You’re Giving Starbucks an Interest Free Loan and Don’t Realize It

New and notes from around the interweb:

  • Stop giving Starbucks an interest-free loan

    Starbucks has around $1.6 billion in stored value card liabilities outstanding. This represents the sum of all physical gift cards held in customer’s wallets as well as the digital value of electronic balances held in the Starbucks Mobile App.* It amounts to ~6% of all of the company’s liabilities.

    This is a pretty incredible number. Stored value card liabilities are the money that you, oh loyal Starbucks customer, use to buy coffee. What you might not realize is that these balances simultaneously function as a loan to Starbucks. Starbucks doesn’t pay any interest on balances held in the Starbucks app or gift cards. You, the loyal customer, are providing the company with free debt.

  • When Qantas retires the A380 they’ll still have first class, a product they plan to offer when they order either an A350-1000ULR or Boeing 777X. And they promise it’ll be an improvement over their current generation first class seat.

  • Barefoot bandit: passenger resting feet on seatback entertainment screen (HT: Donald W.)

  • Virgin Australia takes part in 30 year running prank between sisters

  • Cathay flight attendant fired over pro-democracy Facebook posts

    On Friday, Rebecca Sy, who worked for the airline’s regional arm Cathay Dragon and is also a union leader, said she was pulled off a rota to fly to China and dismissed the next day on August 21.

    Management showed her Facebook posts discussing the political situation, Sy said, but added she was not formally given a reason for her sacking.

    “The answer I got was ‘I can’t tell you why’. This is what I cannot accept,” a tearful Sy told reporters, without giving details about the content of the Facebook posts.

  • Hotels are cracking down on certain kinds of emotional support animals, too.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. It’s hard to imagine that whoever wrote that Starbucks article was unaware that you get free stuff in exchange for loading money on the card. You can get more than 10% back if you do it right.

  2. Regardless of discounts or incentives, if you paid any money at all for the card, it’s a loan to the issuing merchant. Regardless of who it is, Starbucks, Home Depot, Target or any other business. Surprising that people don’t get that. (Well not really)

  3. Plus, doesn’t Starbucks “double dip” by also collecting short-term interest (LIBOR, or some other “float”) on monies received for gift cards and prepaid amounts loaded onto Starbucks cards/phone apps?

  4. To reduce the pain of this “free loan”, Chase Offers always have a 10% back on Starbucks purchases (app load). And so does the AMEX card which currently is at 15% back.

  5. The only reason to purchase gift cards is either as an actual gift or to leverage their purchase to gain some additional value or savings.

    An interesting thing is that they’re problematic for merchants, especially smaller ones who aren’t able to maintain robust inventories. Outstanding gift cards may generate interest income for merchants with in-house card settlement, but they’re also a giant pool of unpredictably pending accounts payable.

  6. I’m really not sure the best way to support HK in their struggle against the inevitable mainland aggression. Do I boycott Cathay? That then hurts the people of HK financially. Do I cancel my upcoming award booking, and fly on JL instead? They can’t be making any money off of me, but maybe it could help to show solidarity against China, and against Cathay management giving in so easily.

    One thing for sure I do is minimize my business with any and all companies that either coddle favor with mainland China (Apple and Google, for example), and avoid if at all possible purchasing anything made in China.

    The final thing I can do is *gasp* support the hard line the POTUS is taking against China, despite the short term pain it might cause, and not use it for scoring cheap political points. Isolating a weaker China is the only way to stop this behavior. A stronger, emboldened China would be a very dangerous world indeed.

  7. That’s the same as purchasing on a credit card and not paying it until the bill due date. Interest free loan.

  8. Gary—

    The interest free loan is true with any gift card. However, if you buy a Starbucks GC with a discount, it’s moot. Especially since Starbucks Cards can be had for more than 5% off, or even a greater discount. I currently don’t know of any fluid savings accounts offering 6% APY right now. But a discounted Starbucks GC for 5% or greater discount, and this point is very moot.

  9. Gary,

    I gladly carry a balance on my Starbucks account for convenience. It is set to charge $25 when I get below $10 on the card. Assuming I could otherwise get maybe .1% (checking acct since not enough to move to money market or brokerage – also pay all credit cards monthly so no interest charges on it) in a year I would get a total of 3.5 cents interest ($35 times .001). Think i am good w that for the convenience.

    Man you need to raise your game. Not sure if just under pressure to publish but many of these are either cut and paste or very weak.

  10. @WR2 – not only does China own Hong Kong (granted under agreement to keep certain things the same) they are material shareholders in cathay. Of course they have the right to question disloyalty by employees and demand action. To assume anything else is just putting your head in the sand.

    China is taking steps, as would be expected, to integrate Hong Kong into the country similar to Shanghai and other large cities. Hong Kong will be fully under Chinese rule.

    I can imagine them keeping. Some of the business friendly policies in place and maybe not requiring a Chinese Visa but the citizens need to understand they are now chinese and will be treated as such. Next step is martial law and no country in the world has any basis telling China how to manage their territory

  11. Starbucks app reloads are a great way to quickly bump up to the 30 transactions threshold with the Amex every day preferred thus triggering the 50% bonus on points earned for that period. This is especially helpful when realizing on the last day of the cycle.

    The reloads can also be helpful if you use Starbucks regularly and end up a few hundred short of meeting minimum spend for a sign up bonus or other spending threshold.

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