Revisiting the Bumped App

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.