If it sounds too good to be true… (on Nick’s mind)

Get a nearly free vacation in the Maldives by opening two credit cards. Buy a thousand dollars worth of Visa Gift Cards with no activation fee and earn 5x points — walking out of Staples with enough points for a free Category 1 Hyatt stay without it costing you a penny. Open a checking account and deposit $1K to get $400 back. Buy a $400 flight and get $250 back in gift cards. Buy a thousand dollar phone and get $1,000 in travel gift cards. All of those things sound too good to be true. But yet those who read this blog (or at least go read those old posts now) know that all of them were 100% true. Last week, a few readers commented either on the blog or social media to say that they hadn’t done the Betterment checking bonus because 7,500 (or later 12,750) Membership Rewards points for opening an account and depositing just $1 sounded too good to be true. At first glance, I couldn’t believe that they couldn’t believe it! The Betterment bonus seemed like small potatoes in the world of things we cover. Yet in conversation on the Frequent Miler on the Air podcast last weekend, I realized why I don’t think twice about a deal like that: I’ve seen this movie before, and I know how it ends (a phrase I admittedly borrowed from the excellent, short, free ebook If You Can: How Millennials Can Get Rich Slowly by William J. Bernstein). This hobby of ours is the rare place where when it sounds too good to be true, it probably is true and you should at least consider jumping on it right away before it’s gone.

Patience with portals

One of the main topics on the podcast last weekend was the fact that sometimes things go wrong when stacking promotions and discounts with shopping portals and card-linked offers. Specifically, we talked about the complete mess of Walmart+ promotions that hadn’t been posting properly. In that specific case, it is surely something wrong with the tracking on Walmart’s end. We have now seen plenty of success reports from those who have continued to follow up with Shopathome (hopefully those having issues with Swagbucks and others find some resolution soon).

Apart from the Walmart+ fiasco and one or two other similar occurrences that come to mind, I have by and large been very successful with shopping portals. In the years before I worked at Frequent Miler, I was sometimes buying tens of thousands of dollars worth of items per month through (many different) shopping portals and rarely ever had a tracking problem. Just a few years go, it was common not to see any indication that a purchase had tracked for a long time. Sometimes it took weeks. The British Airways portal used to reliably take 45 days to show purchases I’d made after clicking through their links.

These days, many portals send notification of a pending transaction within a day or two. But it is important to understand how these things work: the customer clicks through the portal and lands on the merchant page. The merchant records that tracking information so that they know to pay a commission to the portal if you make a purchase. Then, the merchant has to inform the portal that you indeed made a purchase that qualifies for the offer. The timeline for when and how that happens varies wildly. I’m sure that some stores run accounting reports like that daily, some probably only do it on weekdays, some likely batch process that information and send it over every week or two. This is out of the portal’s control — they get what the store gives them when the store is ready to give it. I know that in 2021 we expect everything to be instant, but the fact is that this just doesn’t happen instantly.

The good news is that portals have become very efficient at passing on indication that the purchase has tracked once they are notified by the store that there has been qualifying activity.

Backing up to the Betterment bonus that sort of inspired this post, quite a few readers were concerned not to see any tracking information from Rakuten (the shopping portal) a day or two after signing up. Rakuten’s terms had said that portal rewards would post the next day. When people didn’t see rewards the day or two after signing up for the Betterment account, they understandably became concerned about whether anything would post at all.

But if we go back to how shopping portals work, we see that the store (or in this case the Betterment banking app) needs to notify Rakuten after qualifying activity has taken place. The terms of that offer said that the new customer needed to deposit at least $1. Given that there are no Betterment bank branches, customers needed to initiate electronic funds transfers. My past experience with portals tells me that Betterment’s system is likely set up to mark a transaction as complete only after they have received the initial deposit. At the very least, that process would take a few days to clear. My bet is that once that deposit has cleared the automated clearing house (ACH) process, Betterment notifies Rakuten at the end of the business day and as such Rakuten notifies customers within a day of being notified themselves. All that is to say that I was neither surprised nor concerned at all when rewards didn’t post for new account holders on the very next day after opening because I’ve seen this movie before: I know that there are a few moving pieces at play and past experience tells me that bank bonuses often take months to show up. I certainly wasn’t going to get worried until at least a few days after my account funding went through (and when linking an account to transfer, Betterment estimated my deposit would be available only a week later, so I figure I won’t see Rakuten points for several more days at the very least).

That’s a similar story with most other portal deals — whether The Motley Fool deal while it still stacked or other great past returns, I expect that if I’ve clicked through the portal, the deal will likely hold. On large deals, I will set a reminder to follow up if it doesn’t track automatically within a few weeks. I  always keep plenty of screen shots just in case, but my wide experience with shopping portals has been that it is in their best interest to pay out customers since it means that they are also profiting. When I do my part right, they almost always pay out properly.

Accept that deals don’t always make sense for one side

The frequent root of skepticism on the most exciting deals is that they don’t make sense. A reader or critic will inevitably ask, “But what’s in it for [insert the business offering the deal]?”. Some inevitably get caught up in the lack of an answer to that question. I understand the confusion here: many of the more generous promotions truly don’t make much sense for one side. There are certainly times that statement is true on the consumer end; one wouldn’t be surprised to see a deal that is better for the company than the customer. But at Frequent Miler and in the miles and points community, we instead focus on the opposite type of deal: those times when the customer can come out ahead. Those opportunities are less common but still abound, particularly in the case of newcomers to finance and travel.

I haven’t studied the depths of venture capitalism, but the understanding I’ve gained from being on the customer end of these things enough times is that the focus for a newly growing company is often primarily growth. That is to say that when SoFi ran its October 2019 promotions whereby a couple playing in 2-player mode could get a few hundred dollars by making small deposits and referring one another, I assume that earning a profit on those early households likely wasn’t a primary focus for SoFi but rather it was about becoming a household name. When Google gave out $1,000 in travel gift cards to people who purchased a $1,000 phone, they likely weren’t making their investment back after you paid for the required 120 days on their network. The goal was rather to grow their network of customers and get people talking about Google Fi with their friends and colleagues and the person sitting next to them on the flight they bought with their gift card.

And this strategy of giving something away in order to profit at some undefined time in the future isn’t new. Loss leaders have long been a thing in retail and grocery. When a retail store puts a huge flat screen TV on sale for $200 on Black Friday or a grocery store offers something for free after coupon, we accept that they are doing it for publicity. In those cases, not only are stores giving a huge discount on products at a large scale, but they are also incurring the cost of printing flyers and the cost of publishing them in newspapers and the cost of television commercials. But we have seen a trend in recent years whereby newer players, particularly in banking/finance, cut out the middlemen to a large extent. Instead, they pass a chunk of that marketing money on to consumers directly, likely figuring that it leads to better word-of-mouth advertising for them than a TV commercial that may not be seen by their target market in the era of cable-cutting or skipped past on DVR. That’s awesome for those of us paying attention and ready to take advantage of those marketing dollars being thrown out directly to consumers.

But you have to be ready to…

Strike while the iron is hot

Those familiar with the best of deals know that time is of the essence. In the Internet age, notice of the best deals spreads quickly and advertised end dates can be meaningless. It is rare to see a truly great deal continue open-endedly (which is part what makes situations like the Amex Platinum 100K + 10x deal or the Ink 75K deals so notable — we just don’t often see deals that good last for that long).

Indeed, ask anyone who has been in “the game” of chasing deals for long and they can almost surely tell you at least a few stories of the times they hesitated and missed out. For me, the most memorable was the first of two years that JetBlue ran its all-you-can-jet promotion. At the time, it was $600 to fly as much as you wanted for an entire month. My wife and I saw the deal while it was on and that it was set to expire in a few days, so we slept on it for the night and that proved to be too long. We vowed not to miss that type of deal twice and a year later we grabbed the second iteration (and have been disappointed not to see it return in the decade since). I remember meeting a fellow all-you-can-jetter on a transcon flight from Seattle to Boston or Buffalo who was turning around and flying back to Seattle in the morning, he just figured he’d save himself on the cost of a hotel by sleeping on the plane. I recall shaking my head over the insanity of the promotion rather than the person in that instance, though hindsight tells me that perhaps I had that backwards.

Plenty of other deals come to mind, some intentional and some likely not like when we saw an offer for the Hilton Aspire card that waived the annual fee for a year or for an uncapped 3x on the Freedom Unlimited for a year. There was the 90K Iberia Avios for $183 worth of flights that you didn’t plan to take and the myriad of times when we’ve seen things work temporarily that shouldn’t have (like a credit card coding as debit for person-to-person payments) or fee-free $500 Visa Gift Cards that continued unlimited for months and months. We’ve seen first class mistake fares and business class mistake fares that lasted for merely hours.

The common theme is that those who get in quickly are often able to snag the best deals — whether those are the folks in line first on Black Friday (or in more recent years those first online) or those who sign up for the bank account bonus offering enough cash to buy an oven (as opposed to the old days of giving you just a toaster-oven). That’s not to say that we don’t sometimes get burnt: indeed, those who signed up for the Betterment deal under the 7,500-point offer surely felt singed when the offer went up to 12,750 points on Friday. And there are times when a deal is not honored and it takes more time and effort fighting it out than it was probably worth (which may be how the Walmart+ deal turns out for some). But more often than not, I’ve been well-served by not hesitating on the best deals.

That’s not to say that I dive in to the water head-first every time. I’m not likely to deposit my life savings in a brand new banking app that opened for business yesterday nor am I going to hand over all of my privacy to every new cash back app that sprouts up. But past experience tells me that there is enough regulation in the financial sector for me to be fairly confident that a banking app or credit card issuer is unlikely to run off with my money.

Of course, that same past experience tells me that a private entity with no oversight might (I’m looking at The Plastic Merchant there). I certainly don’t fault some for being cautious and indeed this post isn’t meant to tell anyone to be reckless with their finances or open accounts with which they don’t feel comfortable.

Rather I just found it interesting to consider why I (and indeed many readers) don’t think twice about a deal like the Betterment checking account while others think it too good to be true. To be clear, we don’t get anything out of that Betterment deal, nor do I think it was an amazing deal — it’s just the latest example that was on m mind. Similar skepticism was expressed by some readers on the Brex Cash 110,000 point / $1100 deal (though many readers have since reported receiving the lion’s share of the bonus on that account as easily as it is advertised).

Indeed, the Brex account is another deal where it sounds too good to be true since it seems they are paying out far more than they stand to benefit. That’s true in the short term, though I have to imagine that the long game is to get a portfolio of business customers to which they can market ancillary services. Giving away  $1100 at a shot probably buys you a decent rolodex of business customers and I have to imagine that the bet lies in that rolodex being profitable long-term the same as many other ways people pay to build a network. I actually think it is a great way to get businesspeople excited about moving their banking activity over.

Remember that most of our hobby sounds far too good to be true

When friends see the way my family travels, they occasionally ask questions. When I explain to them that the typical Citi Premier bonus could get them $600 in gift cards or 4 round trip flights to Hawaii, I almost invariably get skepticism in return. When I tell a friend that I once used the number of points necessary for a Days Inn and instead booked a 9-bedroom English countryside villa, they think it can’t be true. When I explain that the floor in the first class bathroom on an Emirates A380 is heated so that your tootsies don’t get chilly after your shower onboard (and that I flew them on an itinerary with a cash cost of $20K by instead using some miles and paying $55 in taxes), I’m sure some friends think I’m making it up. Indeed, when I look at photos of our past first class flights and luxury accommodations, even I sometimes feel like it has been a dream (particularly when I compare them against my early days of travel staying in $3 hostels and flying on airlines that were only in business for a hot minute). That was the allure of points and miles from the start: this hobby gives us a lot of ways to leverage less to get more.

Bottom line

This hobby is one of the rare places where when it sounds too good to be true, it probably means it is time to jump in rather than run away. Healthy skepticism is a good thing that prevents us from getting hurt (indeed The Plastic Merchant case referenced above is an awful example of a deal that ultimately was too good to be true and a lot of people got hurt in a substantial way). At the same time, many of the best deals in our hobby (and indeed many of those referenced in this post) are low-risk, high-return. Whether it’s opening a bank account with $1 and picking up thousands of free points or booking a mistake fare that might not be honored, the amount we stand to lose is often near-zero or substantially low for a substantially high return. I’ll also accept some deals where risk and return are more equal such as in product resale (though in those cases, as risk and reward come closer together, I’ll take my time and be a bit more cautious in decisions about whether or not to proceed). But when it comes to low-risk high-reward opportunities like Betterment, Brex, great credit card bonuses, and crazy loyalty promotions, I’ll likely continue to strike while the iron is hot and try not to get caught snoozing on the best deals that come our way. Past experience tells me that when it sounds too good to be true my friends won’t believe me, but I’ll rest easy knowing that we’ve scored yet another great deal.

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