A great disturbance in the Force

42

In the past few days I’ve been writing a lot about the ability to buy $200 Visa gift cards online from Staples.  This event, in itself, would be unremarkable except for a number of other forces that have converged:

  • Chase began to issue Ink business cards as Visa cards mid 2013 (previously they were MasterCards).  And, both the old and new Ink cards continue to offer 5X rewards at office supply stores.
  • Visa Savings Edge now offers 1% cash back for Staples purchases made with Visa business cards enrolled in the program.
  • Purchasing gift cards from Staples.com through cash back and point earning portals continues to be successful in some cases.
  • Evolve Money has made it easy to use Visa gift cards for payments to loans, mortgages, education savings programs, and more.
  • Since early 2013 Visa and MasterCard gift cards have become PIN-enabled.  This makes it possible to use gift cards for many more purposes than ever before.  See “Gift card PINs.”

The convergence of all of the above means that it is now possible to earn a profit, and 5X points when buying Visa gift cards.  For details, please see my prior posts on this topic:

 

Too far out of balance

The current situation is great for anyone with a credit card that earns bonus points at office supply stores, but its not good at all for the banks that supply the cards.  And, it is probably even worse for Staples.  They are the ones that have to pay the online portals, and they are ones most likely footing the bill for the Visa Savings Edge benefit.  It is inevitable that things will change.  Below are my thoughts about what might change…

Chase to remove 5X benefit?

Per Hack My Trip, Chase may be considering dropping the current Chase Ink 5X category bonuses.  His source is a reader who was part of an online focus group.  The fact that they are asking people for feedback about this idea implies that it is not set in stone.  If they do change the bonus structure of the Ink cards, another question is whether the change would be just for new cardholders or existing ones as well.  In the past, changes like these (when they first introduced the 5X benefit, for example) did not apply to existing cardholders.  Hopefully that will be the case again.  In fact, it would be an awesome opportunity for existing cardholders because we could theoretically keep our existing card(s) to retain the current 5X benefits, and then also sign up for the new card with whatever new benefits it offers.

Banks to lower the cap on the 5X benefit?

Chase already has a cap of $50K per card-year in spend to get the 5X benefit on the Ink Plus and Ink Bold cards (and a $25K cap on the no-fee Ink Cash).  Similarly, the Amex SimplyCash card has a $25K per year spend cap.  And, the Discover business card has a ridiculously low $2K spend cap.  I could imagine Chase and Amex lowering their existing caps, but I doubt very much that they would go lower than $20K per year.  These are business cards, after all, and so high spend in the bonus categories must be expected.

Banks to stop awarding bonus points on gift card purchases?

There is already some evidence that Amex may have stopped awarding grocery store bonus points at Safeway stores when the purchase is made with the Blue Cash Preferred card and consists entirely of gift cards.  It’s possible that this approach will expand to more stores and more situations.  I expect, though, that this would be a major technical challenge and would not be accomplished anytime soon.

Staples to stop selling $200 Visa cards online?

This would undoubtedly be the easiest solution for Staples.  However, since they just introduced the product online, someone at Staples must have thought it was a good idea.  It seems unlikely to me that they’ll reverse course too quickly.

Staples to pull out of Visa Savings Edge?

Staples could get a small win by simply pulling out of the Visa Savings Edge program.  That said, the 1% payout is a really small part of the problem.  The deal would still be profitable to customers (and a loss for Staples) without that little piece.  So, my guess is that they’ll leave it alone through the end of this year before killing it.

Staples to stop paying out through portals?

I would really hate to see this go, but it would make sense for Staples to stop paying out to portals for gift card purchases made on their site (or, as some other sites do, they could pay out less for gift cards).  The fact that they currently pay out to portals for gift card purchases suggests to me that fixing this may be a complicated technical challenge.  The best we can do is hope that it takes them a long time to address this!

Gleaning insight from the past

The last time stars aligned to equal grandeur was when Bluebird was released in the fall of 2012 (see “Bluebird takes flight and changes the game”).  For a short time, it was possible to buy Vanilla Reload cards at Office Depot with a Chase Ink card to earn 5 points per dollar, feed the reload cards to Bluebird, and then use Bluebird to pay bills or even to simply withdraw the money.  It was the perfect perpetual point machine.  In those glory days for point hounds, the big loser was Chase since they had to pay out huge rewards for little gain.  There were rumors at the time that Chase leaned heavily on Office Depot to encourage them to stop the madness.  Less than four weeks later, they did (see “Office Depot discontinues Vanilla Reload cards”).   So, if those rumors were true, I wonder if history will repeat itself?  Will Chase lean on Staples to fix the “problem”? 

Placing bets

Regardless of how it happens, I have no doubt that this situation will not last indefinitely.  The real question is whether it will last for days, weeks, or months.  If I was a gambler I would readily place bets that it won’t last for even half a year.  More likely, I think, is that we’ll see changes within two months.

What do you think?

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