Understanding discounts: how to calculate your real savings

A sale sign can make you feel like you are saving money. But not all discounts are created equal. Understanding how to calculate your actual savings helps you decide whether a deal is worth taking or just marketing.

How to calculate a percentage discount

The formula is simple:

Discount Amount = Original Price × Discount Percentage

Sale Price = Original Price - Discount Amount

If a $120 jacket is 25% off: Discount = $120 × 0.25 = $30. Sale price = $90.

For the final price after a discount, multiply the original price by (1 minus the discount rate). A 25% discount means you pay 75%. $120 × 0.75 = $90. This shortcut is faster and works the same way.

Percentage off vs dollar off

Which is better: 30% off or $20 off? It depends on the original price. On a $50 item, 30% off saves $15, so $20 off is better. On a $200 item, 30% off saves $60, so the percentage is better.

The break-even point where both offers are equal is when 30% of the price equals $20. Solve $20 / 0.30 = $66.67. If the item costs more than $66.67, the percentage discount saves you more. If it costs less, the dollar discount is better.

Stacked discounts

Some stores offer multiple discounts. Buy one get one 50% off, plus an extra 15% off with a store card. Calculate these sequentially, not by adding them together.

If you buy two items at $40 each with BOGO 50% off: full price for the first ($40), half price for the second ($20), total $60. Now apply the 15% card discount: $60 × 0.85 = $51. Your total savings from the original $80 is $29, or 36.25%.

Adding the discounts would give you 50% + 15% = 65% off, which would be $28. The real price is $51, not $28. Always calculate sequentially.

Buy more, save more traps

Buy-one-get-one-free is a 50% discount if you wanted both items anyway. But if you only wanted one, you are spending more than you planned. BOGO 50% off means you get 25% off each item when you buy two.

Three for $10 is a common deal. If each item normally costs $4, three would normally cost $12, so you save $2. But if you only need one item, you are paying $3.33 each instead of $4. Not a bad deal, but only if you need all three.

Percentages on percentages

A store might say take an extra 20% off already reduced prices. This is a double discount. If an item is already 30% off and you get an extra 20% off, you do not save 50%. You save 30% first, then 20% of the reduced price.

$100 item, 30% off = $70. Extra 20% off = $70 × 0.80 = $56. Total savings = $44, or 44% off. The effective discount is always less than the sum of the individual discounts.

Why stores use tricky discount math

Retailers know that shoppers compare discounts visually. A 50% off sign looks better than a buy-one-get-one-free sign, even if the math is the same. Always do the math to find the lowest price, not the biggest percentage.

Free shipping sounds better than a 5% discount, but if shipping costs $8 and your total is $100, free shipping saves you 8% compared to 5% off. Again, do the math.

How to spot a fake discount

Some retailers inflate the original price to make the discount look bigger. If a mattress is always sold for $800 and the tag says “was $1,600, now 50% off,” the real discount is 0%. Check the price history or compare to other retailers.

The best way to evaluate any discount is to look at the final price and compare it to the price at other stores. The discount percentage is less important than what you actually pay.

Use the Discount Calculator to compare different discount offers and find the deal that actually saves you the most money.