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Generic vs. brand name: Is there really a difference?

By Jim Wang/GOBankingRates

Personal finance, like life, is about trade-offs. If you spend a little more here, you have to cut back a little and save money there. In the zero-sum game that is budgeting, a dollar you spend is one that you can't put in your savings account for a rainy day.

So it's not surprising that you'd eye your purchases to see if you can spend less, without sacrificing much in terms of quality.

American consumers had to deal with this reality during the recent financial crisis. Some traded down from brand-name products to generics in search of more savings because that was more important than loss in quality.

In general, brand-name products are better than generic products. Or at least their marketing is. This concept isn't really disputed because if generic vs. brand-name items were priced the same, you would go with the brand name every single time.

In reality, they're not priced the same, so you ultimately have to decide whether quality is worth the extra cost or if you should opt for the savings generic products bring. In some cases, it makes sense -- in others, it doesn't.

So if generic products are not as good as brand-name products, are they at least good enough? Would you rather pay more and get a quality product or pay less and get something lesser in quality? As a consumer, only you can answer that.

I used to work for H.J. Heinz, so I'm biased, but I know I like Heinz ketchup. I don't like most generic ketchup products as much because they're too tangy. Heinz has the sweetness and consistency that I like. I buy Heinz rather than generic products, because I buy very little ketchup and 50 cents saved over six months is not worth it to me and my budget. That's the trade-off.

Deciding on brand name vs. generic

When it comes to deciding whether to buy generic products or brand name, I usually go generic if the product is a regulated commodity.

For example, medication is regulated and so I feel confident that a generic version of an over-the-counter drug will deliver the same results as the branded one. I'd feel comfortable strolling into a Walgreens or CVS Pharmacy and picking up a bottle of store-brand cough syrup.

Here are some products that you should buy generic:

  • Over-the-counter medication: Drugs are regulated by the Food and Drug Administration (FDA) and over-the-counter medication is required to list the active ingredients right on the box. All you need to do to compare brand-name products against their generic versions is look at the packaging information on the side. Pick up a box of Claritin and you'll see that the active ingredient is loratadine, which you can also buy as a generic drug for a fraction of the price. Zyrtec's active ingredient is cetirizine, also now available in a generic version.
  • Staple food products: Staple food products like flour, sugar, corn starch, pepper and others are regulated. In many cases, the same manufacturers produce the generic products and the brand name. You can also throw in some cereals, like Cheerios or Bran Flakes, since it would be hard to tell the difference.
  • Gasoline: Despite what the gas stations might tell you about the additives they use, this is another regulated product with little variation between companies.
  • Electronic cabling: This topic has always been a source of a good laugh, as some companies have the audacity to charge big bucks for a $2 HDMI cable.
  • Paper products: Napkins, paper plates, toilet paper and other paper products are good to opt for generic. I try to use real plates and silverware instead of paper plates, but sometimes that isn't possible. (My personal exception to this rule is with paper towels and toilet paper, as they hold up better, but many people don't seem to mind the generic options.)

Finally, I go with generic products when I just don't care about what I'm buying. It doesn't make sense to spend more on something, especially if I can't tell the difference and won't appreciate the quality.

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