At TravelCon, Matt presented on risk and savings when he purchased his refrigerator using a combination of gift cards purchased from the local grocery store + fuel perks or using Raise to purchase discounted gift cards with TopCashBack savings.
The line segment of $45 and $193 is the method that Matt pursued, using a 5% card and purchasing gift cards at the local grocery store with a bonus fuel rewards. The flat $145 savings is purchasing the gift card discounted on Raise with a 2% cash back.
The reason why you could wind up with $193 or $45 is because the fuel rewards have limitations: you would need to be able to buy the maximum fuel and work around the expiration date. If you don’t fully utilize, you could wind up as low as the low $45 savings.
As you can see from the slide, your risk premium is $48 as that is the difference between the max, $193 and the $145, the simplest way towards savings.
At the end of the day, your opportunity is how you are able to maximize it, if you can’t and choose the wrong option, in this example, you will be left with $45.
Discover It Miles
Doctor of Credit has a great review of the newest Discover It Miles card. Here’s the summary of the earning side of the card:
- For every $1 spent, you will receive 1.5 miles
- As the sign up bonus, after 12 months, you will receive a bonus equal to the total amount of miles earned
Now we look at this chart, everything starts at 1.5% back. The blue line represents year 0 to 1 where you could effectively double your spend at 3%. However, what happens if Discover thinks you’re abusing the card? They’d close your card and your earnings could be like the red line, 1.5% to start then 0%. Even if you don’t get shut down, they could throttle you and put your account under review. You’d still receive the extra 1.5%, but is it worth it?
It never crossed my mind to even think of the Discover It Miles card like this until Matt’s presentation at TravelCon. Without a doubt, yes if you play by Discover’s rules, you could earn 3% on all of your spend on the new signup for the first year. But if you start coloring outside the lines, well, what will be your earnings? For all intents and purposes, yes the card is a 3% for the first year, but the for folks that read any manufactured spending blog it should be “Discover It Miles, earn 3%* in your first year” with a footnote that you might wind up with less 1.5%, especially if they decide to take away your final months’ miles.
I hope you all have the same opportunity and experience to listen to a presentation from Matt, it was quite a lesson.