Not always. The classic case, here and in general, seems to be driving long distances to save a few cents on gas. People are absolutely koo-koo about pump price and a cent or two’s rise at a local station will send them into (1) a fury and (2) long expeditions to find a cheaper rate.
The last time there was a big rise in gas prices and everyone was sharing local-station prices and tips and tricks and so forth (on a local forum), there were a couple of people who were gleefully talking about getting their gas five cents cheaper by driving to the far side of town (15-20 miles). The handful of us who made the actual economic argument and pointed out that their FULL SIZE PICKUP was more than burning up the savings were howled down by this crowd, because “we obviously had money to throw around and didn’t have to watch every penny because.”
So along with all those who can expensively coupon themselves into savings, there are the poor and fixed-income who do the same, and no amount of kitchen math will convince them of their folly.
This is a hot topic in Economics, and is called Behavioral Economics. It generally studies cases where people are making clearly non-optimal economic decisions. A good book for the layman (which includes me, btw) is Predictably Irrational.
There was a serial killer we had (name is escaping me) Whos father would drive some insane distance to get 5$ worth of free animal feed every single day burning about 10$ in gas to do so.
I just chalk this type of behavior as humans are stupid and leave it at that.
My wife went to a store to get a suitcase she wanted on sale, but they didn’t have it in stock. But they have it at a New Jersey store. So she is talking about getting a friend of hers who lives 45 minutes from that store to go buy it for her then ship it. I said she could get the same suitcase at Costco in a different color cheaper than the sale price at this store. But she said she likes the color. How much is color worth to you?
I can’t imagine how this waste-to-save behavior benefits anyone except the various sellers - a store might lose some revenue from a sale or coupon (although more likely, the store’s margin remains the same and the distributor or manufacturer is losing the discount amount) to the benefit of whoever sold Joe Savermax his gas. All failure of Joe to curb his spending benefits the whole consumer-goods industry.
By the time you’re factoring in things like tax revenue and stores being more likely to price items on sale because of booming business, you’re into serious who-knows territory. I’d say the advantages to other consumers from this behavior is negligible.
I can’t believe that I am the first to mention cash-back credit cards.
I suppose this would work if you are the type of person who pays off the balance every month. With the total amount of credit card debt in America today nearing the on trillion (with a T) dollar mark, however, most people do NOT pay off their balances every month.
I you spent $10,000 in a year, you would get $100 back (for a typical 1% cash back card). Considering that most card lenders want at least 4% of the balance in payment each month (at least it was 4% in the old days, when the maximum interest rate was 18-21%), you can’t even break even.
Whoever came up with the idea of offering miniscule amounts of cash back, while raising the interest rates should be shot; instead, that person is probably now a senior VP somewhere, living the high life. And paying off his credit balance every month.
I used to argue with my neighbor, he would drive by the local grocery store, 4 extra miles to get a gallon of milk at Aldi’s, because it was 50 cents cheaper. He drove a old enormous sedan, maybe getting 10 mpg. I pointed out that the trip probably cost him 4 or 5 dollars more, but he didn’t seem to understand that. I guess telling the other 80 and 90 year olds at church how cheap he got that milk was worth something.
This is why I could never get into clipping coupons. Sure if I can save money on something I know I want to buy anyway, but:
[ul]
[li]Maybe I sorta kinda want it or might later- do I buy it now while the coupon is good?[/li][li]I usually get my favorite brand of X but this coupon is for the same product only Brand Y. Should I switch just to use the coupon?[/li][li]Is leafing through fifty pages of Sunday ad coupons worth it to find one or two I might use?[/li][/ul]
Opportunity cost explains why many will perceive this behavior as irrational, but it doesn’t describe the behavior itself. The closest “term”–concept, actually–that I can think of, is the subjective theory of value. bubba001’s neighbor, for example, apparently gets some kind of greater subjective value out of shopping at Aldi’s, even though bubbs001 has explained to his neighbor that the money saved there is lost in gas expense.
From the point of view of economic theory, it doesn’t matter why someone has such a preference. You can say bubba001’s neighbor is stupid or whatever, but in terms of economic theory, it’s not any different than choosing to shop only in small, independent stores, for example, even though they sell the exact some good at a higher price.
Guy comes home bedraggled, sweaty, out of breath. Guy says to wife, “Honey, you’ll be real proud of me…Instead of taking the subway home from work, I ran home behind a bus all the way.” Wife says, “Schmuck! Why didn’t you run behind a taxi?”
Well, we’ve had the argument several times before, and it breaks down that those who use such cards to their maximum advantage - pay off the balance each month, buy items or in categories that pay back maximum returns, etc. - think they’re a license to coin money.
That some majority of people DON’T use them that well and thus get hit with higher interest rates, annual fees, and other downsides that more than wipe out the Cash! Rewards! gets snarkily dismissed. But the issuers are not promoting these cards to lose money, not overall. That a handful of people make out on them is almost certain proof that some larger number do not.
While there are cases where individual consumers, or small groups of consumers, come out ahead in these schemes, I can’t think of a one that is a net loss across the board for the seller, provider or promoter.