When it comes to the often-careless ways Americans spend their money, hardly anything surprises me anymore. After all, the average new car loan in our beloved country is over $500 per month, and the average credit card debt among households carrying a balance is over $9,000. Worse, this goes on while more than half of American households have less than $1,000 saved, and American retirement accounts are woefully underfunded.
Let’s face it: America is increasingly the land of $1,000 smartphones, kid’s sports that cost more than a mortgage, and triple-digit cable bills, whether we can afford them or not. And boy do we pay for our decisions.
Still, a bit of news will sporadically come along to make me realize just how doomed we are. Enter the new Starbucks Rewards Visa Card – a new rewards card that pretty much embodies everything that’s wrong with Americans’ finances. The new Starbucks credit card combines the worst of our consumerism with substandard rewards I can barely fathom.
Should you sign up? It really depends on your goals and whether you prefer coffee to cash. Keep reading to learn more details so you can decide.
Starbucks Rewards Visa Card Details
The Starbucks Rewards Visa Card promises to reward you for all your purchases – not just purchases made in Starbucks stores. Over all, this is good news, since you can use this card anywhere Visa is accepted to make any purchase you want.
Unfortunately, the Starbucks card chose to go with a convoluted rewards scheme instead of offering straight-up cash back. As it stands now, the “rewards” you’ll earn follow this format:
- Earn 1 star for every $4 you spend outside Starbucks stores.
- Earn up to 3 stars for every $1 you spend at Starbucks, including a star for loading your app with your new credit card and 2 stars for making the purchase.
- Earn 2,500 bonus stars after you use your card for $500 in purchases within three months of account opening.
- Earn 250 bonus stars the first time you use your new Starbucks credit card to digitally load money into your Starbucks app.
- Earn 8 “barista picks” coffees per year.
- Get automatic Starbucks Gold Status.
Please say it isn’t so. This card doesn’t offer any cash back, but instead doles out “stars” for behavior deemed worthy. What is this? Grade school?
In all seriousness, the earning structure on this card is pretty laughable. I think Starbucks must already know this since they didn’t even try to calculate the value of their rewards in their very own “yearly rewards” example.
On their website, they basically say that, if you spend $500 anywhere and $25 at Starbucks each month, you’ll end up with “48 rewards” after 12 months. They reach this figure based on the fact that every 125 stars you earn can be used for a drink or food item. Color me unimpressed.
But the mind-boggling details don’t end there. There are so many things wrong with this card, but I think the absolute worst part of the offer is the fact it comes with a $49 annual fee! And no, the annual fee isn’t waived the first year.
So, if you believe you’ll earn “48 rewards” during the first 12 months, the annual fee ensures you’ll hand $1 back per reward in the form of a yearly fee just for the privilege of having this card.
Then again, you do get automatic Starbucks “Gold Status” after you sign up for the card. Hooray!
Oh, wait. What does that mean exactly? According to Starbucks, you get some serious benefits with this status, including:
- A Starbucks Gold Card with your name on it
- Double stay days that let you earn double the rewards
- Bonus stars when you buy a featured item
- Free refills of brewed coffee or tea
- A free birthday reward
- Opportunities to earn more rewards outside the store
In other words, not much… unless you’re someone who works remotely in a Starbucks and could save big bucks by scoring free refills all day long. Then, and only then, does Gold Status seem like a goal anyone should shoot for.
Let’s Learn Some Starbucks Math
Beyond the fact that you earn “stars” and not real cash back, this card’s earning structure has some serious problems.
The fact that you only earn 1 point for every $4 you spend on purchases outside Starbucks stores means they want to reward you for buying their overpriced coffee. That’s fine and all, but that really means this card isn’t much of a rewards card when you use it for other purchases.
At the $4 per point rate, you’d have to spend $500 to earn the 125 stars needed for a free food or beverage item. If you spent that money on a cash back card that earned a flat 2% back, on the other hand, you’d rack up $10 in cash instead. A Starbucks latte may be pricey, but it’s still nowhere near 10 bucks.
The other problem with the card is the fact that you can’t redeem your points for anything other than Starbucks food and drink. You can’t cash in your points for money to spend however you want, nor can you use them for travel. Your choices are fairly limited to things like muffins and cake pops and overpriced frozen coffee drinks. “Stars” are only useful if you’re someone who wants to nosh on Starbucks fare on the regular, and only barely useful then.
But it gets worse. Did you know that the Starbucks Rewards Visa Card comes with an APR of 17.49% to 24.49% based on your creditworthiness? If you thought your spiced caramel mocha latte with soy milk was a rip-off before, just wait until you carry a balance and pay interest on it!
Skipping the Starbucks Credit Card? Here’s What to Do Instead
If you like Starbucks and want to earn rewards on all your coffee and breakfast sandwiches purchases, then by all means, sign up for a rewards credit card. Just don’t sign up for the Starbucks Rewards Visa Card, since you can do a lot better.
While Starbucks apparently hopes your math skills are a little fuzzy, the reality is that there are a ton of cash-back cards with a higher rate of return and no annual fee.
One good example is the Chase Freedom Unlimited®. This card comes with no annual fee, yet it lets you earn a flat 1.5% back for every dollar you spend.
If you spent $525 per month on the card per the Starbucks example, you would earn $94.50 in cash-back rewards per year. And that’s after you earned a $150 signup bonus after using your card for $500 in purchases within three months of account opening. That’s $244.50 in cash you could use for anything after 12 months – not just calorie-ridden cinnamon rolls and fancy coffees. And remember, this card comes with no annual fee.
If you’re angling for travel instead, you could also consider the Chase Sapphire Preferred® Card. This card doles out an amazing 2 points per $1 spent on travel and dining, which would include Starbucks purchases. This is on top of the signup bonus, which lets you earn 50,000 points after you use your card for $4,000 in purchases within three months of account opening. The signup bonus alone on this card is worth $500 in cash back or gift cards, or $625 in travel — although you will have to pay a $95 annual fee after the first year.
Last but not least, consider the Uber Visa Card. While this might seem like an unlikely rewards card to make the most of your coffee habit, this no-fee cash-back credit card offers 4% back on dining — including Starbucks — 3% back on hotels and airfare, 2% back on Uber and certain online purchases, and % back elsewhere.
In addition to these card options, it’s also worth considering whether you should avoid credit cards altogether. While credit card rewards can be lucrative, the points you earn will be nothing if you wind up carrying a balance from month to month. This is especially true with the new Starbucks credit card since it comes with an especially high interest rate that could make paying off debt a struggle.
To avoid disaster and high-interest debt that could haunt you for years, don’t fall into the rewards trap unless you’re ready. If you’re struggling with debt, you should probably avoid all credit cards like the plague and pay for your coffee (and everything else) with cash or debit instead.
The Bottom Line
Only in America would people sign up for a credit card that charges up to 24.24% APR to finance their coffee habit, then relish in the fact they earn “stars” based on their spending. There’s nothing wrong with splurging on a coffee, but this offer says a lot about American attitudes on consumerism, money, and debt.
If you’re a Starbucks enthusiast, definitely continue shopping at their store, but please do not sign up for this sorry excuse for a rewards card. There are tons of cash-back cards that will let you accrue a higher rate of rewards without an annual fee. With most options, you can use your cash-back rewards in any way you want.
- Five Reasons Everyone Should Get the Chase Sapphire Preferred® Card
- Best Cash-Back Credit Cards
- Six Credit Card Reward Strategies for Family Vacations
Are you going to sign up for the new Starbucks rewards card? Why or why not?
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