Stacked discounts do not add up
Two discounts in a row are always worth less than their sum. A 30% discount followed by an extra 20% off saves you 44%, not 50%.
The reason is that the second discount applies to the already reduced price. Take a $120 jacket. 30% off brings it to $84. The extra 20% comes off $84, which is $16.80, so you pay $67.20. A true 50% discount would have been $60.
The order of the two discounts does not matter. 20% off and then 30% off lands on the same $67.20. What matters is that you multiply the remaining shares instead of adding the percentages.
Percent off versus dollars off
Which coupon wins depends on the price of what you buy. Percent-off coupons grow with the price. Dollars-off coupons stay fixed.
Compare a $20-off coupon with a 25%-off coupon on a $75 purchase. 25% of $75 is $18.75, so the $20 coupon saves more. On a $150 purchase, 25% off is worth $37.50, which beats $20 by a wide margin.
To find the break-even point, divide the dollar amount by the percentage. For $20 off versus 25% off, that is $20 / 0.25 = $80. Below $80, the dollar coupon wins. Above $80, the percent coupon wins. At exactly $80, they are equal.
You can also turn a dollars-off deal into a percentage to compare it with other offers. $20 off $75 is a 26.7% discount.
Buy one, get one: what you really save
Buy one, get one 50% off is a 25% discount on each item when the two items cost the same. Buy one, get one free is a 50% discount on each.
Here is the math with two $40 items. Without the deal, you would pay $80. With the second one at half price, you pay $40 + $20 = $60. You saved $20 out of $80, which is 25%.
Two details often shrink these deals further:
- The discount usually goes on the cheaper item. If you pair a $40 item with a $30 item, half off the $30 item saves $15 on $70, which is about 21%.
- You have to buy two. If you only needed one, a 25% saving on two items is still more money out of your pocket than buying one at full price.
Check the unit price
The bigger package is not always cheaper per ounce. The unit price, which is the total price divided by the quantity, is the only fair way to compare sizes.
Say a 24-ounce jar of peanut butter costs $4.79 and a 64-ounce tub costs $11.49. Per ounce, the jar costs about 20 cents and the tub about 18 cents. Over a pound (16 ounces), that is roughly $3.19 versus $2.87. The tub wins, but only if you will finish it before it goes stale.
Many stores print the unit price on the shelf tag. According to the National Institute of Standards and Technology, unit pricing rules differ from state to state, and many states do not require it at all. When the tag is missing or uses different units for two products (per ounce on one, per count on another), divide it out yourself.
Unit prices also catch shrinking packages. If a familiar product keeps its price but holds less, its unit price has gone up even though the sticker has not.
Be skeptical of the was price
A discount is only as real as the price it is measured from. If the original price was inflated, the percentage off means very little.
The Federal Trade Commission's Guides Against Deceptive Pricing (16 CFR Part 233) address this. Under the guides, a former price used in a comparison should be one the seller actually offered to the public, in good faith, for a reasonably substantial period. A price set high for a short time just so it can be cut is treated as fictitious. A tiny cut, such as $10 to $9.99, should not be advertised as a bargain.
The guides describe how sellers should behave. They cannot tell you whether a specific tag is honest. You can protect yourself in a few ways:
- Compare the sale price with what other retailers charge today, not with the store's own was price.
- Look at the price history if the store or a browser tool shows it.
- Ask whether you would buy the item at the sale price if no original price were shown.
- Treat terms like compare at or MSRP as a starting point for research, not proof of savings.
Do not forget sales tax
Sales tax is usually charged on the price after a store discount, which makes the real saving a little bigger than the sticker shows. Manufacturer coupons can be different.
New York's tax department, for example, says store coupons lower the taxable price, while manufacturer coupons do not, because the manufacturer pays the store back. Under that rule, a $10 store coupon on a $50 item at an 8% example rate means tax on $40 ($3.20), for a total of $43.20. A $10 manufacturer coupon means tax on the full $50 ($4.00), for a total of $44.00. Rules vary by state, so check your state's revenue department if the difference matters to you.
A worked example: the jacket, start to finish
Here is the $120 jacket from earlier, with a 7% example sales tax rate. Each row shows what you would pay at the register under a different offer.
| Offer | Price before tax | Tax at 7% | Total | Real discount |
|---|---|---|---|---|
| No sale | $120.00 | $8.40 | $128.40 | 0% |
| 30% off | $84.00 | $5.88 | $89.88 | 30% |
| 30% off, then extra 20% off | $67.20 | $4.70 | $71.90 | 44% |
| True 50% off | $60.00 | $4.20 | $64.20 | 50% |
| $40 off | $80.00 | $5.60 | $85.60 | 33.3% |
Reading the table
The stacked 30% plus 20% deal costs $7.70 more at the register than a true 50% sale ($71.90 versus $64.20). The $40-off coupon looks generous but beats only the single 30% discount by $4.28 ($89.88 minus $85.60). And if the jacket regularly sells for $90 elsewhere, the stacked deal saves you $22.80 before tax, about 25%, not 44%.