

It worked in 2001 when taxpayers received $100 billion in rebate checks, but retailers wouldn’t disclose how much it boosted their sales.

“It was a good idea then and it’s a good idea now,” Mr. Simley said.

The Internal Revenue Service on Friday began mailing checks of up to $400 per child. After the last batch of rebate checks is sent in August, 25 million U.S. families will have received a total of $12 billion.

The checks come at a crucial time for the retail industry. Sales in the first half of the year were sluggish as consumers, worried about job security, kept a tight hold on their money.

Some retail analysts say consumers are still nervous about spending and the tax rebates likely will go to savings or paying off debt.

“We are not expecting a shopping spree and buying binge to materialize,” said Kurt Barnard, president of Barnard’s Retail Consulting Group. “Consumer confidence is very, very shaky. There’s no question that instead of buying frivolous things, people will put the money aside.”

Consumer confidence took an unexpected tumble in July with a 6.4 percent unemployment rate, the highest in nine years. The Consumer Confidence Index fell to 76.6, nearly a seven-point drop from 83.5 in June, the Conference Board said Tuesday. Analysts had expected a 1.5 percentage point increase.

About 41 percent of parents are planning to save or invest some of their tax rebates and 45 percent say they will pay off some debt with the extra money, according to a survey by CoolSavings Inc., an online direct marketing and media company.

Although the savings effect is not immediate, it is good news for retailers.

“Retailers know if consumers save or pay off debt, they’ll be in a better financial situation during the holidays — the biggest shopping season of the year,” said Ellen Tolley, a National Retail Federation spokeswoman.

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