Every Deal Has an Opportunity Cost
When pursuing deals, it’s important to remember there’s an opportunity cost to every deal. What could you be doing instead of going after that deal? Or more importantly, what deal are you giving up by going after another one?
This is especially true with credit card offers. I received one from Discover Card last week and I’m still deciding whether or not I’m going for it. (And this post may help!)
I get $500 Cashback if I spend $3,000 a month on the card for five months.
The Discover It Card gives 1% CashBack on purchases, so if I did $3,000 a month, I would earn $30 for each of those months.
$30 x 5 Months = $150 PLUS $500. So that’s $650 for moving all my spending to one card. A no-brainer, right?
(I will note now, I’m focusing on actual spend based on my normal spending schedule)
What am I giving up?
If I put all $3,000 spending on my Chase Sapphire, I would receive about 5,000 points per month. I receive two points per dollar for work expenses (the majority of my expenses), and one point per dollar for the rest of my spend.
5,000 points x 5 months = 25,000 points.
I could cash out those points for $250. Or, I could use them on a stay at a top tier Hyatt, earning about $400-500 use out of the points. (I’m eying the Andaz…) But the Discover Card is still winning out over my normal spend on the Chase Sapphire.
But the thing about using the Discover Card is that I have to put all my spending on it to get this special. The benefits I get from my Chase Sapphire can be spread out onto other cards… such as my Chase Freedom.
Which brings us to….
What Other Bonuses Are Going On?
I won’t just earn that base level of cashback/points from Discover or Chase. The reason is that both the Discover It Card and the Chase Freedom Card offer 5% bonus categories. In fact, I use the Discover It Card (formerly Discover More card) primarily for the months they have 5% Cashback on Restaurant Spend.
Let’s compare the two coming up and see which one I use most.
I use Amazon.com to make most of my non-work purchases. So this could be very valuable for me–but it is only for the first $1,500. So I have to keep that in mind. That is an extra 7,500 points or ~$75 if I cash it out.
Now for the Discover It Bonus:
Oh, great. I spend a lot on Amazon.com, so I could put my—- wait a second.
Their Cashback Bonus is exactly the same. I can spend up to $1,500 on my Discover It Card and receive ~$75 in additional Cashback.
This is a total wash, and is making me lead towards actually going for the Discover Deal.
But there’s a final consideration.
What Else Am I Giving Up?
I’ve been casually going for $40,000 spend on my Hyatt Card. Just to see if I make it close, and I haven’t been heavily invested in it.
This is what you get from spend with Hyatt:
You’ll also have an opportunity to earn and maintain Diamond status—our highest level of membership—more easily. When you spend the following amounts in a calendar year, we will award you with credits towards Diamond status:3
I have to look carefully at where I am with stays with Hyatt and spend on my cards. When before, I was casually seeing how far I can go with spend, I need to put thought into this moving forward.
(I didn’t mind moving spending from my Chase Sapphire to this card because they both earn extra for travel/restaurant spending. And I primarily stay at Hyatt’s, so I get extra points from that).
So once I do the math for my Hyatt Card, I’ll know where I stand and can make this decision.
What would you do?
Disclosure: I was not a math major, so any errors in math will be sheepishly corrected when pointed out.
Edit: There’s some discussion in the comments that was useful so I’m including it here:
If I lived closer to a Walmart, I’d buy a bunch of gift cards to load into my Bluebird account in order to hit the $3,000 spend $650 – $150 ($30 in gift card fees x 5 months) still equals $500. Almost like getting to have your cake and eat it too!
Happy to do so! Keep in mind it seems like Walmart Money Centers are out of order half the time (they were for me) so it might take a few trips to get things going