Pictured above is a pretty generic coupon — in fact, I found it via a Google Image Search for “coupon.” Please don’t take its inclusion as an endorsement of the product pictured — I have no idea whatsoever if it is any good. Instead, focus on the bottom left corner of the coupon, in the section titled “Mail To.” (Here’s a bigger version if you need it.) You’ll see that the coupon has a cash value of 0.001 cents — that is, one one-thousandth of a cent. In theory, that would imply that if you collected a thousand such coupons, the issuing company would redeem them for a penny; collect a hundred billion, and you’d be a millionaire.
Both of those outcomes are absurd, though, in no small part because the deal the coupon offers is worth way more than a thousandth of a penny. Why bother having that “cash value” in the first place?
As it turns out, this has something to do with the 1890s version of frequent flyer miles — and a handful of state governments misunderstanding how coupons work.
Toward the end of the 19th century, something called “trading stamps” took the American retail world by storm. Like frequent flyer miles, the stamps were a virtual currency which consumers earned as a reward for spending money. Earn enough trading stamps and you could cash them out for various other goods, such as cookware and household appliances relevant to that age. But unlike frequent flyer miles, you didn’t get trading stamps from your credit card company (which didn’t exist yet anyway). Instead, you obtained them from shopping at participating retailers — merchants would hand you a physical stamp to paste into a collection booklet. For the retailers, the trading stamps were a great way to build customer loyalty — if a consumer were ten stamps away from a Dutch oven, he or she would likely patronize businesses which issued the right type of trading stamps to collect those last few.
So how did retailers get the trading stamps? They bought them from the redemption company. The retailers, therefore, incorporated those costs into their business operations. In some cases, merchants offering trading stamps bumped up prices a bit to account for the cost of acquiring the stamps. However, as the Straight Dope observed (and sorry if that link auto-plays a video), various state legislatures weren’t a fan of this practice. Some states wanted customers to be able to get that cash back in the form of cash, not cookware, so legislatures started passing laws requiring trading stamps issues to redeem booklets full of stamps for cash. According to Mental Floss, New York took the lead: “by 1904, [state] had enacted laws that forced stamp makers to put a cash face value on each stamp that would enable consumers to bypass catalog redemptions and get money back for their stamps.” Over time, many other states passed similar laws.
Of course, the trading stamp companies didn’t want to be in the business of sending cash back, so they simply priced the stamps in a way to limit the work. A typical trading stamps collection booklet had room for 1,000 stamps — it therefore made sense to offer one dollar for a filled book. Do some quick math and each stamp was given a cash value of one-tenth of one cent, or 0.1¢. Even though a booklet of stamps could be easily redeemed for products worth a multiple of that, it’s likely that state governments were okay with this pricing — round numbers tend to make sense to us, even when they shouldn’t.
The popularity of trading stamps persisted through the first half of the 20th century and into the 1970s, and along the way, retailers and manufacturers came up with another way to incentivize consumers. That method, of course, is coupons, which work very differently than trading stamps ever did. But often, when lawmakers are met with a new product that they think needs to regulation, they turn to apparently similar products and try and replicate the law. State legislatures often employ strange analogies which lead to even stranger results, and coupons are a victim of such shenanigans. A handful of states believed that coupons would create the same economic cost-reshuffling that trading stamps did, and those states required that coupons, like trading stamps, also be redeemable for a very tiny bit of cash.
Some of those laws have since been repealed, but a few still remain. Because it doesn’t really make all that much sense to issue two sets of coupons to comply with various state laws, we’re stuck with some cash value — very, very little cash value — on our coupons.
From the Archives: Targeting Crime: Target’s incredible, borderline-creepy efforts to send you perfect coupons (and solve crimes at the same time).
Take the Quiz: Unrelated (I meant to include this yesterday but, oops, left out the link): The Bathroom Word Ladder.
Related: “Extreme Couponing: Learn How to Be a Savvy Shopper and Save Money… One Coupon At a Time” by Joni Meyer-Crothers. A treatise on how to really, really use coupons. 4.6 stars on 111 reviews.