Why are some Visa cards dropping collision damage waiver coverage?

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As I tweeted out on Friday, I was surprised to get an e-mail from US Bank telling me that my Flexperks Travel Rewards card would no longer have “Auto Rental Collision Damage Waiver and Extended Warranty Protection” as of February 1, 2021. Today I saw Doctor of Credit report that several additional Visa cards will be dropping the same or related benefits.

All of which made me wonder, what the heck is going on?

Virtually all credit and debit cards include rental car collision damage waivers

I’ve written extensively about the nuances of rental car insurance in the past, since it’s a particularly complicated issue for folks who don’t own their own cars. That’s because car owners typically have liability insurance that covers them whether or not they’re driving their own cars, while non-car owners have to patch together liability (you hit somebody) and collision (you hit a tree, or an uninsured driver hits you) coverage.

Since most travel hackers are sufficiently well-to-do to own at least one vehicle, rental car insurance is typically put in terms of the collision damage waiver coverage when you pay for a rental car with your credit or debit card, and is framed in terms of “primary” versus “secondary” coverage, the difference being that secondary coverage kicks in after your car-owner insurance, leaving you potentially subject to penalty premia going forward, while primary coverage sidesteps your preexisting insurance.

This is all extremely boring, since virtually all credit and debit cards offer at least secondary rental car collision damage waivers. All you really need to know is to decline the collision damage waiver coverage offered by the rental car company when you check in.

Until February!

Rethinking value?

The main reason credit and debit cards offer collision damage waiver coverage is that it’s so cheap to provide: most people don’t get into rental car accidents most of the time, most people who do get into rental car accidents have their own insurance coverage, and most rental cars aren’t that expensive. It’s basically the Gerber Life Insurance of benefits: you make a lot of people feel good about their life decisions without ever having to pay out a claim. Paying out the occasional claim to replace a bare-bones Toyota Camry isn’t even a blip on Visa’s balance sheet.

Of course, the flip side is that people who never use a benefit are unlikely to appreciate it, no matter how cheap it is to provide. So theoretically the offer of “ID Navigator Powered by NortonLifeLock and Postmates benefits” to replace collision damage waiver coverage might be more immediately tangible to some current Visa cardholders.

But let’s not kid ourselves: that’s almost certainly not what’s going on.

Changing processors

The most obvious explanation for what’s going on is that US Bank and some related entities (e.g. “Elan Financial Services,” a wholly owned subsidiary of US Bank) are switching credit card processors. Unlike many banks, US Bank has continued to issue both Visa and American Express cards, so I assume that the current transitional period is going to be used to move some or all cardholders from Visa to American Express (or vice versa!).

If you rely on credit card collision damage waiver coverage, be careful!

By February 1 ,2021, we’ll have a much clearer view of the situation. Was the announcement of the discontinuation of rental car insurance benefits a holding pattern while the benefits for revamped cards are negotiated and rolled out, or a permanent devaluation? It’s an interesting question, but not an actionable one.

The actionable question is, what credit or debit card are you going to use to book your next car rental? If you rely on the collision damage waiver coverage provided by your bank, make sure your bank actually offers it.

Grocery store rewards datapoints at the end of a lucrative few weeks

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The last few months have seen a more or less continuous stream of offers supercharging the value of grocery store manufactured spend:

  • Between September 4 and 10 Green Dot cards earned 5 points per dollar at Giant/Martin’s/Stop and Shop;

  • In quick succession Safeway offered $10 off $400 in Visa, MasterCard, and then again Visa gift cards;

  • Then Giant stepped up and offered triple points on Visa gift cards, double points on MasterCard gift cards, and 10 points per dollar spent on Happy gift cards;

  • And in the meantime, Safeway began offering 8 points per dollar spent on Happy gift cards (and unlike Safeway’s Visa and MasterCard offers, the coupon can be used an unlimited number of times on a single account).

Giant versus Safeway (1): Giant

Obviously a lot of people live in areas with convenient access only to Safeway or to Giant/Stop and Shop/Martin’s stores, so the decision of which offers to focus on has been made for them, but I do want to draw attention to a few important nuances for folks with access to both programs.

Giant’s program is the simplest, with points redeemable for either groceries or gas in 100 point increments, Each 100 points is worth $1 in groceries or a $0.10 per gallon discount on gas at participating service stations (i.e., worth $1 when filling a 10-gallon tank, $2 when filling a 20-gallon tank, etc).

Importantly, when redeeming points for grocery rewards, you do not need to redeem them or spend them in a single transaction, and you can make multiple redemptions in order to “fill up” your grocery rewards balance. As long as you shop at Giant at least every few months, this drastically reduces the risk of breakage, since you can fill up and spend down your grocery rewards balance however you choose.

Finally, there are three quirks of the Giant program that are worth being aware of:

  • First, in my experience grocery rewards cannot be used to pay for alcohol (this presumably applies to tobacco products as well, though that’s just a guess);

  • Second, they can’t be used to cover any taxes on the transaction. In my experience this creates the kind of bizarre situation where if you just buy fresh produce (untaxed here) then your grocery rewards can be used to cover your entire purchase, but if you throw in a pack of toilet paper (taxed here), you’re left owing some trivial amount on the transaction. Unless they’re getting a steep discount on interchange fees, it’s hard to imagine they’re paying Visa less than $0.20 on a $0.20 credit card charge. Obviously that’s not my problem, but it’s a reminder not to leave your wallet at home if you plan to purchase taxable items with grocery rewards. Your grocery rewards balance also can’t be used on gift cards.

  • Third, purchases that are fully covered by grocery rewards do earn additional flexible rewards points. This isn’t normally a big deal since unless you’re a caterer or something you probably aren’t earning more than a dollar or two a month in rewards from your regular grocery spend. Nonetheless, Giant does periodically offer bonus point earning on the purchase of various items, and the fact that you can redeem grocery rewards while earning additional flexible points may over time modestly increase the overall return on your manufactured spend.

It sounds obvious because it is, but also remember that when Giant is offering bonus points on gift cards with activation fees, the fees themselves do not earn bonus points, while when they offer bonus points on gift cards without activation fees, like the recent Happy gift card promotion, the entire value of the card earns bonus points.

Safeway versus Giant (2): Safeway

I started with Giant because their program is simpler, but obviously there are some times when and some people for whom Safeway is the only game in town, so it’s worth doing a quick look at “just for U” as well, if only by way of comparison.

While Giant flexible rewards points can be converted directly into grocery rewards, Safeway adds an intermediate currency: each time you earn 100 just 4 U points, they’re converted into what they call “Rewards.” Your Rewards balance can be “passively” redeemed by using it at participating gas stations (as with Giant, 100 points/1 Reward is worth $0.10 off per gallon), or “actively” redeemed for groceries (the equivalent of Giant grocery rewards).

Here’s the finicky part: 1 Reward (100 just 4 U points) is not consistently worth $1 off groceries, which makes it slightly more complicated to directly compare Giant and Safeway promotions. Take, for example, the current Giant promotion for 10 flexible rewards points per dollar spent on Happy gift cards, and the current Safeway promotion for 8 just for U points per dollar spent on the same cards. We know the purchase of a $500 Happy gift card will earn 5,000 flexible rewards points, worth $50 off a future shopping trip, while the purchase of the same card at Safeway will earn just 4,000 just for U points, worth 40 Rewards.

Redeemed one at a time, those 40 Rewards could be used for $40 off a grocery bill. But Safeway allows the redemption of multiple Rewards at increased value: 7 Rewards can be redeemed for $10 off, meaning 35 rewards can be redeemed for the same $50 in groceries, and the remaining 5 redeemed for another $7. The Safeway promotion is actually slightly more lucrative at the margin, despite the lower earning rate!

Obviously promotions at the two chains don’t always overlap, so it’s not like you always have the choice between more and less lucrative versions of the same promo, but when they do, make sure you’re calculating your return properly.

Finally, a few more notes on Safeway’s program:

  • Unlike Giant’s flexible rewards which allow you to flexibility build up and spend down a grocery rewards balance, Safeway Rewards redemptions are of the traditional coupon form of “$10 off your next purchase of $10 or more.” This is a time-honored method of encouraging customers to buy more than necessary in order to “make sure” their purchase triggers the coupon, but as long as you’re buying stuff you need at prices that are fair I don’t see any great harm in it.

  • Safeway’s terms exclude using Rewards for the purchase of “all fluid items in the refrigerated dairy section—including fluid dairy substitutes,” and states that “[s]ales tax payments and redemption value deposits are not purchases and are not eligible to earn points.” While I’m sure the tax and bottle deposit terms are enforced, I do not believe the exclusion of refrigerated liquid dairy products is, although if anyone knows for sure feel free to leave your datapoints in the comments.

  • Finally, Safeway Rewards can be redeemed for one-off free items. These are mostly generic or own-brand items (3 Rewards can be redeemed for a free 24-ounce “Signature Cafe Soup”) with value that mostly falls in line with the value when redeemed for groceries (the same 3 Rewards are worth $4 in groceries), but you might see some interesting high-value redemptions rotate through: 4 Rewards can be redeemed for $7 in the Meat Department, which gives a significantly higher value per Reward even than the maximum redemption of 7 Rewards for $10. But those high-value one-off redemptions are relatively rare, and maximizing your Rewards in multiples of 7 will typically be the most efficient way to redeem them.

Conclusion

Although I’ve jokingly referred to travel hacking over the years as a kind of extreme couponing, until this year I really never bothered to learn anything about the actual practice of couponing. Hell, I did most of my grocery shopping at places like Whole Foods that don’t even offer coupons!

But then we stopped traveling, and then I lost my job, and it turns out I was right all along: everything I ever learned about getting free travel applies equally well to getting free groceries!

On a more serious note, for folks who do have the ability to earn more in free groceries than they’ll ever want or need (while earning travel rewards on the side, of course), there are a lot of organizations, from food pantries to diaper banks, that are seeing more demand for their services than anytime since the Great Depression. In ordinary times those organizations benefit more from the cash donations they can use to buy deeply discounted goods from wholesalers, but most of them also accept in-kind donations, so it’s well worth considering calling around a few local organizations to see what they need most, and whether you can get it to them for free, whether it’s through Safeway, Giant, or whatever grocery store rewards program is operating near you.

Galveston Revisited: my interview with the head of Galveston Park Board

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Back in May, Sam and Robert of the Milenomics Squared podcast (and a slew of other activities in and around the world of travel hacking) invited me to join their network and record a biweekly podcast. As a reminder for folks who missed the initial announcement, there are two ways to get new and archived episodes of The Manifesto:

And of course you can sign up for both if you want to listen to all the shows on the network and receive my Newsletters: they’re two great tastes that taste great together!

Try before you buy: a free sample episode

Now that I’ve had a chance to get my sea legs as a podcaster, as a treat we’re making lucky episode 13 free for non-subscribers to listen to. This episode is an interview I recorded in September with Kelly de Schaun, the head of the Galveston Park Board. As long-time readers know, I have a somewhat fraught relationship with the island of Galveston, so one of my first ideas when the podcast launched was to hear the other side of the story: what do people who love Galveston love about it? The interview took a while to schedule, but Kelly did not disappoint and we had what turned out to be a fantastic conversation.

You can download or listen to the episode on the web on the Milenomics website, or find it through Apple Podcasts on the Milenomics Squared no-annual-fee feed. If you already subscribe to The Manifesto dedicated feed or Milenomics Squared premium feed, you should already be seeing it there.

I hope you enjoy listening to the episode as much as I did recording it. And if you aren’t a subscriber already, please consider subscribing to one (or both!) of our projects for more great content like this.

Foreign exchange products: TransferWise and Revolut

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As long-time readers know, I listen to a lot of podcasts, and so I end up hearing a lot of podcast ads. A few months ago, I started hearing ads for a new international payment service called TransferWise. As someone who has occasionally needed to send money overseas for things like tuition, and receive money from abroad for things like voice acting work, I’m familiar with how complicated and expensive the process traditionally is. Of course, people who send monthly or weekly remittances abroad pay even higher fees, as a percentage of each transaction.

Then today Doctor of Credit wrote about another similar service, albeit one with a slightly different business model. I’m not sure what has caused this outbreak of new streamlined international payment services, whether it’s less strict enforcement of anti-money-laundering laws or a new central bank agreement on currency conversions, but the products certainly appear easier and more transparent, if not cheaper, than traditional money transfer services.

I did reach out to TransferWise’s PR department to schedule an interview for my podcast, The Manifesto, but haven’t heard back from them. In the meantime, I did a little research and wanted to share some thoughts on these new products.

TransferWise

Sending Money

TransferWise’s main selling point is its transparent up-front pricing. All you have to do is create a free account to see the exact conversion rate and fee you’ll pay to send any amount between any two currencies. For example, to pay the 22,900 Czech koruna tuition fee at the Olomouc Summer School of Slavonic Studies, you will pay a $3.13 ACH debit fee and $6.46 to TransferWise:

You can send money by entering your recipient’s local bank account details (e.g., the Czech bank account details of a recipient of Czech koruny, the IFSC code for an Indian recipient of rupees, etc.), IBAN number, or other destination-dependent information.

Receiving money through TransferWise is slightly more complicated, and varies depending on whether you’re configuring a business or personal account.

TransferWise Business Accounts

Setting up a business account to receive money is relatively simple:

First, you need to set up a “multi-currency account.” Unlike sending money, which is allowed with a free registration, receiving money requires a (one-time, I believe) payment of $31 to receive bank details for 7 “local” foreign currency accounts:

Note that these are not the only currencies you can receive funds in; rather, these are the seven currencies you receive local bank details for. If you’re being paid by a client in New Zealand, it may be cheaper or more convenient for them to send money to a New Zealand bank than to a US or British bank, for example. You should be able to provide those bank details to anyone in any country to receive money, but any inbound transfer will be converted to the currency of the bank whose details you provide.

TransferWise Personal Accounts

Setting up TransferWise personal accounts to receive money is a little more cumbersome, although should be slightly cheaper in practice. That’s because instead of paying a single flat fee to receive your bank details for all seven local currencies, you instead have to make an initial deposit into each currency you want bank details for. The amounts for each currency vary slightly so I’ll simply list them here:

  • Euro: 20 EUR

  • US Dollar: 20 USD

  • Singapore Dollar: 30 SGD

  • Australian Dollar: 30 AUD

  • British Pounds: 20 GBP

  • Hungarian Forint: 6,000 HUF

  • New Zealand Dollar: 30 NZD

If you already have an external account denominated in a given currency, then you can make a same-currency transfer for a nominal fee. If you are making a deposit from a different-currency account (e.g. making a EUR deposit funded with a USD account) you’ll also have to pay TransferWise’s conversion fee. While this is a bit cumbersome, I don’t think there’s anything necessarily nefarious going on here: for personal use, most people probably only need a foreign currency account in a single currency, for example someone with relatives in Europe or Britain may only want to move money between USD and EUR or GBP, and so ends up saving money by making an unnecessary “deposit” into their account compared to paying to open up 6 additional accounts they’ll never use.

One obvious reason you might set up a TransferWise account in your home currency is to receive payments, international or domestic, without revealing your “real” bank account information to the payer, especially if you’re receiving payments from an untrusted source or simply a country with weaker bank privacy and security standards than your own. Most of us have throwaway bank or credit union accounts we can use for those purposes, but most US banks still charge fees when you receive international payments.

If you receive frequent or, especially, small international payments, a TransferWise account may make sense as a payment target since receiving money is free (oddly the help page appears to be out of date and lists “USD, GBP, EUR, AUD, NZD, and PLN” as the currencies you can receive for free — they do not offer Polish local bank details, and do offer Hungarian and Singapore local bank details). You can then make a “withdrawal” by sending your total balance to your regular US bank account for a nominal fee (for example, $4.23 for an outbound transfer of $1,000).

TransferWise Debit Card

Finally, personal TransferWise customers can order a debit card (for a $9 fee), which has two purported benefits. First, if you spend money in a currency you have in your account, then the money is deducted from that account without charging a currency conversion fee. In other words, if you are planning to travel to Europe, you can move money into your EUR account ahead of time and not pay foreign transaction or foreign currency fees. Second, if you spend money in a currency you don’t have in your account, you pay TransferWise’s conversion fees and get their conversion rate, but still avoid those foreign transaction and foreign currency fees. Most, but not all, premium credit cards no longer charge those fees, but some still do, and most no-annual-fee credit cards do, so it’s not hard to imagine people for whom a $9 TransferWise debit card might offer real savings, compared to their other options.

The third, unadvertised benefit of the TransferWise debit card is a way to reduce the cost of withdrawing money from your TransferWise balance. Buying a single $0.88 Walmart money order, or even two $0.99 money orders from Western Union, will end up well below the $4.23 TransferWise wants to charge for the same $1,000 withdrawal. TransferWise wants you to keep money in their ecosystem, and you want to get it out. The debit card appears to offer one easy way out.

Revolut

Doctor of Credit’s writeup of Revolut was focused on its function as a high-interest savings vehicle, for obvious reasons, but it’s actually slightly more interesting than that. Like TransferWise, it’s actually a platform for making both same-currency and foreign-currency payments, especially to other Revolut users. You can imagine the pitch meeting: “Venmo for the globe-trotting elite,” “PayPal for the rootless cosmopolitan.”

Revolut Savings

Revolut’s pays interest based on two calculations: free accounts earn 0.25% APY, and paid accounts earn a base 0.5% APY, with an additional 4.5% APY paid on the amount in your savings account up to the amount you spent on your debit card that month. The obvious problem with this scheme is that at face value it seems to require you to have access to twice as much money as you plan to earn interest on. After all, you need the same amount of money in your Revolut spending account as you do in the savings account in order to earn the maximum interest on the latter balance. There are two reasons that’s not quite right.

First, let’s look at a brute force calculation of how much you earn and pay when you attempt to maximize your Revolut interest as a traditional high-interest checking account, like those I’ve written about many times in the past. Using some round numbers:

  • A $10,000 savings balance earning 5% APY will earn $512.67 in interest per year;

  • 12 months in the “Premium” plan will cost $119.88 in monthly fees;

  • In order to earn 5% APY on your balance, you’ll need to spend $10,000 per month on the Revolut debit card (technically slightly more over time as your savings balance grows). At $0.88 per $1,000 Walmart money order, this comes to a total of $8.80 per month, or $105.60 per year (obviously use your own liquidation costs in your own calculations).

That gives a total annual interest income of $287.19, or an APY of 2.87%. That’s not great. Not terrible, but not great. Note that in this calculation that you don’t need to keep the money in the spending account all month: you only need it available on the day you make your money order purchase. In fact, there’s no reason you couldn’t transfer your savings balance to your spending balance on the first of every month, spend it all, then redeposit it immediately and transfer it back to savings. You’d miss a few days of interest each month, but you’d be earning interest on the same pool of money.

Second, since qualification is monthly, you can use Revolut savings opportunistically to earn a high interest rate on large balances you can only pay with a debit card. The obvious example is a school which allows semester bills to be paid fee-free with a debit card, but that adds fees for credit card payments. Moving $40,000 to a Revolut savings account on the first of the month, and then making a $40,000 tuition payment at the end of the month, should meet all the requirement to trigger 5% APY on your entire balance. Those with especially large estimated tax payments might also decide to trigger a 5% APY on their payments just 4 months of the year instead of all 12.

Note that by my reading of their terms, you can’t easily swap in and out of paid plans, so if you plan to try something like this, you should commit to it for the whole year or you’ll have to pay at least a $19.98 “break fee,” plus any months of unused benefits. They do claim to offer a discount for annual memberships but I couldn’t easily find any public information about it.

Revolut Travel Benefits

Remember above I mentioned that Revolut was supposed to be a payment app for hip globetrotters, and paid plans come with a number of benefits that might offset their obnoxious fees. Unfortunately, their US site doesn’t provide many details about them. Here are the ones that jumped out at me, in no particular order:

  • Lounge Key Pass. This is, near as I can tell, virtually identical to Priority Pass, in that it offers “discounted” entry into participating lounges, and the participating lounges more or less perfectly overlap with Priority Pass. Just as with Priority Pass, it virtually never makes any sense to use this benefit, unless you can use…

  • SmartDelay. Ordinarily, Lounge Key Pass membership gives you access to participating lounges and restaurants at a cost of $25 per person. “Premium” and “Metal” Revolut subscribers get free access to those same lounges and restaurants for themselves and one (Premium) or three (Metal) guests after their flight has been delayed for one hour. Essentially, you enter your flight information into the Revolut app, and if the flight has not departed one hour after scheduled, you receive the free Lounge Key passes. The passes do not have to be used in the airport you’re delayed in, but they do expire after 48 hours. Any possible mischief here is left as an exercise for the reader.

  • Overseas medical, delayed baggage and delayed flight insurance. These have the potential to be extremely valuable benefits…but the website provides no information about the terms and conditions of the benefits.

Conclusion

In my casual research, I gathered that despite its primitive website and missing language about important benefits, Revolut is actually a fairly established company, with many satisfied and not-so-satisfied customers in Europe and elsewhere. Having just planted their flag in the United States, they’re no doubt still getting their ducks in a row regarding many of the benefits they claim or pretend to offer, and that naturally makes me hesitate to take any of their promises at face value.

TransferWise is a more traditional Silicon Valley startup (they brag about having Peter Thiel as an investor, which I would reconsider were I in charge of marketing), but I appreciate their upfront pricing and extremely functional interface.

Finally, I want to touch on something that I thought about while looking at both companies: foreign currency diversification. Traditionally, retail foreign currency trading is done using either very short-term financial derivatives, or foreign-currency-denominated bonds, rather than buying and holding foreign currencies directly. Obviously a lot of us have piles of euros, koruny, and lats lying around at home leftover from previous trips, but it’s relatively complicated (not to say dangerous) to invest in foreign currencies directly, since consumer US bank accounts don’t hold foreign currency deposits.

Both of these companies allow retail investors to spread their cash across multiple foreign currencies with low exchange fees and, in the case of TransferWise at least, no monthly fees. For folks uncertain about the shape of the future economy, I can see potential value in distributing some amount of cash across a range of foreign currencies, not in the belief that any one of them will collapse or any one will skyrocket in value, but on the chance that one or all of them could do one or both.

TransferWise does have a referral program but the rules are so convoluted I won’t bother sharing my personal referral link. As I mentioned above, I’m trying to get in touch with their PR team and have asked for a promo code I can share with readers for free multi-currency accounts or something of that nature that might actually provide some value.

The Chase Freedom family of cards: it's (still) all about quantity

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In a case of impeccable timing, at the beginning of this week I was high in the Blue Ridge Mountains of Shenandoah National Park, far from cell service, and so was barely aware of Chase’s announcement of a shakeup of their Freedom credit card lineup until we returned to sea level. This gave me the great fortune of being able to read what everybody else thought before weighing in myself.

The new Chase Freedom lineup

Just so we’re all on the same page, this is what the Chase Freedom credit card lineup will look like after September 15, 2020:

None of the cards has an annual fee, and all earn non-flexible Ultimate Rewards points, which require an annual-fee card (Sapphire Preferred or Reserve, or Ink Bold, Plus, or Preferred) to transfer to travel partners.

Load up on Freedom cards now

Looking at the table above, it’s obvious that the Freedom Flex is strictly superior to the Freedom card: there exist categories where it has a higher earning rate, and no categories where it has a lower earning rate. That’s the very definition of strict superiority: there are no tradeoffs.

And that’s why you should get as many Freedom cards as possible right now, before the card is closed to new applications and, presumably, product changes on September 14.

Since each Freedom (and soon, Freedom Flex) card has its own $1,500 limit on quarterly bonus spend, the best strategy has always been to have as many as possible through product changes. Applying for Chase Slate cards for their $0 balance transfer fees and 0% introductory APR offers and Chase Sapphire Preferred and Reserve cards for their signup bonuses, then requesting a product change to the Freedom, is a popular strategy for accumulating additional Freedom cards and additional bonused spending capacity.

So if you still have any Slate or Sapphire cards you’re been procrastinating on, this is a wake-up call to request your product change as soon as possible.

Nick at Frequent Miler suggests that product changes to the Freedom Flex will be possible despite the fact that the Freedom Flex will be issued as a MasterCard World Elite card and Chase’s existing cards are issued as Visas. If this is true, then you can call in again and request the change once the Freedom Flex goes live. If it turns out not to be the case, waiting in hopes of requesting a product change to the Freedom Flex may leave you trapped in inferior products going forward.

Freedom Flex for new applicants

Moreover, the Freedom Flex is a card that you will want to apply for from scratch, partly because of its $200 (20,000 Ultimate Rewards point) signup bonus, but mainly because of the ability to earn 60,000 Ultimate Rewards points when you spend $12,000 at grocery stores during the first year.

Since the Freedom Flex’s bonused earning on dining and drugstores is unlimited, there’s no reason to carry more than one of the card or prefer it to the Freedom (assuming the cards will share quarterly bonus categories). In that sense, it’s like the Freedom Unlimited: you want to have one, but there’s no particular reason to want more than one.

Conclusion

That’s the strategy I’ll be pursuing: convert my remaining Chase personal credit cards to Freedom cards, which will leave me with a total of 4, then apply for a new Freedom Flex card when the application goes live. Whether that’s the right strategy for you depends on how far above Chase’s limit of 5 total credit card applications in the previous 24 months you are, and whether you ever intend to fall below it.

If you’re so far above “5/24,” or credit card signup bonuses are so essential to your travel hacking strategy, that you decide that the only way you’ll ever get a Freedom Flex is through a product change, I would still recommend not product changing from a Freedom, since those will soon be irreplaceable. Far better to sacrifice a Freedom Unlimited or Sapphire card, as long as you maintain as least one premium Ultimate Rewards card to maintain the flexibility of your points.

Non-owner car insurance

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Non-owner car insurance is one of the least-understood insurance products because it is needed by so few people: most people who drive own a car, and most people who own a car have car insurance. Moreover, even if you don’t own a car but borrow a friend’s car to run the occasional errand, you’re almost certainly covered by their car insurance policy.

Non-owner car insurance thus fills a relatively narrow gap: people who drive often enough to need liability insurance, but not often enough to buy and insure their own car.

Basics of car insurance

Any kind of car insurance policy has four potential components:

  • personal or medical liability: you hit somebody, they have medical bills or certain other expenses, your insurance covers those expenses.

  • property liability: you hit something, cause damage to it, your insurance pays the owner for the damage.

  • uninsured and underinsured motorist: an incident occurs which you are not liable for, but the liable person has too little or no insurance to cover the damage to you or your vehicle, your insurance pays the damages instead.

  • comprehensive or collision: your car hits something or something hits your car, your insurance repairs or replaces your vehicle. “Comprehensive” coverage differs from “collision” coverage by covering repair or replacement in circumstances besides collisions, most importantly including theft, but also things like severe weather damage or other non-collision incidents.

All car insurance policies cover medical and property liability with minimum statutory limits, and usually include uninsured and underinsured motorist coverage as well. Here in DC all three are mandatory, with slightly different minimum limits for each. If you already own an insured vehicle, then your coverage applies when you rent most cars as well.

Comprehensive/collision coverage is different because unlike the other three, if your vehicle is uninsured, there is no “free rider” problem: if you crash into a wall and the wall is unharmed but your vehicle is totaled, you’re on the hook for the decision to replace your vehicle or not. People who drive older or cheaper cars can and do thus opt out of comprehensive insurance and take their chances, or “self-insure” if you prefer.

Credit card rental car insurance

Virtually all credit cards provide a benefit called something like “Car Rental Loss and Damage Insurance” (American Express) “Auto Rental Collision Damage Waiver” (Chase), or “Secondary Rental Car Collision Coverage” (Discover). The logic here is that all car owners have personal liability, property liability, and uninsured driver insurance, but since some don’t have comprehensive or collision insurance, the credit card will stand in for that fourth leg of the liability stool.

Here credit card bloggers will start to wax about the differences between primary and secondary coverage, but as I’ve written in the past, that distinction only matters if you’re not involved in an accident with another vehicle. If another driver is involved, you’ll have to involve your insurance company anyway, and the benefit of “primary” insurance (keeping the accident “secret”) evaporates.

But what if you don’t own an insured vehicle?

Rental car company insurance

Depending on the rental company and the state, rental cars may already be insured to the minimum required liability and property insurance amounts:

  • According to Avis’s website: “Avis provides liability coverage for all our vehicles as required by local laws. However, in some states, the coverage provided by Avis is only applied after the renter’s personal insurance has been used to cover all that it can.”

  • Hertz claims that: “If renting in Maryland, Massachusetts, Michigan, New York, South Carolina, Virginia, or West Virginia: Upon signing the Rental Agreement, Hertz provides primary liability protection. However, such protection is generally no more than the minimum limits required by individual state law. See Financial Responsibility Limits by State” (I was not able to find any such page).

Rental car companies are also happy to sell you supplemental insurance, but this insurance is very, very expensive. The rate for a daily liability insurance supplement at Hertz’s Washington National Airport location is $18.85, which appears to be fairly uniform at the various rental locations I checked (no idea why Portland’s was 7 cents cheaper).

But of course, the reason to carry insurance coverage is not to satisfy the requirements of the law. Insurance is worth paying for if it’s able to protect you against catastrophic losses.

Non-owner car insurance

In the Before Time, my partner and I flew out to Indiana a few times a year for long holiday weekends, and since we didn’t own a car, the supplemental liability insurance was always a pain point. On shorter stays we’d pay it (what’s $15?), on longer stays we’d skip it (who’s got $100 just lying around?).

But since long-distance and air travel are out of the question for the time being, I finally decided to look into non-owner car insurance. The main distinction between non-owner and owner car insurance is simple: the insurance company doesn’t care what vehicle you’re driving, because they’re not responsible for insuring it. Instead, they exclusively cover the personal and property damage you do (and the damage done by uninsured drivers to your vehicle).

Unfortunately, I’ve never found an insurance company willing to offer quotes for non-owner car insurance online. Nerdwallet has a post from over a year ago with the relevant phone numbers for a variety of insurance companies, but that’s the point: they’re phone numbers. Since I happen to already have a renters insurance policy with USAA, I called them first, but I don’t have any reason to believe USAA’s rates are any better or worse than the other options. These rates are purely for the purposes of comparison.

It turned out that the great advantage of non-owner car insurance is that it’s cheap. For a $100,000 per person and $300,000 per accident policy, I was offered a rate of $189.17 for six months (or $31.53 per month). The minimum legal coverage ($25,000 and $50,000) came in a little lower at $24.54 monthly, and what I would call a “supermax” policy of $1 million in personal liability and $500 thousand in property coverage was $47.77 per month.

Conclusion

I’m not here to tell you it’s fun to spend money, or that you should spend money you don’t have to. If you’re an average American travel hacker with an average American car and an average American car insurance policy, this post just doesn’t apply to you.

But for folks who have been overpaying for years or decades for car rental liability insurance by the day, I do want this post to let you know there’s a better, cheaper way.

Who is the Inspirato Pass ripping off (and who is rich or dumb enough to find out?)

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Every 21st century tech scam involves ripping off some combination of three groups of people: customers, service providers, and investors. If you can exploit regulatory loopholes it’s icing on the cake.

Customers

You might expect customers to be the biggest victims of tech scams, but in my experience that’s relatively rare, simply because customers have the least money of the three groups, and tend to guard it best. Customers are most vulnerable when it comes to subscription services, but in those cases the scam is fairly transparent, or even harmless: gyms sell more memberships than they have equipment with the understanding that most members won’t show up very often, and dedicated athletes simply plan their workouts during slower periods.

Another frequent occurrence is customers victimized not by the platform, but by the service provider. A wonderful Vice article from last October described how scammers used AirBNB to advertise properties they would then substitute for uninhabitable units when guests arrived. AirBNB’s technology and policies made the scam possible, but the company itself wasn’t actively participating in it.

But ultimately, customers are not often the victims of tech scams. Uber has never and will never turn a profit, but their customers really do receive the transportation they pay for. MoviePass never stood a chance, but their customers really did get to see movies.

Service Providers

Service providers often end up being the victims of tech scams, especially in fragmented and competitive markets. Restaurants, particularly during the pandemic, may feel they need to participate in delivery services in order to stay in business, and are thus willing to sign over a huge share of their revenue over to platforms like DoorDash and Grubhub.

Contrast that with MoviePass: logically, movie theater seats, like airline seats, are the ultimate “expiring” good: the second the movie starts or the plane takes off, empty seats lose their entire value. In the case of aircraft, the mere presence of the seat adds to the flight’s fuel expense with no off-setting revenue. But movie theaters, unlike restaurants, operate in a super-consolidated market, with even very large cities having just 4-5 companies operating all or almost all of their movie theaters. That gave AMC, Regal, Loews, and Carmike leverage over MoviePass: if MoviePass wanted customers, it had to pay the theaters whatever they demanded, and what they demanded was full price.

Investors

In most cases, it’s obvious who’s getting ripped off by tech scams: it’s the investors. Ride-share services like Lyft and Uber cannot be operated profitably, but they are being operated: customers get the rides they order, and drivers are paid to provide them. The difference between the price riders pay and the amount it costs to operate the service comes from the only place it can: investors. This is good and right, since investors also have the most money to lose of the three groups of potential victims.

Of course, these three models can mix in different amounts. Customers who paid up front for year-long MoviePass subscriptions were certainly victims of the company’s insolvency right alongside the company’s investors, and even movie theaters that had adjusted their expectations based on the surge in MoviePass ticket sales had to adjust them back down after the sales vanished overnight.

How Inspirato is supposed to work

That’s the framework I brought while reading yesterday’s Miles to Memories post about the Inspirato Pass. For a $2,500 initiation fee and $2,500 per month, you get what works out to about 14 days per month of hotel stays, with “no nightly rates, taxes, or fees.” The mechanics are a bit complicated, and completely opaque unless you have a membership, but it seems that each Inspirato Pass allows you to make one 7-day reservation at a time, and on the day you check out, you are allowed to make another reservation at a minimum of 7 days out. That means 14 nights are included for every 28 days, or roughly 182 nights per year. Including the initiation fee, maximizing the pass during the first year works out to roughly $178 per night ($164 per night for future years).

Hilariously, Inspirato explicitly says you are allowed to have more than one Inspirato Pass, which would allow for back-to-back 7-night bookings: “If you are interested in multiple reservations for Inspirato Pass, you can simply purchase another Pass."

Before we get too off-track, let’s be clear: at face value, this is a pretty good deal, if it works even close to how it’s advertised. If you’re the kind of person who would pay $6796 for a 7-night stay at The Westin Snowmass Resort from Christmas through New Years, then paying $2,500 for the same stay is a good deal. Paying $1,250 for the same stay is an even better deal, which is where you’d end up if you booked two week-long stays the same month, 7 days apart.

How does the Inspirato Pass really work?

Inspirato does have a booking engine that appears to reflect availability in real time, so I ran two simple tests: a 7-night reservation in the United States beginning two days out (the minimum booking window) and one beginning 7 days out (the minimum booking window after a completed stay). The two-day booking window was pretty grim, with only 4 properties available for 7-night stays, in Savannah, Portland, Baltimore, and San Francisco:

To save you the trouble, here’s the breakdown of paid rates at these hotels for these dates:

  • Hyatt Regency Savannah: $844.30

  • Portland Marriott Downtown Waterfront: $1,023.97

  • Baltimore Marriott Waterfront: $732.03

  • InterContinental Mark Hopkins San Francisco: $1,156.05

In other words, at none of these properties would you be better off paying $1,250 for a 7-night stay rather than the rate publicly available to anyone with a web browser.

The 7-day advance booking window is at least slightly more interesting, with options in Las Vegas, Boston, Colorado, and Texas. The Vdara in Las Vegas cracked the $1,250 barrier at $1,749.50, but that difference depends largely on whether the Inspirato’s “no nightly rates, taxes, or fees” claim includes resort fees, which make up a whopping $357.15 of the stay’s cost.

Is the Inspirato Pass a gym membership or a MoviePass?

This is the question I keep returning to. The logic of 21st century tech scams is always the same: [W capital asset] is unused [X percent of the time], why not charge [Y percent discount] or [Z subscription fee] to people who have have more time than money to maximize the usage of the fixed capital investment?

Like a very expensive gym membership, obviously Inspirato is capable of being profitable: any business that charges customers $30,000 annually is capable of being profitable! Since Pass members can only make one reservation at a time, surely around holidays some customers will feel the impulse to “lock in” their reservation in a single high-value reservation, even if that means paying multiple months of membership fees for a single week-long reservation a month or two in the future.

Like MoviePass, Inspirato doesn’t seem to have worked out any particular bargains with any of the hotels on their site. Their availability roughly matches the publicly available rooms. That inclines me to think they’re operating like a MoviePass, paying full freight (or perhaps slightly discounted corporate rates) for rooms, and using their inactive members’ money to pay for their active members’ rooms.

Conclusion

I don’t have any insight into Inspirato’s business model or balance sheet. But my very strong hunch is that we will see the same “observer effect” as we saw with MoviePass. As long as the company flew under the radar, they were able to finance the difference between the membership fees they collected and the ticket prices they paid. As soon as it became a nationwide phenomenon, their ticket purchases swamped their revenue and the company collapsed.

Inspirato has a built-in bulwark MoviePass didn’t have: they charge $30,000 per year! And maybe that incredible price point will discourage enough people to keep the platform viable. But, in my experience, rich people are even more meticulous about maximizing the value they get from every service they subscribe to, and I can’t imagine the Inspirato Pass will be any exception.

As long as the Inspirato Pass remains an affectation for rich weirdos, it might survive, and there’s no reason not to look into the value they’re offering for close-in trips. Just keep in mind, the second people start hammering it as hard as they can, the booking restrictions, “abuse” allegations, and insolvency are likely to follow. It’s a movie we’ve seen so many times we can recite the lines by heart.

More Delta Platinum and refund hijinx

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Right now all travelers, but especially travel hackers, are juggling even more decisions than usual. In the before time, we might make speculative bookings far in the future as soon as award space opened up for trips we weren’t sure we’d be able to take. Now even a last-minute trip is “speculative,” depending on constantly changing infection numbers and quarantine restrictions, not to mention our own health conditions.

Back in May I wrote a couple posts about cancelling airline tickets for a refund instead of store credit and my plan to use Delta’s COVID-19 flight change policy to lock in a low-cost companion ticket that I hoped could then be used on other, more expensive dates.

As a reminder, the key to that second trick was that travel to any destination, booked before May 31 for travel before September 30, 2020, could be changed to any dates before September 30 with no difference in fare charged. The policy’s intention was obvious: they wanted people to be comfortable booking flights with the knowledge that if they need to postpone their trip they won’t be on the hook for more money. But taken literally, it also meant you could search the schedule for the cheapest available travel dates, then change your flights to any desired dates before September 30, as long as the destination remained the same.

Of course, back in May there was still hope the country would pull together and defeat the virus. Once it became clear that wasn’t going to happen, my focus shifted from getting a deal on a New Orleans trip to getting a refund.

Fortunately, as early as June my outbound 10:14 am flight was cancelled and I was rebooked on a 8:20 am flight, so I knew I was entitled to a refund. With the original reservation dates finally approaching, last week I pulled the trigger.

Don’t cancel your flight, apply for a refund

In the e-mail notifying me of the schedule change, Delta wrote:

“We also understand that your new itinerary may not be best suited for your travel needs and we have the following options to give you flexibility.

  • “If you prefer to change your trip from the itinerary listed below, please visit My Trips on delta.com or follow the step-by-step instructions here. If you need additional assistance, please contact us at 1-800-221-1212.

  • “If you would like to cancel your flight, the value of your ticket will become an eCredit, and you can find more details available here. You'll be able to use your original ticket number as the eCredit number when you are ready to redeem it by following the step-by-step directions here.”

As you can see, Delta doesn’t even mention the possibility of a refund, despite knowing perfectly well I’m entitled to one. My main concern was that if I canceled my reservation and received an eCredit, that might break the link in their system showing that I experienced a schedule change as well. So instead, I applied for a refund without canceling my reservation. Fortunately, Delta lets you apply for a refund online.

Redeposited companion ticket

My secondary worry about canceling my flight was that the terms and conditions of the companion ticket are crystal clear:

“Cancellations/Ticket Changes/Reissuance: If the primary ticket or the Companion ticket is cancelled, both tickets will be cancelled and the Companion ticket will not be reissued. Subject to the fare rules of the primary ticket, the value of the primary ticket, less a $200 administrative service charge and any fare difference, may be applied to future travel. Cancellations are subject to the rules of the fare purchased. Neither a new Companion Certificate nor Companion ticket will be issued upon a cancellation.“

If I canceled my ticket, I thought there was a good chance I’d be both stuck with store credit and out a perfectly good companion ticket, the worst of both worlds.

Thankfully, a few days after my refund was processed, I logged into Delta and saw my previously “closed” companion certificate had been restored with a reassuring checkbox next to it, ready for use. I recalled that when I submitted my refund request, the confirmation page mentioned in passing that companion tickets would not be reissued “unless they are subject to our COVID-19 cancellation policies.” But of course I didn’t request a refund under their COVID-19 cancellation policy, I requested a refund under longstanding Department of Transportation guidance on flight cancellations!

A classic case of good execution but poor communication.

Conclusion

Obviously we play a lot of games with loyalty programs, so I try to stay philosophical about the games travel providers play with us. Turnabout is fair play and so on, after all. If they think they can get a few bucks more from customers by charging for seat assignments or priority boarding, I’m inclined to say more power to them.

Refunds on the other hand are a real opportunity to put companies’ values (if any) on display, since it’s a situation where they’re the ones in a position of power: they already have your money, you want it back, and there’s no particular reason to believe you’ll spend it with them in the future once you have it back. No one expects a company to be exactly eager to issue refunds, but especially under conditions when customers are clearly entitled to them, I have a lot more respect for companies that issue them gracefully rather than belligerently.

Although Delta could have been more proactive about alerting me to my right to a refund, their simple online form and reissuance of a companion ticket they weren’t strictly speaking required to offer left a much better taste in my mouth than the lecture I got from my Alaska Airlines representative.

Once (if) we get out from under COVID-19, I’ll be interested to see whether Delta continues to reissue companion certificates on refunded tickets. It’s a small gesture, but given the importance of their relationship with American Express, I think it would behoove them to adopt a single policy on companion ticket cancellations — and follow it.

Virginia's Eastern Shore: our first road trip out of quarantine

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The pandemic has caused different kinds of pain for different people. For the very social, the pandemic has meant losing the ability to visit with friends and family in person. For the unemployed, it has meant the loss of income, health insurance, and experience. For those in nursing homes and prisons, it has meant the loss of contact and physical and emotional support. And for people who love to travel, it has meant the shrinking of the world down to a few grocery stores, restaurants, and hardware stores within driving or walking distance.

Over the last 3-4 weeks I’ve seen more and more people I follow in the travel hacking community venturing outside those narrow limits. Usually by car, or by short, non-stop, masked, socially-distanced flight, people are trying to see whether travel can be safe again. After reading and listening to a number of reports, last weekend I put together a short road trip to Virginia’s Eastern Shore.

Renting the car

In the past when we needed to rent cars, the most convenient location was a Hertz desk at the Washington Hilton on Connecticut Avenue, a short walk away. Whether due to the pandemic, Hertz’s Chapter 11 bankruptcy filing, or both, that location is (at least temporarily) closed, and the best option Autoslash came up with was Hertz’s Union Station location.

I ended up making a week-long reservation from one Wednesday to the next, although we only planned to use the car over the weekend, since it turns out the breakeven point was just around 3-4 days, and we thought the car might be nice to have to run errands on either side of the trip. We did end up using the car to pick up a takeout order on the other side of town on Tuesday, so I think the extra couple bucks turned out to be money well spent.

I hate renting cars, but the experience wasn’t noticeably different from before the pandemic. After going through the tax/gas/insurance rigamarole, the agent told me where the car was parked, and I found it had two “Hertz Gold Standard Clean” stickers “sealing” the front driver and passenger side doors, so to open the door you’d “break” the seal. The car certainly looked clean, but I still couldn’t help but laugh — does that mean they didn’t clean the back seats?

Getting there

I’ll be honest, I grew up in Montana, so the whole “toll road” thing has always been a bit of a mystery to me. Back in Wisconsin we had an “I-Pass” transponder for trips to Illinois, but it disappeared in one of our recent moves, so when Google Maps warned me that our route to Virginia “included toll roads,” I went to the change drawer and put together a formidable stack of quarters, safely stuffing them into the driver side door.

It turns out, the route to Virginia’s Eastern Shore does not include “toll roads.” It includes a single toll bridge, which hilariously only charges for eastbound trips, and not at all hilariously no longer accepts cash. As we neared the bridge and the signs for the toll bridge became more and more frequent, I got more and more anxious. It turns out there’s some way to pay your toll after the fact by mail, and presumably Hertz is going to get a bill sometime in the next year and come after me for it.

My recommendation is just to pick up an E-ZPass transponder. Each state that participates in the E-ZPass system sets its own charges for these things. They’re currently free for Maryland residents and appear to be free in Virginia as well (with a $35 prepaid balance) so if you know anyone you can have one mailed to in those states, that’s probably your best bet. Other state charges are:

Staying there

There are a number of larger tourist towns on the Eastern Shore, including Ocean City in Maryland and Chincoteague in Virginia, but we weren’t comfortable staying there, so we opted for the Hampton Inn & Suites in Exmore, Virginia. At 30,000 Hilton Honors points per night, that ended up being a phenomenal redemption at 0.6 or 0.7 cents per point. Due to a coding error (or one of Hilton’s overlapping promotions) I also got a rack of points back at the end of the stay, which brought the total cost down to just 55,000 points — a great deal.

Just as with the car, the housekeeping staff had placed a tearable sticker on our door before arrival, which one assumes was supposed to indicate that no one had entered the room after it was cleaned. Unfortunately for the pandemic theatrics, the sticker simply fell off, instead of tearing, when I opened the door.

The hotel was by far the place we felt least safe during this trip. Our room was fine, and they proactively asked at check-in whether we wanted to skip housekeeping during our stay, but other than the actual hotel staff themselves (who were great), no one was observing any of the practices we’ve become used to in preventing the spread of the virus. The situation finally reached peak absurdity when I noticed what the unmasked workmen were doing in the lobby on our second day in town: installing the virus prevention signs the hotel had undoubtedly been shipped from Hilton headquarters. Guests were also congregating, eating, and drinking throughout the day in the hotel’s common dining area.

After our first night, we just used the stairs on our end of the building to exit and avoided the lobby area completely.

Eating there

We ordered dinner takeout from two Exmore restaurants, the Exmore Diner and the the Great Machipongo Clam Shack. Both are local institutions that are surely swamped during normal travel seasons. Both are now offering only takeout and drivethrough, and when we called our orders in ahead of time we had a 15-25 minute wait time at each.

Annoyingly, the Exmore Diner has a vast daily specials menu they only post on their Facebook page, so I ordered a serviceable but boring burger instead of the daily steak or pasta dish I would have ordered if the person taking my order had thought to mention it.

The Great Machipongo is one of the weirdest places I’ve ever eaten, which I will illustrate with the following image. This is the “2 Baked Stuffed Clams” listed in the “Sandwiches” portion of their menu:

These are, clearly, two baked stuffed clams. Then they are served, for reasons I cannot begin to fathom, on clam shells.

Besides the perfect hush puppies (pictured above), the “She Crab Soup” was a fascinating and delicious twist on clam chowder based on Maryland’s official mollusk (I have no idea if the crab is actually Maryland’s official mollusk, but go with me here).

Chincoteague and Assateague Islands

On Saturday, we drove about an hour north from Exmore to Chincoteague Island and the Chincoteague National Wildlife Refuge. Besides what I would call an “excessive” mosquito population, this part of the trip was great. The Refuge had a $10 per vehicle entrance fee, which gave you access to the entire Virginia side of Assateague island (I’m not sure if the Maryland side is accessible from Chincoteague or whether you have to drive around), including hiking trails, scenic turnoffs (there’s a herd of feral horses managed by the Chincoteague fire department), and Assateague Beach. A number of locations are designated as approved fishing and crabbing spots, for enthusiasts of the region’s famous soft-shell crabs.

We spent an hour or two walking around the beach, and it gave me a chance to reflect on one of the stupid fights people insist on having online about social distancing during the plague. There is a certain faction of online scolds who insist that newspapers showing large groups of people gathering outdoors are misleading people about the relative risks of indoor and outdoor socializing. But that’s not the actual experience anyone has of going to the beach.

On a windy, rainy day, all the groups of people I saw had plenty of space to separate themselves. I can’t imagine any virus transmission happened on Assateague Beach itself. Even the restrooms seemed to have been recently cleaned and were stocked with plenty of hand sanitizer. But the thing beach truthers can’t get their heads around is that “beach” transmission doesn’t happen at the beach. It happens in the car you fill with your friends to drive to the beach.

If we can get groups of people to isolate themselves, we can contain the virus’s spread. If people continue to socialize, they’ll continue to spread the virus. Whether you’re driving to a movie theater, a restaurant, a beach, or a doctor’s appointment doesn’t make the slightest difference to the virus.

Two Chincoteague highlights

After meandering around Assateague Beach, we passed back through Chincoteague proper and got some lunch. Pico Taqueria had awesome vegetarian and fish tacos, and a much better “vibe” than Lily’s Little Mexico, the first place we stopped before being discouraged by the astonishingly slow line and limited menu.

The Black Narrows Brewing Company is also located on Chincoteague, and we enjoyed stopping in for a few sips of beer. They have outdoor seating, where we split a cup of their Weathered Together pale ale, but were not currently selling cans to go due to the now-years-long “aluminum shortage.” The front deck was more crowded than we were comfortable with, but on a rainy afternoon we enjoyed a break on their back lawn, which had some ornamental cover.

Revisiting the Bumped App

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Back in November, 2018, I wrote about a then-new app called Bumped which awarded fractional shares of stock when using linked credit cards at participating merchants. Over the last few weeks as I sorted through every bank, brokerage, and loyalty account to update my address, I discovered that Bumped not only survived, but I had also forgotten to unlink several of my credit cards and had accumulated a tidy stash of $10 or so in fractional shares.

In a comment to that original post, reader ABC pointed out some important limits on earning: $50 in rewards per purchase and $250 in rewards per brand, per year. Oddly, these limits are not disclosed in the current (May 2019) customer agreement. Instead, you can find them by clicking through to each brand in the “Loyalties” section of the app.

In any case, having essentially discovered $10 in change under the cushions, I thought I’d share some additional thoughts with my beloved readers.

Use Bumped for reimbursable expenses at pharmacies

Even if you have health insurance, you might still be on the hook for hundreds or thousands of dollars per year in pharmacy expenses. If you have a pre-tax flexible spending account at work, or a health savings account connected to a high deductible health plan, you may have the ability to pay for your prescriptions with your own credit card and then request reimbursement from the health plan.

Both CVS and Walgreens participate in Bumped, and offer a 1% payout (on all merchandise, not just pharmaceuticals), so this technique might allow you to receive your normal credit card rewards, an additional 1% in the form of company stock, and then pay for the charge with pre-tax money.

Use Bumped for deductible or reimbursable business expenses

The Kroger “family” of grocery stores, and Walmart and Target stores (classified as “superstores”), are also in the app at the 1% rewards level. While all three stores sell PIN-enabled prepaid debit cards, if you assume the folks at Bumped have an eye out for abusive behavior, you may still be visiting those stores to source toys for your reselling business, or produce for your catering company, or baked goods for office birthday parties.

The point is simply that when someone else is footing the bill (for reimbursable expenses) or subsidizing your expenses (for deductible expenses), then directing your spending towards merchants that offer you personal rewards is an easy way to come out (even further) ahead. Some Kroger and Walmart stores even sell gas at competitive prices, and Bumped may make it worth directing your reimbursable or deductible gas spending towards those stations.

Verizon Wireless, AT&T, and T-Mobile are also options at a 0.5% reward level, so if your employer reimburses you for some or all of your mobile or internet expenses, that’s another easy opportunity to come out ahead.

Use Bumped to steal from venture capitalists

One option that never would have occurred to me if it hadn’t been laid out explicitly in the customer agreement, is abusing returns. For example, by spending $5,000 at Walmart, you can earn the maximum $50 per-purchase quantity of Walmart stock. After executing this procedure 5 times, you could then sell the stock, withdraw the proceeds, and return the $25,000 in merchandise. The other obvious candidates are Sam’s Club and The Home Depot (where you need to spend $10,000 per transaction, given Home Depot’s lower earning rate of 0.5%).

I think this behavior would certainly get your account closed, and may result in them pursuing some kind of legal action against you. On the other hand, we’re talking about making off with a maximum of perhaps $1,000, which is so much lower than the cost of filing a lawsuit or arbitration claim it’s hard to imagine them trying very hard to get their money back.

It’s not for me, but I’m also not going to judge anybody who tries to pull off this little stunt.

Conclusion: what do you do with the stock?

Obviously if you’re making some kind of huge play on Bumped, whether because you despise venture capitalists or you just don’t think the company will be around much longer, then you should pull your money out as soon as possible. If you plan to continue using the program as intended, then I actually think you’re better off leaving the money in your companies’ shares.

This is for a very boring reason: since you receive your shares for free, they are (correctly) treated by Bumped’s brokerage house as having a “cost basis” of $0, and the entire amount of your sale proceeds is treated as a capital gain. This is not a big deal in terms of its tax burden, but it has the capacity to grossly complicate your life or that of your financial advisor or tax preparer, especially if you transacted in any of the same companies in your non-Bumped accounts. In other words, a savvy tax-loss harvest in one account can be offset by a thoughtless sale in another.

Within the Bumped app, dividends seem to be properly paid and reinvested, so as long as you’re earning anything less than $50-100 per year in rewards, I would simply let them ride. In 20, 30, or 50 years, you might be looking at a few thousand dollars, or you might be looking at $0, but at least the rewards were free and you didn’t cause yourself any unnecessary tax headaches in the meantime.