Blog

Short blog posts, journal entries, and random thoughts. Topics include a mix of personal and the world at large.

It's not enough that I win

One of my recent YouTube rabbit holes is the Delivrd channel. It’s videos of a guy named Tomi negotiating car deals for his clients. His company charges a simple $1,000 to do the thing most people loathe about the car buying process: everything before signing on the dotted line. Customers save time and headaches, whilst getting a great price on the car they want.

American car dealerships truly make vehicle purchasing a horrible experience. Say what you want about the current CEO, but Tesla’s direct sales method is the absolute best. Customer can do the entire transaction in 15 minutes right on their smartphone. No longer do we have to beg some asshole salesperson to please take our money.

To be fair, the dealership system wouldn’t have its sour reputation if cars strictly sold at MSRP - no markups, no discounts. That fact that everybody practically pays a different price creates a competitive game, with opposing sides fighting to keep as much money as possible. The game then creates hurt feelings, because there are winners and losers.

Services like Delivrd have a finite ceiling it can scale to, at least with the current dealership system. Franchises can afford to give Tomi’s clients a great deal only because there exist other customers who are getting the opposite. People that pay above MSRP, plus all the add-ons, are effectively subsidizing those who are coming under invoice. For there to be winners, there has to be losers.

Credit card companies would close up shop tomorrow if every single account holder pays off their monthly balance promptly. In reality, it’s the profits from the minimum balance interest payers that allow the companies to give people like me 5% cash back. Someone loses so that I can win.

Is it fair?

Subsidized lifestyle

Word on the street is the Chase Sapphire Reserve card - the preeminent travel rewards credit card - is increasing its annual fee. What started at an already hefty $450 per year is now a whopping $795 per annum. COVID-era inflation comes for everything eventually.

Of course, Chase has all sorts of new card benefits to potentially offset the price jump. But it’s all predicated on one thing: cardholder spending. This is a classic case of spending money to save money, which only works if that money is what you would have spent regardless. If you wouldn’t have in the first place, then you really shouldn’t have.

I did sign up for the Sapphire Reserve when it was first introduced many moons ago. The signup bonus was super generous: 100,000 points on a $4,000 initial spend (worth a thousand dollars in cash value.) Coupled with the $300 travel credit per year, the true annual fee was only $150 at the time. As an annually traveler, it was not difficult to for me to “break even”, so to speak.

That 100,000 bonus point allowed me to fly first class to Korea in 2017. Truly living the champagne life on a beer budget. But that was during a time when lots of capital was going toward subsidizing a rich person’s lifestyle for the mundane middle class earner. Surely you remember: UBER rides used to be cheap, thanks to the company continuously burning through VC cash to hide the real cost.

Did we honestly think we can afford to have our burritos hand delivered from the taqueria for only a few bucks? DoorDash fees used to be not so exorbitant, too.

Well, those sweet subsidized days are over. The premium travel reward credit cards are now only for those who can comfortably spend the high amount necessary to reap the rewards. Good news for me, I cancelled my Sapphire Reserve soon as COVID prevented any sorts of traveling.

A credit card person

After four years, my Yamaha CP88 keyboard is finally paid off. Why did it take so long? Well, Guitar Center allowed me to open a store card to spread the high initial cost over four years with zero interest. Of course I am going to take that arbitrage opportunity. That lump sum has instead been growing in my investment account.

You offer me free money, I am going to take it every time.

I recently had to buy new tires for the M2. For the occasion I opened a new credit card with Capital One. The company is offering a signing bonus: $200 cash back on a $500 spend within the first three months of account opening. There’s also zero interest for 15 months. That’s just easy money. I paid for the tires on the card, got the $200 as a statement credit, and will pay the amount in full sometime early 2026.

Buy now, pay later - splitting payments over four equally small ones - services like Klarna and Afterpay are showing up more and more on online checkouts. I’ve not use those services before, but if I ever need to split a large payment and take the zero interest arbitrage, it’s an easy decision. Heck, even my bank - Chase - offers a program to split large credit purchases over time, with introductory zero interest offers.

Of course, in order for me to “profit” from these credit opportunities, there has to be a loser on the other side of the trade. And it isn’t Guitar Center, Capital One, or Klarna. The loser is their other customers, the ones who are not paying the balance before interest (and back interest) starts accruing. It’s the credit debtors subsidizing the profiteers.

After paying off the new tires, I will never use that Capital One card again. Therefore, they will never recoup that initial $200 in startup bonus. Not from me directly, anyways.

Right to privilege jail, right away.

Don't blame the system

This video popped up on my Youtube feed talking about how credit card companies are criminals for charging such high interest rates. But that’s a bit disingenuous. People aren’t forced to deal with credit card issuers. You absolutely do not need a credit card! Cold hard cash will always be king. There’s also the debit card too, if convenience is what you are after.

I’ve had and still have many credit cards, and never have I paid a penny of interest. (Good move by President Trump in directing the Treasury to stop minting pennies.) Credit cards are a fantastic financial tool, so long as the monthly balance gets paid in full. The issuers can charge the most usurious interest rate, and it wouldn’t affect me one iota. That’s how everyone should be using the cards. Visa and MasterCard more than make enough money on swipe fees.

It’s wrong to call something predatory when both parties came to an agreement. The customer borrows money from the credit card companies, with the promise to pay it back. Interest will be charged if payments are late. It’s not the issuer’s fault if the customer did not read the APR fine print. The issuer is not evil because the customer cannot fully pay the balance in a timely manner. It’s hugely infantilizing to obviate responsibility from fully grown adults.

Again, credit cards are not necessary to living. People did just fine before their invention. Whatever life emergency that people use the cards to cover should instead be covered by an emergency cash fund. Don’t have one? Eat only rice/beans/chicken/lentils (a completely nutritious meal for very cheap) until you’ve saved enough. Sorry, DoorDash is no longer in your vocabulary.

If you’re in credit card debt, it’s time to reevaluate your expectations of what is truly necessary in life. The Amazon habit is too difficult to quit? Better increase your income, then.

I know. Right to privilege jail. Right away.

Exploiters adjacent

On Shark Tank last evening, there was a woman peddling premium hiking socks for $24 a pair. I cannot wrap my mind around such extravagance. My modus operandi for socks is to buy in bulk at Costco (brand doesn’t matter). They get thrown away when holes inevitably develops. For a heavy wear item such as socks, I don’t see the utility of spending heavily. This isn’t a winter jacket that will last a lifetime kind of thing.

I’m sure premium wool socks feel fantastic. But who can afford them but millionaires or sock enthusiasts. It’s a luxury item for sure, not a must-have. At least with an expensive mattress one can make the argument the improvement on sleep is worth the money.

Maybe I’m just being a miserable miser. Half the stuff I see on Shark Tank, I can’t believe there are actually people who would spend money on them. In the same episode from yesterday, another entrepreneur was selling a metal trunk for people to store their keepsakes - for hundreds of dollars. A Sterilite plastic container from Target for magnitudes less money would have sufficed the same. I wonder: are we in so much consumer debt because of such frivolity?

Then again, the American economy would grind to a halt if a majority of the populace spend only on what’s truly necessary. DoorDash would not be worth billions because people understand it’s stupid to overpay menu prices plus fees and tip to have someone chauffeur a burrito to your home.

But please, by all means, spend. Debt spending is singlehandedly sustaining the r/churning subreddit. There aren’t thousands of dollars in bonus travel points to earn if on the slip side there aren’t customers to siphon heavy interest payments from. Those of us on the positive side are directly adjacent to the exploitation of people in severe credit card debt. That is, if your level of empathy causes you to regard credit card companies as exploiters.

Farewell for now, CSR

The hefty $550 annual fee on my Chase Sapphire Reserve card comes due this month, so of course I had to make the call to downgrade to the regular Sapphire Preferred card, with a far more manageable $95 yearly fee. In these times of COVID that’s still showing no signs of abatement anytime soon, there is absolutely zero chance for me to do enough traveling in the next calendar year to justify the high cost of the Reserve card.

Remember back a few years ago when the card was all the rage? A premium travel card with a 100,000 bonus points after you spend $4,000 within the first three months of sign-up (I spent a majority of it on books, believe it or not). I use the bonus points to score first-class seating on the return leg of the trip to South Korea, a thing I wouldn’t have otherwise ever pay for. The Reserve card also paid the application fee for Global Entry, allowing me to breeze pass through TSA heading out, and immigration coming back in like a special VIP.

The then $450 annual fee was quite a lot for someone used to paying nothing fo credit cards, but in combination with the $300 travel credit, the affective fee was only $150. Chase have since raised the fee by a hundred dollars, which in a normal year I still would have been able to “break-even” with the amount of travel I typically do. As we are well aware, the global pandemic effectively shutdown all of our plans to get on an airplane, so the economical move is to downgrade to a lesser tier card and wait until the world returns to normal to upgrade back to the Reserve.

Another sad reminder of what is the wildest and strangest year. I’m optimistic though; soon as big Pharma figures out a proper vaccine, I’ll be back in the skies off somewhere alongside the rest of you.

Time to pay up to Chase

Yesterday I got charged the annual fee for my Chase Sapphire Reserve credit card, a quite hefty sum of $450 dollars. My Asian mother would never approve of paying a yearly fee for a card, much less one in the hundreds. Indeed, on the surface I do not fit the salary profile of a person who carries credit cards with high annual fee, but the beauty of Chase Sapphire Reserve is that it literally (?) pays for itself.

It’s just one of those things that catches you off guard when it shows up on your bank statements, like the annual membership for Amazon Prime. Just yesterday I wrote about being austere through the rest of 2019, and this charge was certainly a sudden shock. Thankfully, unlike Amazon Prime which has hiked its rates many times (I can remember when Prime membership was only $70 dollars), at least the Sapphire Reserve card has stayed consistently at $450 per year since inception. I’m very glad Chase did not follow the footsteps of American Express, who raised the fee of their premium Platinum card to $550.

It’ll be my fourth year with the Sapphire Reserve card, and as long as I remain traveling on a consistent basis, I completely make the annual fee back through points accrued. The $300 travel credit is still there, and that not only can reimburse for obvious stuff like airfare and hotel, but Uber rides and public transportation also count. Via rudimentary math, that cuts the net annual fee down to a manageable $150, which will get canceled out once I spend a cumulative $4,000 on travel and restaurants next year (a very easy target for me to hit.)

I reckon there will come a time when I will divorce from the Sapphire Reserve card and switch over to a pure cash-back variety (hello, Capital One!) I don’t suppose I’ll keep on traveling as I have done for the past few years, and at that juncture there won’t be enough appropriate spending to offset the annual fee. In the meantime I think Chase would be smart to split up the annual charge into monthly payments, because us millennials love that sort of accounting: my phone only costs me $40 dollars a month!