Double-Dipping at Starbucks

If you go to Starbucks once every two months or more, you should pick up a Starbucks gift card. And register it.

The Starbucks Rewards program is a hybrid between a store loyalty card and a store credit card. Just like a loyalty card, with each transaction, you accumulate points and make your way to earning more benefits. But similar to a store credit card, the benefits only accrue if you use the store card rather than your primary credit card to pay. In Starbucks’ case, however, there’s no need to give out your social security number and wait to get approved. Rather, to accumulate Stars (their version of points), all you have to do is pay for your drinks and food with a Starbucks gift card.

This is how the program works: first, you get yourself a Starbucks gift card. They come in several different styles and may even vary by city – any of them is fine. It can also even be the gift card that you receive when you redeem your credit card points. Then, you create an account in the Starbucks Rewards webpage and register that gift card. From that moment on, you will get one Star each time you make a purchase (no matter what you buy or how bill or small the bill) at Starbucks using that gift card. You can register as many gift cards as you want in your account.

The benefits increase with the number of Stars you get, and will be more or less meaningful to you depending on your drinking and loitering habits. Here are the benefits at each level, straight from the Starbucks Rewards website:

 

Starbucks Rewards Benefit Levels

 

It’s a little annoying that you need to reach 45 Stars to earn your first “free drink every 15 purchases”, but the good thing is that as long as you maintain your Gold status, you’ll keep earning this benefit. That is, provided that you make 30 purchases  at Starbucks every 12 months, you’ll continue getting a free drink every 15 purchases – you don’t have to go 2 rounds of 15 without earning anything again.

To Double-Dip

Now, because Starbucks Rewards requires that you use their gift card to pay for your purchases in order to earn Stars, it may seem like you’re giving up on earning whatever points or cash back you earn through your credit card – but you don’t have to. This is the perfect double-dipping opportunity: a Starbucks gift card can be re-loaded as many times as you want, so why not re-load it using your preferred credit card?

Suppose you go to Starbucks twice a week. Next time, rather than paying for your order on your credit card, you can pick up a Starbucks gift card right on the counter and use your credit card to load it with, say $20. Then use that to pay for your order and all your subsequent orders until the balance runs low again. Then just use your credit card again to re-load it. This way you earn your credit card points (loading a gift card will show up in your credit card statement just like a purchase and earn you the points or cash back accordingly) AND accumulate Stars.

If you have the CitiForward card, for example, this method will earn you 5 ThankYou points whenever you re-load the Starbucks card and a Star each time you actually use it. The Starbucks Rewards webpage even allows you to set up for auto-reload if you so prefer.

If you have a credit card with 5% cash back categories that rotate every quarter, this approach allows you to stretch that benefit even further. For instance, from July to September 2012, the Chase Freedom card is giving 5% cash back on gas station and restaurant purchases. Since Starbucks counts as a restaurant for that credit card, you could load your Starbucks gift card before September 30, 2012, with roughly what you would spend over the following couple of months. Then, even once October kicks in, you can continue paying for your drinks with your Starbucks gift card, essentially earning 5% cash back for drinks bought outside the 5% cash back window!

Also note that your Starbucks gift card can be used in various countries including Canada and the UK – even if purchased and loaded in the US – so no need to worry about foreign transaction fees or navigating local currencies just to get a cup of coffee. And you still get a Star.

Discover More and Chase Freedom: 5% cash back is great and two ways to get it is even better

I am a huge fan of Discover’s credit card, and I am certainly not alone. Discover has ranked very well in several customer satisfaction surveys in recent years, receiving an award for best call center in the Credit Card Industry in 2010, and coming out on top in various areas directly related to consumers, including ease of online application and general customer satisfaction. Despite this, however, when I praise the Discover More credit card to friends or family, I often hear the same objection: “but no one takes Discover!”

I am guessing this response was probably the impetus for Chase’s launch of the revamped Chase Freedom card in March of last year. The Discover More card, which offers 5% cash back on purchase categories that rotate every quarter is clearly a good idea. Chase makes it even better by trading in the customer service but offering a card that is accepted almost everywhere.

If you are in the market for a credit card with a permanent place in your wallet, both of these cards are worth considering.  Although eligible purchase categories rotate quarterly, 5% cash back on a credit card is an amazing deal right now, especially when the cards come without an annual fee.

Notably, the rotating calendar for which you can earn 5% cash back is not identical between the two cards, so that owning one of the cards does not necessarily mean there’s no point to owning the other. Here are 5% cash back categories for 2010 Chase and Discover side by side:

Importantly, both of the cards cap the 5% cash back you can earn each quarter. Discover’s varies by quarter, such as $800 spent on the categories in the first quarter (effectively $40 cash back) and $300 in July –September ($15 cash back). The Chase Freedom card, on the other hand, caps the 5% cash back to $1500 spent ($75 cash back) on eligible categories each quarter. So if you are a big spender on the cash back credit card, the Chase Freedom card is probably a better option for you. But if you’re a big big spender, getting both cards is even better since you can charge purchases in the categories that overlap between the two cards to the Chase Freedom card, and then charge purchases in the other eligible categories to the respective card.

Excepting the 5% cash back categories and purchases made through the credit card portal, the Discover More card offers a standard .25% cash back on the first $3000 spent each year, and 1% thereafter. The Chase Freedom card is a step above, offering 1% cash back on every purchase not earning 5%. Nonetheless, you may be able to find cards that offer more value than 1% cash back (such as an airline credit card), making these two cards really good secondary cards, used mainly for purchases eligible for the 5% cash back. Besides, neither of the two cards has an annual fee, so you don’t have to reach any spend threshold to make owning either of the cards “worth it”.

Even though Discover’s card came out first, the Chase Freedom card is coming out ahead for now. Discover has the better customer service, but Chase uses the Visa network and is therefore accepted in many more places. Which card offers the better set of rotating categories will depend on your lifestyle, but Chase’s higher cap on purchases for which you can earn 5% cash back continues to push the Chase Freedom card ahead. And Chase’s current offering of $100 as a sign-up bonus only makes the deal sweeter.

If you are going to get only one of the two cards and are not one of those unlucky people who have to use customer service frequently, the Chase Freedom will probably be the one for you. But given the slight difference in 5% cash back categories between the two cards and the lack of annual fees on both, there may also be no harm in letting the Discover More share in your wallet real estate. If you need a nudge, try calling the Discover call center to sign up over the phone and you will see the difference.

Cash for a Clunker Appliance

Similar to last year’s cash for clunker program, the American Recovery and Reinvestment Act of 2009 has allocated $300 million for rebates to eligible residential consumers when they recycle their used appliances and purchase new energy-efficient ones (otherwise known as ENERGY STAR appliances).  Each state is in charge of designing  and implementing its own unique Appliance Rebate Program, and the Department of Energy (DOE) has already approved all of them.  A handful of states (Iowa, Kansas, Minnesota, Rhode Island) have started their programs, but most will launch theirs later this month.  Click here for details of the program available in your state. Continue reading

With Discover, March Brings Some Generous Cash Back

Starting tomorrow and until March 31, 2010, Discover More cardholders can earn 5% cash back on purchases made at grocery and drug stores.  This bonus applies to up to $200 in purchases – effectively $10 in cash back, – and, to be eligible, users must sign up when logged into their Discover account.

This promotion is also in addition to this quarter’s 5% bonus on travel purchases.  That is, if you haven’t maxed out the $800 on airlines, hotels, car rental, and cruise charges that are eligible for a 5% cash back ($40) from January-March, you still have another month to go.  And with the new March deal that kicks in tomorrow, your more mundane purchases at grocery and drug stores will get that same great cash back rate.

Soon, No More Free Trips for Eating Your Veggies

Travel is not the only source of frequent flier miles.  With proper planning, you can often score miles through online shopping, credit cards, and evening dining out.  But another source of miles – grocery shopping – is soon to dry up.  Safeway recently announced that, as of February 28, 2010, it will no longer award airline miles to its customers.  Until then, customers can earn 125 miles for every $250 in purchases at Safeway and other stores within its group.

Although a rate of 1 mile per $2 spent is not great, Safeway’s partnership offered a good deal for regular patrons – and could be combined with airline credit card offers for even more miles.  But this turn-around does not mean customers are necessarily losing out.  There are still other ways to score deals at Safeway.  First, Safeway has had to cut out this program presumably because it is now offering more frequent sales and deeper discounts in face of the economy.  Second, you can still take advantage of online coupons that can be uploaded into your Safeway card for more discounts.  Third, you can enroll your Safeway card with UPromise to earn cash back in your UPromise account for purchasing specific items from various brands including Nestle, Hefty, and Florida’s Natural.  Customers are only allowed to enroll their Safeway card in either the miles program or in the UPromise program, but, with the miles program about to be canceled, that decision has already been made for you.  The cash back rate for groceries on UPromise is generally low, but it is better than no miles or cash back at all, and can be much higher when combined with the eCoupons you can upload from the UPromise site.

If you are close to reaching the $250 threshold for 125 miles, make sure you do that before the end of this month.  But if you are not, you may as well switch your Safeway card to UPromise and start earning that cash back as soon as possible.  To learn more about UPromise, check out our previous post on the program here.

Saving for Retirement through a Credit Card? Not So Fast.

Two weeks ago, the WSJ published an article on credit cards that offer cash back or points that can be used to fund your retirement or another investment account.  As the article explains:

Instead of redeeming earned points for the typical airline tickets or gift cards, users of these cards receive cash that they can then deposit into an individual retirement account or another investment or savings account.

This seems like a reasonable deal, and may in fact be useful to those who need some help remembering to move some of their savings into their retirement account.  But beware of the conditions and reward rates.  Here, we review the cards mentioned in the WSJ article:

  • Ameriprise: Ameriprise has 5 credit cards – 2 for only members of its Achiever Circle Elite program.  Its rewards program is like many others, awarding one point per dollar spent on most purchases (and varying bonuses depending on the card).  Points can then be redeemed for a range of things, including travel, gift cards, and funding into an Ameriprise account, including savings and investment accounts.  Points for funding Ameriprise accounts can only be redeemed in increments of 10,000, which are converted into $150 – effectively, a 1.5% reward return.  Two of the cards have no annual fee, while the fees for the other three cards range from $125 to $450 after the first year.
  • Edward Jones: The rewards program for the Edward Jones Personal Credit Card is very similar to Ameriprise’s, offering a variety of options for which points can be redeemed.  One of them is funding into an Edward Jones account, such as an IRA or 529.  However, points can also be redeemed for cash at exactly the same point exchange rate.  For example, for 2,500 points, you can get either $12.50 in your account or as a cash reward check, and for 50,000 points, you can get $500 in either form too.  The reward rate is also relatively low, as it ranges from 0.5% when redeeming 2,500 points to just 1% for redeeming 50,000 points.  There is no annual fee for this card.
  • Fidelity Investments: Fidelity offers 4 different credit cards, all of which transfer your rewards straight into your Fidelity account.  There are 3 American Express options, which post 2% of the value of your purchases into a Fidelity Investment, IRA, or 529 accounts, respectively.  The Visa card, on the other hand, gives only 1.5% on the first $15,000 you spend per year on the card, and 2% thereafter.  All 4 cards do not have annual fees.

The WSJ article also warns about interest rates, but even readers who pay their balances in full every month should think carefully before signing up for one of these retirement or investment cards.  These cards require that rewards be deposited into an account opened at their respective financial  institutions.  Further, their reward rates are quite low, and you are likely better off getting a good cash back card – such as Discover or CitiForward – and, if you want, depositing some or all of your returns into an investment account or IRA of your choice.

Rewards in Checking: Bank of America

Barring the rare interest-yielding accounts, it is hard to get much out of your checking account besides the money you already deposited into it and some checks.  But using programs associated with you bank may get you a little more.  Two weeks ago, I wrote on how to make the most of your Citibank account using the ThankYou network, and today I will cover Bank of America.

Bank of America hosts Add It Up, an online shopping portal offering cash back for purchases you make through it.  Of course, there are several other similar portals, such as ShopDiscover, UPromise, and each of the airline portals, and Add It Up won’t always have the best deal.  However, it is worth a visit when you online shop, since the top cash back offer varies by retailer and the cash back earned through Add It Up is deposited directly into your Bank of America checking account – unlike ShopDiscover, for which there are thresholds for cash back redemption, and UPromise, which has a threshold and only makes transfers quarterly. (Click here for a previous post comparing different cash back offers and here for last week’s NYTimes’ Your Money column’s explanation on online shopping portals).

Moreover, unlike most other online portals, Bank of America has a good range of in-store partners as well – at least until the end of 2009.  Once you register your Bank of America checking account for the Add It Up program, you can get a 5% cash back for purchases you make at Staples, Barnes & Noble, Sephora, Macy’s, and Radio Shack stores and at Olive Garden and Burger King restaurants.  This offer runs until December 31, 2009, and is limited to $250 in cash back.  Once you enroll in the Add It Up program, just use your Bank of America check/debit card when shopping at these stores and the bonus will be credited straight into you checking account.  And don’t forget that you can always combine these cash back offers with store coupons.

With Add It Up, it is almost as if Bank of America is paying you to do your holiday shopping – or at least giving you a discount for doing so.

Start Lining Up Your Date Nights

For the last quarter of the year (October 1 to December 31, 2009), Discover is offering a 5% cashback bonus on up to $400 in purchases made at grocery stores, restaurants, movie theatres and video rental services.  If you make the maximum amount of $400 in eligibile purchases, you will get $20 in cashback, which can be turned into a $25 gift card from certain retailers such as Banana Republic and Brooks Brothers.  So remember to sign up.  Then get out there and start making plans for some great date nights!

Shop Around for Miles and Cash Back Too

With so many online portals offering miles or cash back if you shop through their website, it pays to look around for the best rewards out there.  So after you’ve done your research for the item you are going to buy and have found the perfect coupon code, you should look for bonus deals on online portals before hitting the purchase button.  You may need some patience to look through them but you will be duly rewarded for that, as the bonuses differ a lot from website to website and from store to store.  Here are four examples:

The Apple Store:

  • Discover’s ShopDiscover: 5% cash back
  • Bank of America’s Add It Up: 2% cash back
  • Upromise: 1% cash back
  • United’s Mileage Plus Mall: 3 miles per $2
  • American Airlines’ AAdvantage eShopping: 1 mile per $1
  • Delta’s SkyMiles Shopping: 1 mile per $1
  • Amtrak’s Points for Shopping: 2 points per $1

Expedia.com:

  • Upromise: 1% cash back
  • Bank of America’s Add It Up: 1% cash back

Macy’s:

  • Upromise: 6% cash back through August 7, usually 3%
  • Discover’s ShopDiscover: 5% cash back
  • Bank of America’s Add It Up: 4% cash back
  • American Airlines’ AAdvantage eShopping: 4 miles per $1 through September 6, usually 3 miles per $1
  • United’s Mileage Plus Mall: 7 miles per $2
  • Delta’s SkyMiles Shopping: 2 miles per $1
  • Amtrak’s Points for Shopping: 3 points per $1

Snapfish:

  • Bank of America’s Add It Up: 15% cash back
  • Discover’s ShopDiscover: 15% cash back
  • Upromise: 9% cash back
  • American Airlines’ AAdvantage eShopping: 6 mile per $1
  • Delta’s SkyMiles Shopping: 6 miles per $1
  • United’s Mileage Plus Mall: 9 miles per $2
  • Amtrak’s Points for Shopping: 5 points per $1

As you can see from the list above, bonuses vary significantly, and some stores even have limited time deals.  So if you have the time, don’t just stick to one portal.  In deciding through which one to shop , consider the size of the bonus as well as in which program you already have some miles or are close to reaching some sort of cash back threshold for redemption.  Either way, you will be turning your good deal purchase into an even better deal.

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A Note of Encouragement

I am a firm believer in loyalty programs, but I know that with some of them it almost feels pointless to give your number/card since it looks like it could take years to reach a reward level.  But these past two weeks were great for me on that front, and I want to offer you a note of encouragement.

Two weekends ago, I received $2.50 Extra Bucks back (a free ½ gallon of milk or cereal?) from CVS for purchases I made during the spring.  A few days later, I redeemed $20 in cash back I had accumulated on Discover for a $25 gift card on Banana Republic, which I used over the weekend to get a top for free!  I use my Discover card mostly for purchases that give me a 5% cash back bonus, which means it takes me a little longer to accumulate cash back than if I used it as my primary card, but I still usually accumulate $20 every 3 or 4 months.

A $5 certificate on Best Buy also came through my Inbox last week.  Their Reward Zone program gives $5 for every $250 spent, and the netbook I bought for my mom last month was $250 and some change.  In the mail, I also got a $10 certificate from DSW just to welcome me to their rewards program (I have only ever made one purchase there before) – and there, $10 goes quite a long way.  And, a year since we first started using OpenTable, we finally reached the points for a $20 gift certificate, which can be redeemed at any member restaurant.  Admittedly, $20 is not much compared to how much we spent dining out over this past year, but being rewarded for using a service that makes life more convenient (no calling restaurants for reservations) is always great.

And in terms of future rewards, thanks in part to my AAdvantage/Citibank credit card, I recently reached enough miles on American Airlines for a free flight to Europe.  While I haven’t booked my ticket yet, I am planning on going to England in a month, and if my recent experiences with reward programs are any indication, I expect redeeming my miles for a flight will be a breeze, too.

Some rewards programs are obviously more generous than others, and I think that the instances in which it may make sense to spend money just to get a reward are few and far apart.  Nonetheless, if you diligently use your loyalty number/card whenever you do make a purchase, there just might be a reward coming your way sooner or later.

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