So with using 5C or ER40 collets to hold the work piece, what happens when the the round stock you buy isn't precisely the same size?
I buy most of my metal from McKinnon Metals, https://mckinnonmetals.com/ and some times what is sold as 1/2" or 1" is somewhat under or over sized, these collets don't look like they they have a lot of give in either direction.
Would I be damaging the accuracy of the collets by using them for nominal size stock?
These are common questions and there is some disagreement on the answers. Even amongst very experienced members.
Most collets have some range built into them. But all I do is make shims out of pop cans. They are very uniform thickness and will take up enough space to hold parts quite well. I cut the can into strips and then cut to size with a small gap to accommodate the downsizing. Sometimes I might use several layers. Make the strips wide enough to use the entire clamping depth of the collet. But you don't really need to worry about damaging collets if you use them within their rated range. However, NEVER force a part into any collet. Forcing a collet to accept something BIGGER than their design range can damage them.
It is true that ER collets have a wider closing range but I don't find this extra range to be very practical. I end up using shims regardless because I don't like distorting the collets too much. 5C was developed to hold stock and ER was developed to hold nominal tools. That's how I use them 95% of the time.