Lending Club Blog

Carefully Consider Stimulus Offers

In a recent post on his Red Tape Chronicles blog, Bob Sullivan reminded readers to beware of stimulus check offers.

Everyone from department to grocery stores seems to want a piece of your economic stimulus check. As an incentive to get you to spend at their store, many are offering discounted gift cards. A common practice is to offer a $330 gift card for the standard rebate check amount of $300. Some stores don’t care if you actually have a rebate check, and place no limit on the amount of cards you can buy at the discount.

The main point that Bob makes, as I have mentioned in the past, is that gift cards tend to be a bad deal. Companies count on a portion of the balance going unused. My previous post cited statistics that 10% of gift cards were expected to go unused. It’s no wonder that companies are offering a 10% bonus as part of the stimulus check promotion. If prior trends hold, that 10% bonus is the same 10% that will go unused. So the companies have little to lose but much to gain in the way of new customers and increased spending.

What’s more, fees can quickly eat up more than the bonus amount, leaving you with less money than if you had just cashed your check. Other risks include bankruptcy of the company or spending more money than you intended either by supplementing your gift card with cash or wasting your “free” money.

The article advises using such an offer only if you have an impending purchase that was already planned. In doing so, you basically get 10% off the price you were planning to pay. In a similar manner, I would also concede that taking the offer from the grocery store is probably a safe bet. Food is a constant expense and one that will easily allow your gift card balance to be depleted quickly. Loading up a grocery gift card at a discounted rate can mean real savings in your food budget.

There are certainly instances where taking a company up on a stimulus check offer will provide a financial benefit. Unfortunately that is not always the case. Like any other financial decision, think about the value of the offer and whether you will actually see the marketed benefit.

Friday, June 20th, 2008 at 6:47 am

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