How Coupons Can Lead to Overspending

We rationalize it by thinking we're saving money, but often we’re buying things we don’t actually need.

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Do a survey among your friends to find out how they feel about coupons. Chances are, most will think they’re a good thing. One or two may say they’re not worth the time. The one opinion you probably won’t hear? That coupons are downright bad.

However, truth be told, coupons aren’t always a good thing. Here are five reasons why.

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1. Spending a lot more to save a little more. Retailers know exactly what it takes to get us to spend more. They offer enticing promotions with a minimum spending requirement, such as $10 off a $100 purchase. If you actually have $100 worth of stuff you were planning to buy anyway, this makes sense. But how often do we find ourselves buying a few extra things just so the coupon kicks in?

All of us are guilty of doing this once in a while, myself included. Of course, we rationalize it as saving money, but if we’re buying things we don’t actually need, then all we’re doing is wasting money. Then for those who carry a balance on their credit cards, the problem is magnified by the extra finance charges they’ll end up paying.

2. We are bombarded with coupons. My friend Kylie Ofiu (an Australian blogger) mentioned in one her posts that “coupons are everywhere in the USA but here, we don’t get much.” This has been echoed by other international friends of mine.

In a nutshell, Americans are the king of coupons, no doubt about it. For someone that uses them responsibly, this is a good thing ... more selection is better, right? However, if they entice someone to spend more, then being exposed to this constant bombardment of coupons is kind of like being a recovering alcoholic working in a bar.

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3. Expiring offers lead to irrational decisions. Groupon, Living Social, and similar sites run an ingenious model. All their deals show a countdown clock, putting the pressure on you to buy now. So instead of contemplating, a person is probably more inclined to buy now and think later. The end result? Buying coupons that we don’t really want.

Last winter, I made this mistake on an offer that was about to expire, coughing up $39 for wine tasting in Laguna Beach (and I couldn’t care less about wine). Fortunately. I learned my lesson from that and now impose a mandatory 24-hour (or longer) waiting period, from the time I see the offer until the time I buy. This ensures I’m thinking rationally versus an impulse decision.

However in all fairness, many other industries operate the same way. For example, you’re probably used to getting those balance transfer checks in the mail from your credit card company. The letter enclosed with them will practically paint it as a once in a lifetime 0% opportunity and that you must act immediately. Which is funny, considering that they seem to send the same balance transfer checks in the mail every single month.

[See Why I'm Shunning Groupon.]

4. Usually for more expensive name brands. How often do you see a coupon for buying a bundle of fresh broccoli or a box of generic cereal? You probably have a better chance of seeing Elvis.

Often, the final price with a manufacturer’s coupon doesn’t even trump what its generic counterpart costs. So your quest to save could lead to spending more in the end. Of course, this isn’t always the case, and extreme couponing is a perfect example of folks coming out ahead. But you also need to take into account the time it takes to find and acquire the coupons.

5. We don’t consider them to be bad. Perhaps the most dangerous part about coupons is the mindset we have. Since the general consensus is that they are a “good thing,” the drawbacks are rarely taken into account. Contrast that to something like credit cards, whereas most people consider both the good and bad that go along with them.

The bottom line is that coupons can be a wonderful way to save money, but when someone looks at them with a “can do no wrong” mentality, there’s good chance they’ll end up spending more rather than saving.

Michael Dolen is the founder of CreditCardForum, a social website for talking about all things credit card. There you will find him blogging about the best credit cards for small business owners, students, and of course the everyday consumer.