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Valued Contributor
bs6054
Posts: 1,673
Registered: ‎11-11-2012
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Re: Big Changes (bad) Coming to US Bank Cash+?

While I am not privy to US Bank's financial information on the performance of the Cash Plus, the reported changes seem to be a little too much.  Simply capping 5% spend would seem to give most of the control needed (and maybe 2%).  After all, to reach $100 to get the $25 using 1% spend would take $10,000, with US Bank making money off each swipe.  And similarly, if the spend is capped, there doesn't seem to be such a pressing need to get rid of big-spend categories.  (I guess the reasoning could be it's easy to reach the cap with bill pay, whereas users are less likely to do so with say, water parks)

 

It's a little like instead of  just capping grocery spend for the BCP, Amex would also:

 

a) reduce the reward on the first 6K to 3%

b) remove gas as a reward category

c) Increase the annual fee.

 

But of course the reported change is still just speculation (although we have all predicted that change would come)

 

One question: for BCP (and BCE) Amex made the change effective on card anniversary.  Is there any need to do that (I can see with an AF maybe, but the BCE doesn't have one) or can an issuer just say "Conditions changing in May, use of card after that date implies acceptance of those conditions..."

Senior Contributor
Open123
Posts: 4,194
Registered: ‎02-23-2011
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Re: Big Changes (bad) Coming to US Bank Cash+?

I think US Bank being "new" to the credit card rewards game (which is why I imagine Wells Fargo just doesn't even bother to compete) made a series of very rudimentary errors.  

 

1.  Rewards accelerated categories must be capped - either in amount per month or a value per year.

2.  To gain market share, only need to be "marginally" better than Freedom, Discover, and other cash back cards.

3.  Learn from the mistakes of Chase's AARP.

4.  Know the characteristics of "no fee" cards.

 

Whomever or whatever department who devised this programs isn't very familiar with the subtleties and nuances of the rewards market.  For instance:

 

1.  Every cash rewards caps has caps -- even Amex, who has historically eschewed caps of any kind had to cap the BCE and BCP.  US Bank erred greatly in not placing in caps on earning rewards.

 

2.  This card was so much better than the competition, it was if they were competing and outbidding themselves.  In an almost "perfectly competitive" market place--which CCs certainly are--be marginally better, and never offer more unless competitors dictate otherwise.

 

3.  The 5% AARP card was so rampantly abused, Chased realized any cash heavy rewards card must be restricted to avoid "unintended" use and rampant abuse.

 

4.  By nature, no fee cards will never be the "go to" card.  The only reason to offer 5% (a loss category) is to gain market share hoping to make a profit on other spend. No fee cards will always be relegated to the "special" categories, whereas "fee" cards will be utilized more since one is "paying" for the rewards.  

 

This card was such an extraordinary one because it was unsustainable the way it was set up.  In it's current form, this card will never make the bank any money, assuming most users will just focus on the 5% earn categories and just use another card for everything else--which is the characteristic of the fee sensitive demographic.

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bs6054
Posts: 1,673
Registered: ‎11-11-2012
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Re: Big Changes (bad) Coming to US Bank Cash+?


Open123 wrote:

 

4.  By nature, no fee cards will never be the "go to" card.  The only reason to offer 5% (a loss category) is to gain market share hoping to make a profit on other spend. No fee cards will always be relegated to the "special" categories, whereas "fee" cards will be utilized more since one is "paying" for the rewards.  

 

 


Is that really true in general?   I do the opposite, using more the logic "since my BCP charges a fee, I must maximize the benefit, therefore ONLY use it where I can't get a higher return elsewhere, i.e. groceries" and I use no-fee cards as my go to cards (Fidelity Amex, Penfed, Cap One Cash Rewards)

Senior Contributor
Open123
Posts: 4,194
Registered: ‎02-23-2011
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Re: Big Changes (bad) Coming to US Bank Cash+?

[ Edited ]

bs6054 wrote:

Open123 wrote:

 

4.  By nature, no fee cards will never be the "go to" card.  The only reason to offer 5% (a loss category) is to gain market share hoping to make a profit on other spend. No fee cards will always be relegated to the "special" categories, whereas "fee" cards will be utilized more since one is "paying" for the rewards.  

 

 


Is that really true in general?   I do the opposite, using more the logic "since my BCP charges a fee, I must maximize the benefit, therefore ONLY use it where I can't get a higher return elsewhere, i.e. groceries" and I use no-fee cards as my go to cards (Fidelity Amex, Penfed, Cap One Cash Rewards)


The BCP's 6% is so good, that in this case, you're absolutely right.  Even with the fee, there's no reason to use the BCP anywhere else!

 

For example, I have the SPG and Fid Amex.  Because I pay for the SPG (because I value a SPG point higher than 2% cash), I will use it over the Fid Amex everytime.  If I didn't pay for the SPG, it may not be that easy of a decision.  

 

I'd imagine this would be the same for most people who have annual fee cards.  

 

PS - With no fee cards, it always allows the user to mix and match and use each card for a specific purpose.  Fee cards are harder to do this since it could be costly when using a fee card for each category.  So, in the end, most will have one main fee card, and at most two; whereas the no fee card user can rotate Freedom, Discover, Citi Dividend, Forward, Pen Fed for Gas, etc....

Valued Contributor
bs6054
Posts: 1,673
Registered: ‎11-11-2012
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Re: Big Changes (bad) Coming to US Bank Cash+?


Open123 wrote:

bs6054 wrote:

Open123 wrote:

 

4.  By nature, no fee cards will never be the "go to" card.  The only reason to offer 5% (a loss category) is to gain market share hoping to make a profit on other spend. No fee cards will always be relegated to the "special" categories, whereas "fee" cards will be utilized more since one is "paying" for the rewards.  

 

 


Is that really true in general?   I do the opposite, using more the logic "since my BCP charges a fee, I must maximize the benefit, therefore ONLY use it where I can't get a higher return elsewhere, i.e. groceries" and I use no-fee cards as my go to cards (Fidelity Amex, Penfed, Cap One Cash Rewards)


The BCP's 6% is so good, that in this case, you're absolutely right.  Even with the fee, there's no reason to use the BCP anywhere else!

 

For example, I have the SPG and Fid Amex.  Because I pay for the SPG (because I value a SPG point higher than 2% cash), I will use it over the Fid Amex everytime.  If I didn't pay for the SPG, it may not be that easy of a decision.  

 

I'd imagine this would be the same for most people who have annual fee cards.  


OK, I guess we are just different!  If I valued SPG higher than 2% cash, I would use it whether or not there was an annual fee.  Or are you saying that the AF impacts (subconsciously or otherwise) your evaluation of the relative worth?

 

(But then I never use my Citi AA except once a year to preserve my AA miles, and if I looked deeply into that, I probably couldn't justify the AF!)

Senior Contributor
Open123
Posts: 4,194
Registered: ‎02-23-2011
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Re: Big Changes (bad) Coming to US Bank Cash+?


bs6054 wrote:

OK, I guess we are just different!  If I valued SPG higher than 2% cash, I would use it whether or not there was an annual fee.  Or are you saying that the AF impacts (subconsciously or otherwise) your evaluation of the relative worth?

 

(But then I never use my Citi AA except once a year to preserve my AA miles, and if I looked deeply into that, I probably couldn't justify the AF!)


 

Because there's an annual fee for the SPG, I spend enough to justify the fee.  At those levels of spending, the incremental spg point because I have so many is worth more than the marginal 5% return on small expenditure.  

 

 

Senior Contributor
Open123
Posts: 4,194
Registered: ‎02-23-2011
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Re: Big Changes (bad) Coming to US Bank Cash+?


bs6054 wrote:

Is that really true in general?   I do the opposite, using more the logic "since my BCP charges a fee, I must maximize the benefit, therefore ONLY use it where I can't get a higher return elsewhere, i.e. groceries" and I use no-fee cards as my go to cards (Fidelity Amex, Penfed, Cap One Cash Rewards)


Precisely, you value the Fid Amex and Cap One the highest for all non category spend.  

 

For the US Bank, you will *only* use it for the 5%, and defer all spending to the Fid Amex and Cap One.  US Bank's 5% is a loss their willing to take in hopes you will generate spending in other categories, which you never will.  So, if every rational user relegates US Bank (or, Discover or Freedom) to only 5% spending, and divert all "non specific" spending to Fid Amex 2%, how will they ever make money?

 

 

Valued Contributor
bs6054
Posts: 1,673
Registered: ‎11-11-2012
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Re: Big Changes (bad) Coming to US Bank Cash+?


Open123 wrote:

bs6054 wrote:

Is that really true in general?   I do the opposite, using more the logic "since my BCP charges a fee, I must maximize the benefit, therefore ONLY use it where I can't get a higher return elsewhere, i.e. groceries" and I use no-fee cards as my go to cards (Fidelity Amex, Penfed, Cap One Cash Rewards)


Precisely, you value the Fid Amex and Cap One the highest for all non category spend.  

 

For the US Bank, you will *only* use it for the 5%, and defer all spending to the Fid Amex and Cap One.  US Bank's 5% is a loss their willing to take in hopes you will generate spending in other categories, which you never will.  So, if every rational user relegates US Bank (or, Discover or Freedom) to only 5% spending, and divert all "non specific" spending to Fid Amex 2%, how will they ever make money?

 

 


Oh, I totally agree with your basic point that the Cash + model is totally unsustainable, I just wasn't so clear about the role of the AF in the CONSUMER'S decision-making. 

 

It might be again that we (users on this and similar forums) are highly unrepresentative, and the majority of users will find a card they like and use it for all 0,1,2,5 spending.   (Though as the average card holder has 3.5 cards, there must still be some flexibility in usage).

Senior Contributor
Open123
Posts: 4,194
Registered: ‎02-23-2011
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Re: Big Changes (bad) Coming to US Bank Cash+?


bs6054 wrote:

Oh, I totally agree with your basic point that the Cash + model is totally unsustainable, I just wasn't so clear about the role of the AF in the CONSUMER'S decision-making. 

It might be again that we (users on this and similar forums) are highly unrepresentative, and the majority of users will find a card they like and use it for all 0,1,2,5 spending.   (Though as the average card holder has 3.5 cards, there must still be some flexibility in usage).


 

For most people, I think paying a fee for a card (except the Amex Plat type cards) will cause them to use it more.  I'm not sure if this is psychological (I paid, so better use it) or the natural correlation causing one to use the benefits of something that was deemed high enough value to pay an expense for, which in my case is the SPG, for example.

 

In the end, do I spend more because I pay the fee or value the points higher?  Perhaps both.

 

 

Established Contributor
emptypockets
Posts: 999
Registered: ‎02-03-2009
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Re: Big Changes (bad) Coming to US Bank Cash+?

According to posters on the FW forum, they went into a US Bank branch to apply, and they told them the same thing: $25 bonus once per year, and billpay, home improvement, and airlines are going away. The bonus change is effective immediately, but the categories will remain until the end of the first quarter. Local banks received an email about this change on Monday, and mailers to existing cardmembers have already been sent out.

 

i have not received any mailers, but maybe someone with a branch near them could verify the change.


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