There’s been much electronic ink spilled since the weekend about Office Depot’s decision to pull variable amount gift cards from their shelves. There’s been a great deal of speculation about their motives, the best intelligence being that these are a focus of fraud (people buying gift cards with stolen credit cards, and they’re popular with drug dealers to boot).
Lower dollar gift cards have the same price to purchase, and cost less to process (lower credit card interchange fees for each card) so there’s better offsetting economics for the loss prevention folks to look at.
Of course it could be some other motive, and we’re all just stabbing at the dark. I haven’t had high level discussions with Office Depot about this, so my speculations are just that.
But what I’m more interested in what the change means for mileage-earning. There may well be replacements coming for those higher dollar gift cards, but what if there aren’t?
What the Value Proposition Used to Be
If you could earn 5 points per dollar with certain credit cards shopping at an office supply store, you could then buy gift cards and use those for your every day spend and effectively earn 5 miles per dollar on everything. The cards would cost $4.95 so you would pay 1 cent per point to earn those extra 4 points.
It used to be that you could buy ‘Vanilla Reload’ cards even cheaper, and cash those out, but Office Depot stopped selling those.
So some folks were buying gift cards, and using those gift cards to buy Vanilla Reload cards at CVS. Then loading those cards onto Bluebird, and paying off the credit card. Purchasing both cards, your cost was $8.90 per $500 or 2500 miles earned. Well worth it at just over 1/3rd of a cent per point.
Are $200 Gift Cards Worthwhile for Every Day Spend?
If you can buy a $200 fixed-value gift card at Office Depot for $204.95, and earn 1000 miles in the process, then spend the gift card instead of a credit card for everyday transactions you are earning an extra 4 points per dollar at a cost of $4.95.
Those extra 800 points cost you a bit more than 3/5ths of a cent apiece. That seems worth it to me but there’s the hassle factor.
- They are harder to use for larger transactions. You can use multiple $200 cards, but not every merchant will do a split tender transaction (let you pay with more than one card) and it’s extra time and aggravation to do so.
- You have more cards to keep track of, each with small balances at the end, I personally load small balances in any exact amount of $10 or more onto my Starbucks card to not wind up with extra cash on cards.
It’s probably still worth buying $200 cards at $4.95 for the extra points, but it’ less valuable than it used to be when you could buy $500 cards at the same cost.
And so I’ve struggled with the math and the ‘hassle factor’ of the $200 fixed-value card which also cost $4.95. It’s a pain to use gift cards with no name on them, track balances, and liquidate funds at the end (say, putting any precise amount over $10 onto a Starbucks card in-store).
With the same cash cost for a lower card value I’ve struggled with whether or not it’s worth it. But I believe it is. $200 cards cost $6.95 at Staples which makes the value proposition even less good, though.
Are $200 Gift Cards Worthwhile for Purchasing Vanilla Reloads?
For folks with access to Vanilla Reload cards, the economics have changed as well but it’s certainly still worthwhile.
You can still load $1000 a day in Vanilla Reloads onto a Bluebird card. So:
- (5) $200 Visa gift cards @ $4.95 each = $24.75, earns 5000 Ultimate Rewards points
- (2) $500 Vanilla Reload cards from CVS @ $3.95 each is $7.90
You’re going to have to use the 5 different gift cards to make a $1000 payment. You aren’t just liquidating one gift card to one ($496.50) Vanilla Reload. But I haven’t had a problem doing this.
Your cost is $32.65 to generate 5000 points, or a tad until 7/10ths of a penny per point — the same price as my all-time best haul, the 2009 US Airways holiday shopping promo (“Track it Back stickers” which of course could be done strictly at your computer and without limit, but for one airline’s currency rather than a flexible currency).
I’d argue this is still worthwhile, just less lucrative than it used to be.