While Pepper has killed the market for third party gift cards bought at a 10% discount in some brands, others like BestBuy and Lululemon are largely unaffected given the purchase limits on the former with Pepper and the lack of those cards altogether on the latter.
The Chase Sapphire Reserve, United Club card, and Ritz cards no longer offer primary rental car insurance to New York residents, where it now reverts to secondary insurance. They also exclude Israel, Jamaica, the Republic of Ireland, and Northern Island in the benefits guide.
The US Bank Altitude Reserve doesn’t have this restriction and therefore wins New York, but does also restrict coverage in Israel, Jamaica, the Republic of Ireland, and Northern Ireland. The Venture X is similar, but doesn’t win New York because it’s Capital One.
The other semi-official way to win New York: Snap a picture of at least four different varieties of the same, slightly off, character.
Staples has fee free $200 Visa gift cards starting Sunday and running for two weeks, limit nine per transaction. The two week promotional window is odd, normally when promotions are extended it’s because either (1) people pick up other profitable things when in store for the promotion, or (2) there’s not enough volume to exhaust the promotional budget in one week, so they extend. Neither feels like the right explanation though.
Bilt Rewards has two new transfer partners, which solves the, err, mystery of why some travel bloggers were at a Bilt offsite earlier this week. I wonder who paid for the offsite? Anyhoodles:
– Accor Hotels at a 3:2 ratio – TAP Air Portugal at a 1:1 ratio
Accor Hotels partners with Citi and Capital One but with a worse 2:1 transfer ratio. Accor Hotel points are worth about 2.2 cents per point with fixed redemption values and are often a great deal in the European equivalents of Lubbock, TX. TAP Air Portugal is a Capital One transfer partner with the same ratio as Bilt.
Giant, Giant Food Stores, Martin’s, Stop & Shop have 2x points on Visa gift cards through Thursday, limit $1,500 or $2,000 per account depending on store. (Thanks to his eminence, Stephen at GCG)
You can pair this with the Citi AA Personal card’s 75,000 AAdvantage miles after $3,500 spend in four months which also has the annual fee waived for the first year, just space out the applications by eight days or one will be automatically denied.
– No more reciprocal earning on paid flights or stays – Exchange AA miles for Hyatt certificates after several Loyalty Points thresholds – Choose Hyatt certificates as a Loyalty Point Reward at some thresholds (this is a bad value) – Exchange Hyatt Milestone Rewards for AA seat coupons or status – Hyatt elites can redeem points for “status for a day” with AA (this is also a bad value)
We don’t know what the conversion rates look like yet for exchanging miles, but we do know what the redemptions for threshold rewards and status for a day look like, and they’re terrible. Don’t let the hype machine get you excited over this. UPDATE: Gary at VFTW let me know that we do know that redemptions for Category 1-4 certificates will start at 25,000 AA miles, and redemptions for Category 1-7 certificates will start at 65,000 AA miles.
– 5 carriers: 10,000 bonus miles – 10 carriers: 100,000 bonus miles – 15 carriers: 1,000,000 bonus miles
There are 21 (or 20 minus Aeroflot) SkyTeam carriers. I believe it’s possible to do this at an approximate cost of $75 per ticket if you’re very flexible and able to sandwich it in-between other flights you’ve already got on the books, putting the lower minimum cost at approximately $1,125. If you’re less flexible or don’t have additional travel that you can piggyback on, you’re probably looking at $5,000 in tickets to pull this off. The SAS Eurobonus chart is quite good on SAS metal to Europe at 50,000 miles in business, and it’s reasonable-ish for partner awards. One million miles would be worth 20 business class one-way flights on SAS metal, so there’s utility for gamers.
Alanis Morissette called and told me that one of the most valuable airline currencies, AirCanada Aeroplan, teamed up with one of the least valuable hotel currencies, Marriott Bonvoy. Under the partnership, you can match status between two programs:
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
– 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)
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.
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.
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:
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.
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)
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!
– $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.
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.
