In the past year alone, 23 million Americans, or 10 percent of the adult population, purchased a coupon from a "deal of the day" website like Groupon or LivingSocial, according to a new survey by the American Institute of Certified Public Accountants by Harris Interactive. Facebook recently joined the fray with its own massively discounted coupons on everything from wine tasting to gym memberships and more.
With hundreds of sites offering similar deals, the question emerges: Are they really worth it?
On "The Early Show," Farnoosh Torabi, personal finance expert and author of "Psych Yourself Rich," shared ways to know when the "deal of the day" may not be so great, and how you can avoid suffering from buyer's remorse.
Torabi explained many people waste a lot of money on these sites.
She said, "The facts show that one-in-five buyers on these daily deal sites like Groupon, LivingSocial, end up completely wasting the voucher. They never redeem the deal. And the problem is, these sites are very clever at getting us to buy on impulse. You know -- we see the ticking clock on the side of the website saying we have two hours left, 45 minutes left to bank on this deal, whether it's 50 percent off acupuncture or buy-one-get-one-free cupcakes, and we lose our minds. Adrenaline kicks in, and we end up making an impulsive purchase that oftentimes is not rational."
"Early Show" co-anchor Chris Wragge said, "Very similar to going shopping and buying things that are on sale when you had no money to begin with."
"You get most mystified by the deal," Torabi said. "We get clouded by the sale sign, the 50 percent off, and mistakes happen."
Torabi offered a few example deals that may not be the best when you're shopping these sites:
Circus training classes on Groupon: "Now, if you're going to join Barnum and Bailey, maybe this is for you. But clearly, a whimsical deal, not a need.
On Living Social, a half-off night's stay at a Tahoe ski resort: "OK, now -- lovely deal, would love to go to Tahoe. But watch out: In the fine print, the parameters of how you can redeem this are very limiting. You can only redeem it during certain months of the year."
Torabi added, "Keep in mind that travel deals are not an end-all on these sites. You can find even better deals sometimes outside of the world of Groupon and LivingSocial, because they are very competitive."
Torabi also pointed to a few deals that may be a good investment:
Groupon for Nordstrom Rack: "A national deal (is) great, because it allows you to really have room to redeem. It's not this little store in town close by. It's pretty much all over the country."
DiapersDirect.com: "They were giving a $25 voucher that got you $50 worth of diapers and wellness products. A great deal is one that exemplifies a need -- something that you were going to buy anyway. ... If you're a new parent, this is a win-win."
Torabi's top tips:
1. Buy extremely local: She said, "You know, if this is a store or a vendor that's on your way to work, that's within your home's radius, that's close to your school, you're more likely to redeem it. It's all about the path of least resistance."
2. Buy from national vendors: There's more room to redeem. And also, you don't run the risk -- the risk is not as high of the store closing overnight. And this has happened to people who have bought deals on these daily deal sites. let them sit, and then six months later realize the store's not even there anymore.
3. Use the buddy system: "There's two advantages to the buddy system. The first is obviously there's safety in numbers. If you go in on a deal with a bunch of friends, the peer pressure is healthy, you're going to make a date, make a time to go. You're going to actually act on the deal, more likely, than if it's just you. Additionally, these sites will incentivize you for referring people to their sites to buy a deal. So if you find something that's like a restaurant coupon, and you invite a couple of buddies, and they actually end up buying the deal, Groupon, for example, will give you Groupon bucks as a thank-you. And you can use this toward future deals. Also, (on) LivingSocial, your deal might end up being free on that site if you refer enough people."
However, if you've already committed to one of these deals and it's really not for you or you made a mistake, Torabi said there are ways to avoid taking a loss.
"There are a bunch of resale sites like eBay or StubHub for daily deals. So if you're thinking, 'Oh, what was I thinking?' You go on Lifesta.com, DealsGoAround.com and CoupRecoup.com and you can sell your deals on these sites. The earlier you post, the better. You don't want it to get too close to the expiration date; otherwise you may not be able to find a buyer."
Torabi said thse sites often charge a fee to list a deal, but it can pay off if a deal is in demand.
She said, "That Nordstrom Rack deal from Groupon in the fall was really, really popular. It actually sold for higher than what it was originally sold on Groupon, because people just wanted the deal. So you can make a profit."