Finance Globe

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6 Sneaky Ways Coupons Lead to Overspending

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When it comes to saving money there’s no denying the popularity of coupons. In their 2017 Coupon and Promo Code Use Study, public opinion research firm PRRI found that 92% of consumers have used coupons in the past year. But do they really help us save money? Unfortunately, too many of us end up spending more money when we use coupons than we would have without them. And that is exactly why coupons exist.

Budget conscious shoppers must never forget that retailers and manufacturers are in business to make money. Offering coupons is simply one of the many tactics they use to get you to spend more money.

Below are some common coupon scenarios and how they can steer you toward spending more money than you planned on.

1.   BOGO and other ‘spend a lot to save a little’ schemes

Raise your hand if you’ve ever bought something you didn’t really need because of a “Buy one, get one half off” coupon/sale, or BOGO’s evil fraternal twin “Buy 10, save $10”. If I didn’t need both of my hands on the keyboard to type, one of them would be high up in the air right now. Yes, ladies and gentlemen, I have fallen into this trap too. The allure of the almighty discount is hard to resist, even when it causes us to spend more than we can afford.

Unless you need two pairs of shoes, ten bags of chips, or whatever number of items that so-called discount hooks you to into buying, the only thing you’ll save is space in your wallet where money used to be.

Let’s say you set out to buy one pair of shoes for $50. The BOGO deal convinces you to buy another pair of $50 shoes for “only $25.” Have you saved any money? Nope. Not at all. You’ve just spent $75 when you only planned on spending $50. If you put it on a credit card and can’t pay it off before the next billing cycle rolls around that “discount” will cost you even more in finance charges.

2.   “Free” Shipping

Online shopping is a convenient way to buy all kinds of items, often for less than they would cost in brick and mortar stores. However, shipping charges can outweigh the savings. Coupon codes for free shipping may help you avoid these additional expenses, but many online retailers require you to spend a certain amount to qualify for the free shipping.

Finding the perfect items online at a perfect price becomes an exercise in frustration when we go to check out and realize we’re only a few dollars short of qualifying for the free shipping deal. We may hastily add something else to our cart because paying for shipping somehow seems more painful than buying something we don’t really need. But if the additional item costs more than the shipping would have we ultimately gain nothing.

3.   Minimum Thresholds

Minimum thresholds are a ubiquitous trick retailers use to get us to spend more. The free shipping scenario above is only one example. All too often nowadays coupons come with minimum spending requirements. Grocery coupons commonly require you to buy multiple packages of any given product for the privilege of saving a lousy 40 cents. Countless department stores and clothing retailers offer deals like $10 off a $100 purchase.

If you actually need 3 boxes of frozen waffles or $100 worth of socks it makes sense to use these types of coupons. But if you end up buying more items than you’d planned on just so the coupon kicks in you’re wasting money. When the extra items end up costing more than what you were trying to save you’ve defeated the purpose of using the coupon.

4.   Expiration Dates

Expiration dates on coupons create a sense of urgency. That sense of urgency may persuade us to buy stuff we don’t need or can’t really afford for fear of missing out on a deal. But that fear isn’t always warranted. For many retailers, coupons and coupon codes are cyclical. Good things can come to those who wait.

Popular daily deal websites such as Groupon and LivingSocial have leveraged the psychological power of expiration dates to maximize their profit margins. Along with listings for deals that seem too good to pass up they display a countdown clock that really puts on the pressure to buy now. Furthermore, deals typically come with expiration dates, which a lot of businesses actually hope you’ll forget about. An estimated 15% of coupons bought on daily deal sites never get redeemed before they expire.

5.   The curious effect of manufacturer’s coupons

One of the best ways to save money on groceries is to buy store brand products. In most cases, their quality is on par with that of major national brands. The only noticeable difference is the packaging. However, coupons for store brand products are rare. Manufacturer’s coupons for name brand products are much more widely available. This is not a problem in and of itself, as store brand products usually cost significantly less than major national brands, with or without coupons. The problem occurs when we overlook that fact because a manufacturer’s coupon steers us toward buying a more expensive product.

Strange but true, coupons tend to have a bewitching effect on us, rendering us unable to do basic math. A New York University study showed that people who had coupons were more willing to buy higher priced products and spent more on average than those who bought nearly identical products with no coupons.

Buying a $5 box of cereal made by a major national manufacturer with a coupon for 50 cents off may make you feel like you’re saving money. But if the store brand counterpart of that same cereal costs only $3.50 at regular price you’ve missed out on an opportunity to save significantly more on a box of cereal that’s essentially the same. No coupon necessary.

6.   Pseudo discounts

Coupon codes for online shopping are more popular than ever. But they might not score you the best deal. Many online retailers offer coupons only after inflating their prices. So, that $100 jacket you buy today with a 25% off coupon ends up costing more than it would have if you had bought it last week when it was listed for $70, without a coupon.

The point of all this is not that you should never use coupons. Rather, it is to raise your awareness so you can avoid overspending. Let math be your friend and only use coupons if they truly help you save money. Better yet, the next time you’re tempted by a coupon to spend more money than you should, consider this: buying something with that coupon might save you 25% or maybe 50%, but not buying it at all will save you 100%.

 

Sources: NYU Stern School of Business, PRRI, Psychology Today, US News and World Report, USA Today, Wise Bread

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Comments 2

Frank on Sunday, 30 April 2017 20:46

I always get caught on #3. My wife too!

I always get caught on #3. My wife too!
Alison on Monday, 01 May 2017 10:51

Me too! I'm sure we're not the only ones. Coupon psychology is powerful stuff, and that one is especially insidious!

Me too! I'm sure we're not the only ones. Coupon psychology is powerful stuff, and that one is especially insidious!
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Friday, 06 December 2019

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