Insurance, Personal Finance, Saving Money, Shopping

Getting Full Value Isn’t Black and White

“Here, let me show you these great glasses — I want to make sure you get the full value of your insurance coverage,” enthused the salesman trying to get me to upgrade my purchase. I had already carefully chosen my favorite pair from the rack of frames my insurance would cover completely, using up enough time that my children’s attention spans and my husband’s patience were both ending. Now the salesman, doing his duty to his employer, was trying to get me to change my mind.

“You have great insurance,” he elaborated. “It covers $130 for glasses. If you don’t buy this [$170] pair, you won’t be taking full advantage of your benefits.” Funny, I thought, that the full value costs me $40 more.

I saw no difference in quality between the completely covered $120 pair of glasses and the $170 pair on which I would owe money — both would improve my vision, and both appeared pretty sturdy. Plus, I actually preferred the appearance of the less expensive pair — the more expensive one made my eyes look squinty and had designer brand logos splashed all over the thick arms. (I try to avoid giving designers free advertising.) Despite what the salesman said, not having to pay extra for my glasses seemed far more valuable than using the entire $130 my insurance covered. “Free” was the full value he was trying to pitch to me.

Gift cards present a similar situation. Because it’s rare to spend exactly the amount on the card, particularly when taxes are added to the sale, gift card recipients usually have to decide whether to buy something that will cost less than the total value of the gift card or to spend more than what the card will cover. Which option gives the full value of the card?

Most people will choose to spend more than the card covers — retailers count on it. If your bill at that store would be the same whether or not you had a gift card, and the card acts as a discount on your purchase, spending more than the face value truly does give you the full value of the card. However, if you are using the card as an incentive to treat yourself to something you would not normally buy, going over the amount on the card means spending money you didn’t intend to.

Available options also figure into the equation. When you get a gift card, you might see it as a challenge to get as close to the value of the card as possible without going over. However, the store may not have anything below the amount on your card, except for a whatchamacallit you don’t really want or need, while you could choose a thingamajig you really love for just over the target price. In that case, you must decide whether a free whatchamacallit is worth more to you than a discounted thingamajig. It might not be.

In the end, getting the “full value” of credit (in the form of a gift card or insurance, for example) doesn’t always mean the same thing every time. Some dollar amount will usually be wasted — either the cash you didn’t intend to spend or the credit on your account. In some cases, spending the entire amount on your gift card or insurance gives you the full value. In other cases, the full value means getting something for free, even if you don’t spend all you are entitled to spend. You get the full value of “free money” by considering your options each and every time you have some to spend.

Image courtesy of ifranz

4 thoughts on “Getting Full Value Isn’t Black and White

  1. I dislike the attitude that would lead you to spend the full value of your insurance. That is one reason why health care costs rise so much each year. I know the article isn’t about health insurance but its a whole attitude that people have that costs all of us more and prevents some employers from even offering health insurance.

  2. Very interesting article. I think it is because of this dilemma that gift card recipients on average spend 20% more than the value of their gift cards. This is understandable because if someone gives me a $50 gift card, spending that extra $10 of my own money to get the “full value” of the gift card is not a bad deal.

  3. Some of the other problems with gift cards is getting one for a place you don’t ever go and wouldn’t go. I got a Starbucks gift card from a brother who knew I didn’t drink coffee. It was a duh moment. His rational being that they sell other things there. I ended p givng it to my son for his wife who does go there. Gift cards can actually make you spend more especially if it is a card for a dinner ($25) because it is rare to have two people eat for that at a better restaurant. So you end up spending up to another $25 with tips to pay for your FREE meal out.

    I enjoy getting gift cards to places I frequent frequently and I try to only give gift cards to places that I know the recipient goes to frequently. So that way we really can get full value. If it isn’t used up all in one trip, then you may have a few dollars towards your next visit.

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