Being smart about costs – Part 2

Do you feel embarrassed about asking for a discount?  I was chatting with a friend about investments and I mentioned to him that the easiest way to make money in the long run is to ask for a discount in every transaction that you do every single day of your life. He initially thought I was kidding. I explained to him that often the return from an investment is not in your control, but the costs you incur in your day-to-day life are. This attitude may not be the sexiest way to make money as it does not have any multi-baggers associated with it. However in the long run it would magically beat many of your investments hands down.

When I shared with him the calculations he couldn’t believe his eyes. Every time I need to fill my tank, I go to a particular gas station and use a specific credit card This credit card coupled with the loyalty card of that oil company, gives me a neat 16% discount. Just this one single saving compounded at a reasonable rate over a life time of driving, will pay the down payment for a home in Singapore. In most other places where real estate is not as expensive, it will pay for the home itself. Will you still be embarrassed to ask for the discount? This is just one example. How many transactions do you do in a day where you can enjoy similar discounts, either by using a  particular credit card, or a loyalty scheme, or sometimes simply by asking for a discount?

Always ask

You can enjoy the same pleasures in life at lower costs just by being a bit smart about costs. And it is amazing what you can achieve just by ‘asking’. Getting a good deal gives me lot of joy. I always make it a point to ask while paying a restaurant bill, whether there is any discount on any credit card. And more often than not it turns out that some card or the other is offering a 10% or a 15% discount. Please understand that the restaurant or the credit card company is not doing you any favour by giving you the discount. In fact more often than not they are not even incurring it from their pockets. The millions and millions of customers who are embarrassed to ask for the discount, are actually subsidizing your meals or your purchases (in the form of a discount), by not asking for it themselves. Same applies to any loyalty program. Members who let their reward points lapse indirectly pay for the free tickets for those who care to redeem their points.

The non-refundable deal

I have this bad habit of canceling or changing travel plans at the last moment. Hence I always try to book a changeable/refundable ticket. Last year we had planned a trip to Sydney, and by mistake I had booked a non-refundable hotel stay. Something came up at the last moment and we were forced to cancel the trip. I asked my assistant to call the hotel to request for a refund. She thought I was out of my mind. After all it was clearly mentioned in the cancellation policy that there will be no refunds for last-minute cancellations. However when she finally reluctantly made the call, she was surprised that the hotel ‘out of goodwill’ agreed to just charge me for one night and refund the rest of the nights. I explained to her that this does not happen always but it is still worth trying. The hotel will anyway try to resell the room-nights. So in a busy season, the hotel is literally earning free goodwill by  a gesture like this. Often a promise of a ‘positive Tripadvisor review’ is all that takes for one to get such favours from hotels.

Arbitrage opportunities

Often you don’t even need to ask. The discount is hidden and all you got to do is look for it. While renewing my medical insurance policy few years back, I realized that they had an option of paying in 3 different currencies. However on asking they revealed that the exchange rates are only updated 2 times a year. This immediately threw up an amazing arbitrage opportunity as the exchange rates are usually much more volatile than that. 

Since the last time it was updated in their system, GBP has appreciated considerably against the USD. My usual currency of premium payment used to be the GBP and I had kept the funds aside. However it was smarter for me to just convert the GBP into USD and pay a lower premium by converting the premium currency to USD. I hope the insurance company does not read this post. Opportunities like this galore and I can end up writing a book on these.

Sometimes similar arbitrage opportunities can be exploited as simply as purchasing something online as opposed to buying it from the swanky store. I often compare prices of items on the different Amazon sites in different countries and find great arbitrages. This is no rocket science. We all take advantage of such price differentials from time to time, sometimes unconscious about the long term benefits. The moment you think of these savings in terms of their lifetime value as opposed to just a ’25 bucks saved’, you will be inclined to find it over and over again.

I guess the trick is to not take anything at face value and convince yourself that if you seek 10 times, you will probably end up getting what you seek, at least 3 times.

Read the Part 1 of this series here

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