Month: October 2024

One of the hardest transitions between casual churning and becoming a heavy hitter is the switch from earning miles and points to earning cash back.

The transition should happen when you’ve earned all the miles and points you can spend cover your travel for the next 12-18 months, because:

  • Miles and points devalue by 30-50% in the span of years
  • The programs with the best redemptions change over time
  • Points don’t earn interest
  • The value of an unredeemed point is zero
  • Most of us don’t travel as much as we think we will (even if we travel a lot)

When you earn more points and miles than you can burn in a short time, the risk that excess points eventually become worth much less than when you earned them grows bigger than James’ Giant Peach from the famous historical documentary that I think is called “A kid finds a big fruit and someone wrote about it”.

Why do we fail to transition to cash back, even when we know analytically that it’s not the best option? The common answers I hear and that I’ve thought are:

  • Points and miles are fun, pennies aren’t
  • I’m motivated by travel, my job covers my cash needs
  • What if me and six of my closest friends need to fly Lufthansa F on last minute notice to Frankfurt and I don’t already have the miles banked, and my 800,000 Membership Rewards won’t post for another week?

They’re all valid reasons, but seeing them written can help prevent you from falling into the same trap. Trust me, you don’t want to be down 100,000 Hawaiian miles that expired a few years ago because you didn’t ever have an actual use for them and weren’t active in the program; $1,000 would have been a lot better. #askmehowiknow

Happy Wednesday!

Nerds gonna nerd.

Forward: Does it ever feel like we as a collective have the memory of guppies? We talked about an American Express Personal Gold 2025 4x dining cap of $50,000 in July and it’s not news anymore, right? Or is this crazy town? Please don’t answer, I probably won’t like what I hear.

  1. Do this now: Put a charge or two on each of your Bank of America credit cards in anticipation of avoiding fraud alerts on November 7, when you’ll get +2x on all spend up to $2,500 on every card account. (Thanks to TeddyH)
  2. American Express Offers has new travel related, partially gameable offers:

    – 20,000 Membership Rewards or $200 statement credit after $1,200 spend on Virgin Atlantic through November 30
    – 20,000 Membership Rewards or $200 statement credit after $1,000 spend on AirFrance or KLM through December 31

    It’s too bad the Virgin Red Synchrony Mastercard isn’t somehow also involved but that’s probably because it hadn’t been invented yet when AmEx cooked up the offer, at least according to what I just made up. (Thanks to FM)

  3. Frontier Airlines has 10,000 bonus miles for booking a roundtrip flight by tonight and completing travel before the end of 2025.

    As we all know, what’s even worse than a Frontier flight? More Frontier flights, that is unless you want to fly Des Moines, Iowa direct to Guadalajara Mexico; Frontier is the only airline that has that flight in the bag.

Happy Tuesday!

Guppy food.

  1. The Chase Sapphire Preferred has both a 70,000 Ultimate Rewards and $300 travel credit as a sign-up bonus via referral links, though not all referral links see the increased sign-up bonus. The offer is also available in-branch.

    I prefer Ink cards to the Sapphire Preferred for lots of reasons, but this bonus is worth your attention if you can refer another player. If not, the periodic 100,000 Ultimate Rewards bonus version is a higher value.
  2. The Citi AA Platinum Select card has a sign-up bonus of 75,000 AAdvantage miles after $3,500 spend in four months, and the annual fee is waived the first year. (Thanks to DDG)
  3. United MileagePlus has a tiered transfer bonus of up to 30% for incoming Marriott Bonvoy points through the end of October, and registration is required. Points transfer at a 3:1 ratio and if you transfer in 60,000 point increments you get a bonus 10,000 miles too, so each increment earns:

    (60,000 * 130% * 1/3) + 10,000 = 36,000 miles

    Marriott has a similar deal with AirCanada Aeroplan with a smaller bonus that works out to 28,000 miles, which frankly is worth about the same as 36,000 MileagePlus miles. Frankly I’m impressed at some marketing person’s mileage valuation prowess.
  4. Staples has a fee free $200 Mastercard gift cards through Saturday, limit eight per transaction.

    These are Pathward gift cards.
  5. Chase has the following transfer bonuses through October:

    – 30% to British Airways, Iberia, or Aer Lingus Avios
    – 50% to Marriott Bonvoy (this was 70% over the summer)

    A 30% transfer bonus to the above Avios programs is effectively a 30% transfer bonus Qatar Avios and FinnAir Avios too.
  6. Safeway, Albertsons, Vons, and other Just4U stores have a promotion for 10x points on Zillions and Choose Your Card gift cards through Saturday, and if you wait to buy until Saturday you’ll probably earn 12x instead of 10x with the weekend 4x coupon.

    How does 10x+4x=12x? That’s one of the least weird things about the Just4U program, just roll with it.
  7. Kroger has a coupon for a fee-free variable load Visa or Mastercard gift card of $150 or more through October 15. I won’t go out of my way for one fee-free gift card, but there’s a great chance that it’ll happen organically.

    These are now Pathward gift cards, so long US Bank.
  8. Southwest has a 25% off base fares sale for flights booked today and travel between October 29 and February 10, 2025.

Just4U points as a grocery store mascot.

Introduction

The Pepper gift card platform, seemingly created as a conduit for moving money between venture capital bank accounts and gamers’ wallets, warrants discussion based on recent developments and crowd think.

Background

Moochoo, the company, the company behind Pepper, raised $23.05 million on December 21, 2023. Is it auspicious that they closed on a pagan holiday? Probably not, but it’s funny. Pepper’s go-to-market strategy started shortly thereafter with effectively unlimited 10% back (in Pepper coin currency) on new accounts for the first 15 days of the account’s existence, along with bonuses for the referrer. They appeared to want new users at all costs and turned a blind eye to gaming with zero due diligence on new accounts. (Have a new device? That’s a new person, obviously. It’s not possible to have more than one, duh. Just make those charts go up and to the right!)

Seven months later in July, Pepper pivoted its rewards scheme away from unlimited new account cash-back, almost certainly because at its then current burn rate, it wouldn’t survive long in the face of unlimited purchases of Walmart, Home Depot, Amazon, and other high value gift cards at ~90% of face value. Pepper replaced the new-user sign-up bonus with double base points on gift cards for the first 15 days, which wasn’t useful for bulk resale and caused volume to plummet. How do I know volume plummeted? Pepper order IDs are sequential, naturally.

The Now

Pepper took a few weeks, but they’ve settled into the new normal. Now, they release “Daily Boost” merchants once, twice, or three times a day. Boosted merchants earn much more than regular, like 12x on Amazon or 20x on Columbia Sportswear. Boosted merchants have a total capacity before the boost goes away, which sometimes happens in 30 minutes for popular brands and sometimes doesn’t happen at all.

The Warning Lights

There are a few recent developments that could be taken as warning lights:

  • Boosted merchant rewards payouts are now delayed by several weeks (is this related to cash-flow concerns?)
  • New accounts now require ID scans, but only as of a few weeks ago (why now, maybe because they’re trying to raise money and VCs want real user verification?)
  • Boosted merchant deals are getting better brands and higher payouts daily (why offer bigger than 10% discounts on high-volume bulk resale gift cards like Amazon, Walmart, and HomeDepot, which were probably burning Pepper’s cash reserves down like a dry Christmas tree on fire? Maybe to build temporary operating revenue?)
  • The capacity for boosted merchant deals seems to be increasing steadily (again, is this for cashflow reasons?)
  • Boosted merchant deals seem to be shifting to the brands that sell-out quickly from the brands that don’t (why push for more volume on cards you’re probably taking a loss on?)

To answer these questions, I think it’s time to build a simple quant-model for Pepper’s cash reserves.

The Pepper Doomsday Countdown

Let’s come up with a model for how much cash Pepper probably has left. The formula is really just $23.05 million, minus burned cash, plus earned profits. Let’s make some data-driven assumptions:

  • Monthly operating expenses, salaries, and benefits for 37 employees, assuming an average overall employee expense of $65,000 per year (this is likely a rather low estimate): 37 * $65,000 / 12 = $200,416 / month
  • Number of transactions through September 30, 2024 (order ID’s are sequential): 857,000
  • Average transaction size (bulk brands are usually between $750 and $1,500 in max size): $1,000
  • Monthly profit from regular discount gift card purchases for non-boosted accounts and users, assuming 3% profit: 3% * $500,000 = $15,000 / month
  • Per order losses on boosted transactions, assuming 3% loss: $1,000 * 3% = $30
  • Percentage of transactions that are boosted, in a new user sign-up bonus, or otherwise money losing: 80%

Now, let’s run the America-Loves-Math-o-tron-5000:

2024 losses = $200,416 / month * 9 months + $30 / order * 857,000 orders * 80% – $3,000 / month * 9 months = $22,236,744

So, ~$23 million raised and ~$22 million in expenses by my simplistic toy model. You can play with the numbers and come up with your own conclusion, but you have to get pretty far below a 3% per transaction loss to make things look rosey for Pepper, or really far above $500,000 per month in profitable transactions.

Where does that leave me? I think Pepper is about 10% likely to die in the next 30 days, and maybe 50% likely to die by the end of 2024; unless of course they find another VC that wants to shoot money into a toilet. I’m still playing the Pepper game but only at a small level. If they fold and I lose my floated Pepper rewards, I’ll live without much regret.

Happy weekend I guess?

The result of the last round of Pepper’s VC money cannon.

  1. Do this now: Register for Choice’s Q4 promotion for 8,000 bonus points on two night (or longer) paid stays through January 5.
  2. Do this now: Register for Marriott and Singapore Airlines reciprocal earning promotion for bookings and flights between October 10 and December 12. You’ll earn:

    – 500 Singapore KrisFlyer miles on paid Marriott stays
    – 1,200 Marriott Bonvoy points on paid Singapore flights

    Because Marriott is Marriott, 500 Singapore miles are probably more valuable than 1,200 Bonvoy points.
  3. The Chase Hyatt personal card has a new sign-up bonus for five free category 1-4 free night certificates with $4,000 spend in three months. The $95 annual-fee is not waived the first year. I prefer the points version of the sign-up bonus since those don’t effectively expire and are more flexible. (Thanks to shris420)
  4. Etihad Guest has a tiered 20%-40% transfer bonus for incoming Citi ThankYou point transfers through October 31. With the transfer bonus, AA short0haul flights are cheaper to book with Etihad than with Alaska MileagePlan.
  5. Qatar Avios has a 25% transfer bonus for incoming Citi ThankYou points transfers through October 31.
  6. Bank of America has a $500 personal checking account bonus requiring $15,000 deposited within 30 days, keeping the money there through day 120, and one of: sending a bill payment, using Zelle (don’t do this), mobile depositing a check, or making a singe direct deposit. Use promo code MCC500CIS. There are exclusions for

    The effective APR of this deal is 13.3% in the best case or 10.0% in the worst case, but the real reason to do this is for opening up Bank of America credit card approvals. (Thanks to DDG)
  7. US Bank has a $900 business checking account bonus requiring $30,000 deposited within 30 days and maintaining the balance for 60 days using promo code Q4AFL24. This bonus requires that 12 months have passed since you last had a business checking account with US Bank.

    The effective APR of this deal is 36% at best and 18% at worst which is reason enough to go for it, but like with Bank of America, opening a checking account will help with credit card approvals. (Thanks to DoC)
  8. Chase’s Q4 Pay Yourself Back 25% bonus categories are: utilities, insurance, fitness clubs and gyms, gas stations, and annual fees. Bonuses are all only the Sapphire Reserve this quarter too. “Select Charities” remains at its 50% bonus value. So long high volume gold cash-out, but hello octopus insurance cash-out!
  9. Chase is making a change to the Sapphire Reserve $300 annual travel credit which seems to be:

    – $300 travel credit resets in December as usual for use past your December statement
    – Remainder of unused December credit becomes a statement credit on December 31
    – $300 travel credit for January 2025 – [your anniversary date]
    – $300 travel credit for [your anniversary date 2025] – [your anniversary date 2026]

    I think this means a bonus $300 travel credit in 2025.
  10. Chase’s has a few targeted promotions for booking through the travel portal:

    – 10,000 bonus Ultimate Rewards after booking a hotel stay of $400+ by January 31 (via email)
    – $100 back on $500 in spend by October 31 (via Chase Offers)

    These will stack, and these are (probably) both gameable. (Thanks to FM)

Pay yourself back hiccups when buying Octopus insurance.

  1. There’s now a public, safe version of an upgrade link to a Business Platinum for Business Gold and Business Green American Express card holders with 120,000 bonus Membership Rewards after $10,000 spend in 90 days.

    This one is safe for anyone to use, potentially unlike the one made public last week which was dubious at best and err, scary at worst. Why was that one dubious? It was a manufactured link specifically constructed with two contradicting offers that happened to pass through the application system in an unintended way. Side-note: That fact that this link is dubious still isn’t noted on other blogs, hopefully because they just don’t know. Always know the province of links before diving in. (Thanks to reb702)
  2. Southwest has a 40% fare sale for selected flights booked by tomorrow night for travel between October 29 and January 31, 2025 with the typical blackout dates that you’d expect using promo code SAVEWOW.

    I got approximately 25,000 Rapid Rewards points back by grooming by existing bookings, though most of those existing bookings are backup flights so the expectation value for my actual cost is lower than 40%.
  3. Marriott Bonvoy has a transfer bonus of 15% to AirCanada Aeroplan miles through the end of October. Points transfer at a 3:1 ratio and if you transfer in 60,000 point increments you get a bonus 5,000 miles too, which means you’ll earn:

    (60,000 * 115% * 1/3) + 5,000 = 28,000 miles

    Which increases the normal transfer ratio to 2.143:1. (Thanks to TheSultan1)
  4. AirFrance / KLM’s FlyingBlue program has released its promo awards for October for travel through March 31, 2025 to and from Europe. US cities include Dallas, Austin, Houston, Los Angeles, Atlanta, Miami, Chicago, and Detroit. US-lite cities include Havana and Toronto.

    There’s a ton of economy space at 15,000 miles in this month’s drop, more than I’ve ever seen in-fact. Discount business class space is almost non-existent this year and barely-existent next year.
  5. American Express has 100% off of purchase fees with promo code 100AMEXGIFT. The main use for these is shifting spend to a later time while earning the sign-up bonus now, but only if your manufactured spend-fu can’t support immediate spend needs. (Thanks to GCG)

Calendar view of discount business class inventory in this month’s FlyingBlue promo awards.

  1. Virgin Atlantic FlyingClub will be moving to a spooky dynamic award chart on October 30 for Virgin metal awards, and apparently will offer a new saver level of awards that prices similar to saver level flights today. Somehow the new saver level is different than the old saver level though because #marketing.

    Partner award flights are purportedly unaffected.
  2. The United MileagePlus shopping portal has a spooky 500 bonus miles after $150+ in spend through October 7. The actual spooky part of this story is that giftcards.com remains absent from major airline shopping portals.
  3. Futurecard, a debit card with capped 5% cash back in some spend categories, added Amtrak as a 1:1 transfer partner. Major banks haven’t been able to pull off a direct transfer to Amtrak in modern history, and indirect transfers via JetBlue TrueBlue and Points.com are only a 2:1 ratio.

    I guess now we’re getting excited about a debit card with a $5 sign-up bonus because of course 2024 brought that too.
  4. JetBlue has an award sale for economy travel on Etihad for travel though October 31. Where does spooky fit into this one? Long-haul economy, duh. (Thanks to Gary)

More October spookiness.