Defending the Discover Cashback Model

Quite frankly, Discover card does not get talked about too much in the blogosphere, and on that point I can agree with Frequent Flyer University’s (FFU) recent assessment of the program.

FFU goes on to discuss how simple Amazon payments have earned him $75 in cashback in his account due to this quarters 5% cashback bonus on up to $1,500 in online purchases.

FFU then goes on to answer the question on whether people should consider getting a Discover card.

Q: If I currently don’t have a Discover Card, should I signup for one to take advantage of this promotion?

A: NO! While this promotion is great if you are already a Cardholder, outside of these promotions, normally my Discover Card gets $0 of spend in a year because their cashback program is really bad and they don’t offer any frequent flyer miles or hotel points. In addition, Discover doesn’t offer a substantial sign on bonus that would make it worthwhile to get their cards to begin with so I would not recommend getting this card.

I think considering the rough year the frequent travel community has experienced with devaluations across the board, cashback programs are looking more valuable than ever to the consumer.

We are a select group of people that know the ins and outs of earning and spending miles and rewards to our benefits. As I attended the Dan’s Deals seminar this past week, I can attest to the fact that most people in the audience and in general are completely overwhelmed by the idea of not only earning rewards, but then turning around and having to redeem them. On top of it, after people work hard to earn said rewards, the programs then elect to change the rules to their benefit by requiring mountains of more miles or points to redeem.

People want simplicity, and while there are those of us that can and will take advantage of these programs for the benefits they provide, the masses want things to be easy. They much rather have cold cash (or in this case cashback) that they can redeem on whatever they want. Yes, said consumers may not see the same return on the dollar as opposed to cashing in miles for an expensive flight around the world that they otherwise might not be able to afford, but they also are not having to deal with the intricacies of the changing rules.

The fact that Discover does not offer a “substantial” signup bonus is false, as they currently offer up to $150 cashback bonus for a quite modest spend.

Carrying a Discover cashback card also comes with the Shop Discover program, which almost always offers a higher cashback payout than any other shopping portal on the market. Right now the Shop Discover Holiday Cashback Bonus promotion awards cardholders with 10-25% cashback. Pair that with the purchase being an online purchase, which qualifies for the quarterly 5% bonus on $1,500 in purchases, and you can earn 15-30% cashback on purchases you might already be making. I have more details on other double and triple dipping opportunities that are available with a Discover coming soon too.

I have predicted for quite a while that the sustainability of earning huge amount of miles and rewards with obtainable goals by the providers was bound to bust. Within the last week we have already seen major devaluations by Hyatt, United, and Alaska Airlines, not to mention the previous ones from Delta, Starwood, Southwest, and Hilton.

In Conclusion

While I see and know the advantage of miles and point programs, I also see a tremendous value in having a cashback card in your wallets. It is hard to justify to someone who is new to the game that they should be obtaining miles and points when there is a rapid movement to make those rewards less and less valuable.

While most people will not ever bother with going about using reward programs to their advantage, those that take the time but want simplicity will see the benefits in having simple cash rather then trying to redeem for limited travel availability.

Save Money, Travel More!

Source: InACents