Rebates paid by legitimate rebate providers are not a scam, however scams do exist. The most common scam is a rebate provider that marks up the spread or commission in order to pay a higher rebate than competitors. Many brokers do allow a referring party, or rebate provider, to markup costs to traders they refer. Obviously this defeats the purpose of the service provided by the rebate provider and thus jeopardizes the viability of the rebate provider’s reputation and business, so a reliable provider wouldn’t consider this. Besides this, certain rebate providers may not pay on time, or not at all. This is why it’s important to choose a reliable provider.
In once case since we first began offering rebates in 2007 a broker was found to be marking up pricing on their own to gain a higher profit for themselves. This is very easy to catch since clients quickly report the pricing difference. The agreement with that broker was terminated indefinitely.
When working with a trustworthy rebate provider, there is no ‘catch’. It is more beneficial to a trader’s financial position to work with a rebate provider than solely with the forex broker.