One important aspect in getting your personal finances in order is being able to critically analyze offers that come to you to see whether or not they are a good deal. The offer come-ons often make it sound like there’s no way that it could be a bad deal, but it’s important to look at the details and your own circumstances to see if the offer is truly a good deal or something that will take money out of your pocket. Here is a recent one that came to my attention that first appeared to have promise and how I analyzed it.
If you have been reading my writings for any amount of time, you know that I’m one of that small minority that isn’t a big fan of gift cards. That being said, there are opportunities when even something that isn’t a good deal under normal circumstances can be a good deal in special circumstances. This may be the case for some with a TurboTax tax filing promotion that is going on.
TurboTax has set up a program with over 50 retailers where you can opt to have part or all of your Federal tax refund given to you in gift cards from these retailers instead of cash. The part that might make this a deal for some is that most of the gift cards come with bonus dollars added from 10% to 20%. That means that if you had a $1,000 tax refund could be worth $1,200 in gift cards. That comes to an instant and risk free 10% – 20% return on your money – something that you aren’t likely to achieve from your investments. The issue to take care to note is that this return comes with a lot of asterisks of which you need to be aware.
Some of the TurboTax partner retailers
First, if you currently have credit card debt, pass on this program. In this case you’re already spending more than you should be and don’t need to spend more. Instead, take your refund and pay down your credit card debt and get the instant return on whatever your credit card interest rate is.
If you currently don’t have an emergency fund, in most cases it will be better to pass on the promotion. If an emergency happens and you have to place it on a credit card any savings from the gift cards will be more than wiped out. Instead, open an online banking account and begin an emergency fund.
If you have paid off your credit cards and have an emergency fund, then this promotion might be beneficial under certain circumstances. First, you need to take a look at the retailers that are part of the program and see if you know (not think) you’ll be spending money at them during the next year. If you end up buying something that you wouldn’t have normally bought due to the gift card, you don’t save any money no matter what the discount.
If there are some that you know you’ll spend money at, then you need to calculate exactly how much you will spend. If you can’t list the exact items and how much, then it’s better to pass on the gift cards. Again, it’s too easy to spend the gift cards on things you would not have normally purchased if they haven’t been set aside for specific purchases.
If you can find retailers where you will shop and list the exact amount you’ll spend, then you need to look at the cost of the program. TurboTax charges $30 for its service plus any costs for their software. Since you may be able to file your Federal taxes for free through the IRS tax e-filing program, these charges can be extra money you don’t need to spend. That means that the $30+ also needs to be calculated in the cost thus reducing or wiping out the value of the gift cards.
When you take all these aspects into consideration, the program isn’t near as appealing as it first looks and most people should probably avoid it. Still, for those getting a large refund and who have their personal finances in order, there is an opportunity to come out ahead with this promotion. Evaluate all the points that apply to you to make the decision that is correct for you.
For us, we passed. Although we have no credit card debt and an emergency fund in place, our refund will be small, if anything (why give the government a free loan if you don’t have to?). This means that the fee that Turbotax charges in the promotion would wipe out any gain we’d see from the bonus dollars from the retailers. While it at first appeared to be a good deal, by taking the time to look at all aspects we found that it wasn’t right for us.