Is a few percent off always a bargain?

Spending less on a given purchase can be very easy. The difference in time and energy between going to a website directly, and first going to a rebate portal like Mr. Rebates or EBates, is trivial. I've witnessed people saving over $250 on a single order simply by doing this.

I'm a huge fan of saving money basically without thinking about saving money.  Rewards credit cards are perfect for this (as long as you pay off the balance in full each month, of course, and don't spend more than you would otherwise simply because you're getting the rebate).

There are times, though, when saving a few percent is risky, or more trouble than it's worth.  The extra steps can result in financial loss once in a while, or make your financial life more difficult in more subtle ways.  A couple of situations come to mind:

1.  Store-specific rewards cards

Reward credit cards come in many flavors, from simple cash back or “points,” to airline miles, to mortgage payments.  These kinds of credit cards will give you 1% rewards all day without limit.  Getting 2% or 3% on entire classes of merchants (gas, hotel, grocery, etc.) is usually not without limit.  To get that kind of reward without limit, you'll need a store-specific card.  The Target store brand credit card gives a 5% discount on Target purchases the last time I checked.

That works for Target.  But do you really need, or want, a store credit card for every store you go to often?  It's awfully easy to go overboard.  Having that much available credit can hurt your credit score.  Plus, there are more credit cards to get compromised.

A better way to use your rewards credit cards is to know which stores give the premium discounts.  This way you can squeeze more rebate out of your existing cards.  A recent article over at Financial Ramblings taught me something I had wondered about, but never sought out the answer for.  Why did some stores qualify as a grocery store — for the higher discount — but others didn't?  Enter the Merchant Category Code.  That article explains how to go to Visa's website to search the stores around you to see how the stores are classified.

2.  Discounted gift cards

Places like Cardpool sell gift cards to stores at a discount to their face value.  The discount ranges from 2% or so to 20% or more.  This discount depends on the merchant, but the gift cards for merchants that already have low prices tend to go for a smaller discount.  Walmart is a prime example.  Their gift cards go for only a 2% discount.

We do a lot of shopping at Walmart because it is so close-by.  So, I bought a few of the discounted gift cards.  I regretted doing this a little bit, because I only was saving a couple of bucks on a $100 order.  These were physical cards.  If we were away from the mailbox, they'd be sitting in there.  It was a little worrying.  Had the discount been higher, I wouldn't have worried so much, but exchanging 2% for the risk of having the cards delivered didn't really seem worth it.

There's no problem doing this with electronic gift cards, though.  There's no physical delivery, and therefore no risk of the cards getting lost or stolen in transit.  I gladly bought discounted Walmart electronic gift cards to buy powdered milk through Walmart.com and their Home Freeâ„¢ shipping.  I'll remember that next time, and save the physical card delivery for the bigger discounts.

Sometimes a couple of percent off isn't worth the trouble or risk.  What other times is it not worth the trouble or risk?  I'd love to hear about them in the comments!