Retail Loyalty Points are a Scam

Stores plan on you not redeeming store points/dollars/rewards that they offer. So don’t let them trick you when shopping this Black Friday and Holiday season with deals that sound better than they actually are.

Every store seems to have it’s own loyalty program that has a version of points, dollars, or rewards where you pay up front for a deal and they give you back the points for your next purchase. Retailers love to do this, because they get your money up front instead of offering a more traditional discount promotion where you get the savings instantly.

How to value Retail Loyalty Points and “Dollars”

Retailers have a concept called breakage:

Breakage: Is the percentage of points earned by customers that are never redeemed.

According to the Customer Insight Group 30% of retailer points is a fairly normal number for points to go unredeemed. One way to think about it is that stores plan to never have to pay out for a large portion of the points they give out. They could offer out points with the ‘value’ of $10 but only have to plan on paying out $7.

The breakage rate varies depending on a lot of factors that I’m sure you’ve experienced when trying to use these programs:

  • The points will expire quickly.
  • They need to be spent in large amounts.
  • Numerous restrictions on what can be purchased.
  • Hard to redeem.

When you look at the value that the store tells you, think about how likely you are to actually spend it. Also remember if the store values the points at 70% of face value–or even less–you probably should too.

Examples of Egregious Point Offers

The more onerous the terms; the higher the breakage. You see offers like this Sears ‘100%’ cashback on $250, with terms like:

They’re going bankrupt so uh this is a little risky.

  • Points are valid for 7 days
  • $25 points per week for 10 weeks
  • Points have no cash value
  • Terms can change at anytime

This is one of the more obvious rip offs, but I’m sure that there are a few of you out there could make this deal work if you happen to live next to the last Sears or Kmart with the lights still on.

Their terms bring up a lot of great examples of how retailers abuse point systems.  Because the retailers own the system of points, they can issue as many as they want. If they happen to over-estimate the breakage rate–meaning they made it too easy to redeem the deals– they can simply devalue their points or create new policies to increase the breakage rate.  You see this a lot in programs that reduce the amount of time you have to use the points, increase restrictions, or increase redemption minimums.

Points can be worth it, but beware.

There are a lot of programs out there that are worth it, but it 100% depends on your personal habits.  If it’s a store you go to frequently the loyalty programs are great ways to save and shop more.  But you need to watch out the offers to stores that you rarely frequent, because those are the most likely to not pay off.

Just to recap good programs will be:

  • Places you normally shop
  • Long expiration date (1+ year)
  • Flexible redemption amounts
  • Clear point to product valuations

Bad programs will be like:

  • Short expiration cycles
  • Multiple point/”dollar” types for the same store
  • A store you rarely go to
  • Long lists of product exclusions
  • Hard to manage rewards like papers
  • Confusing

Is Imperfect Produce Worth it?

I’ve been using Imperfect Produce which is a vegetable and fruit delivery service for the past few months. Imperfect Produce aims to reduce food waste by delivering ugly and surplus fruits and vegetables to your door.  I liked the mission statement, but after a few months I felt like most of the food I was getting was labeled ‘surplus’ and prices seemed to be less competitive.   Delivery to delivery, I would often buy basics like carrots and onions that were always labeled ‘surplus,’ but if they’re available all the time are they really surplus?

One of the Imperfect Produce boxes

One of the boxes most things look pretty normal.

Another box with more fruit

The fruits were kind of small

So I broke out my kitchen scale, and I tracked 4 deliveries (2 months worth!).  I compared the amount that Imperfect Produce sent me and priced out the equivalent from my local grocer.  Everything was compared against a direct replacement as best I could match.  To keep it fair, I also included the Box Fee ($3) and Delivery Fee ($5) that Imperfect Produce charges.

Here are the cost comparisons by delivery:

Imperfect ProduceGrocery StoreSavings over Store
Box 1 $31.85 $29.90 $(1.95)
Box 2 $32.78 $28.13 $(4.65)
Box 3 $33.76 $6.57 $(7.19)
Box 4 $29.01 $26.52 $(2.49)

As you can see, Imperfect Produce has cost more than the grocery store on all of my boxes.  If you subtract out the box and delivery charge the prices of the actual produce and fruits are cheaper, but once you include the total cost Imperfect Produce really isn’t a deal.

The actual produce usually looks pretty comparable to what is at the grocery store.  Some of the items (espeically fruit) are often smaller than at the store, but really the most obvious things are like the carrots are almost always shaped like giant turnips and the onions tend to be either gigantic or tiny.

Items that saved the most:

ItemImperfect Produce Cost Store Cost Savings%
Conventional Green Bell Peppers (2 ct) $0.99 $5.56 $4.682%
Conventional Avocados (12 ct) $7.74 $12.20 $4.537%
Organic Leek (2 ct) $4.67 $8.18 $3.543%
Conventional Parsnips (1.5 lb) $0.69 $2.30 $1.670%
Conventional Apples (3 ct) 1lb $1.88 $3.15 $1.340%

Don’t use this to save money.

If you are looking to get your vegetables delivered this is totally a viable option that doesn’t cost much more than the store.  But keep in mind, you will generally end up paying more for the convenience of the having the box delivered. Selection varies week to week, so I do like using the boxes to try out different fruits and vegetables.  On top of that you’ll be helping out to reduce food waste, although I’m not sure how much of those savings are offset by the delivery and non-reusable delivery box.

If you want to try out imperfect produce and live in one of the cities here’s a link for your first Imperfect Produce box. As of this post, Imperfect Produce operates in many cities including:

  • San Francisco Bay Area, CA
  • Los Angeles, CA
  • Orange County, CA
  • Portland, OR
  • Seattle, WA
  • Chicago, IL
  • Indianapolis, IN
  • Milwaukee, WI

Equifax a record of every pay check I’ve had for 10 years

Equifax has all of my salary history.   It’s all in a 20 page packet detailing each paycheck that I’ve received since I was in college.  Yes, this is the same company that got hacked and leaked practically every Social Security Number to hackers; they also have information that I only thought the IRS had.

I got curious what data Equifax keeps and ran across the Work Number.   Employers–including all of my former employers–send Equifax salary history. Equifax takes this data and sells it to other companies who want to verify your income thru a service called the Work Number. You can request your own free report at the Work Number online, thru mail, or via phone. I couldn’t figure out how to use the website–not surprised that their IT infrastructure isn’t super updated.  So I printed the PDF and mailed them a letter. The report arrived a couple weeks later.

What’s in a Work Number Report

The report is broken out into three parts. The first details an overview with an introduction and record of who has requested a report in the last 24 months.  The second part is a record of your income history; mine was especially detailed.  The third is a bunch of stuff on the terms and how to correct the records if they’re wrong.

My data has been provided three times to two companies (Credit Karma and Chase) over the past 2 years.  This is what is looks like:

Work Number Report requestors

It’s not entirely clear to me what employers or creditors can and can’t see if they request the report.  I’ve never logged into the Work Number website to get a pin, but I must have clicked a button or signed off somewhere to give Credit Karma and Chase access to my data. That means whenever you agree to a background check by a potential employer, creditor, or landlord you could be also giving them permission to access your pay records that the Work Number sells.

Every pay check is listed in detail

The next 17 pages were a record of my employment history. It lists a gross and net record of each and every pay stub I have ever received as an adult.  The layout and information that is includes varies a little bit by employer, according to the Work Number each employer owns the data so they decide what they send.  My current employer has a pretty typical layout:

At the top you have employer info, role information, start and end dates.  Next is an annual summary of my income.  Then comes the unexpected part of a listing of every paycheck with the net and gross income. It is 100% accurate.  In fact, I think that these records are far more thorough and complete than anything I personally have been recording for the past 10 years.  When I requested the report, I never expected that this level of detail was being sent to and recorded by 3rd parties.

The report just goes on and on after this. Some of my former employers reported information about insurance, specific with-holdings.  Also, at least one employer only listed out my cumulative annual pay, but that was for an internship.

Be careful what you share

I see a lot of job search advice that says to fudge salary history, so that you can ensure that you get a raise for jumping ship, but keep in mind that this information is available and out there.  If you lie about what your compensation was at a previous employer, you could be found out.  So be careful with what you agree to, because your records are out there for companies who are willing to pay for it.

This report is 100% free, so I would definitely recommend requesting it at least once just to see what is in your file.

Comparison of 2018 Income Taxes by City

It’s tax season! Here is a table comparing some of the largest cities by combined income tax of Federal, Social Security & Medicaid (FICA), state, and local. The table assumes:

  • $100k annual income (mostly so that the percent that goes to taxes is easy to calculate)
  • No dependents
  • No deductions or itemization (401k, SALT)
  • Taxes are annualized.
  • The taxes were copied from Smart Asset’s Paycheck Calculator
  • Cities in the list were picked from the top 35 metro areas.
  • Does not include any other taxes like property tax or sales tax.

The not so surprising result is that New York City has the highest combined income tax coming in at $33.1k (33.1% of income). Not far behind are Portland, Baltimore, and Philadelphia in that order. I am shocked by how high the taxes are in those cities, especially since they don’t have the reputation of New York. At the low-end low tax cities in Texas, Florida, Nevada and Washington all tied for last place, since they do not have incremental state or local income taxes.

Combined Income Taxes by City

Note: If you are on mobile, you can drag the table right or left to see the Federal, State and Local tax amounts.

Tax RankCityTotal Income TaxesFederal Income Tax + FICAState TaxLocal Tax
1New York, NY $33,111 $24,056 $5,594 $3,461
2Portland, OR $32,041 $24,056 $7,985$-
3Baltimore, MD $31,593 $24,056 $4,503 $3,034
4Philadelphia, PA $31,050 $24,056 $3,070 $3,924
5Los Angeles, CA $30,977 $24,056 $6,921$-
5Riverside, CA $30,977 $24,056 $6,921$-
5Sacramento, CA $30,977 $24,056 $6,921$-
5San Diego, CA $30,977 $24,056 $6,921$-
5San Francisco, CA $30,977 $24,056 $6,921$-
5San Jose, CA $30,977 $24,056 $6,921$-
11Washington, DC $30,805 $24,056 $6,749$-
12Detroit, MI $30,440 $24,056 $4,080 $2,304
13Minneapolis, MN $30,321 $24,056 $6,265$-
14Columbus, OH $30,084 $24,056 $3,420 $2,608
15Kansas City, MO $29,893 $24,056 $4,971$866
15St. Louis, MO $29,893 $24,056 $4,971$866
16Cincinnati, OH $29,653 $24,056 $3,420 $2,177
17Atlanta, GA $29,566 $24,056 $5,510$-
18Cleveland, OH $29,463 $24,056 $3,420 $1,987
19Charlotte, NC $29,323 $24,056 $5,267$-
20Indianapolis, IN $29,075 $24,056 $3,267 $1,752
21Boston, MA $28,830 $24,056 $4,774$-
22Denver, CO $28,394 $24,056 $4,338$-
23Pittsburgh, PA $28,126 $24,056 $3,070 $1,000
24Chicago, IL $27,724 $24,056 $3,668$-
25Phoenix, AZ $26,756 $24,056 $2,700$-
26Austin, TX $24,056 $24,056$-$-
26Dallas, TX $24,056 $24,056$-$-
26Houston, TX $24,056 $24,056$-$-
26Las Vegas, NV $24,056 $24,056$-$-
26Miami, FL $24,056 $24,056$-$-
26Orlando, FL $24,056 $24,056$-$-
26Tampa, FL $24,056 $24,056$-$-
26San Antonio, TX $24,056 $24,056$-$-
26Seattle, WA $24,056 $24,056$-$-

Updates for 2016 Survey of Consumer Finances Data

The triennial updates have begun! Today the Federal Reserve released the latest results from their 2016 Survey of Consumer Finances.  This survey contains detailed information on the financial status of American households on things such as retirement, net worth, income and debt. All percentile calculators (Net Worth and Income) using Survey of Consumer Finances data from the US Federal Reserve have been updated today.

Inflation Adjusted Highlights 2013 – 2016

To read the entire summary, here’s a link to the 44 page report published by the Fed on the survey changes for 2013 vs 2016. Most of the numbers are adjusted for inflation.

  • Median Household Income is now $52.7k up from $48.1k (up 9.5%)
  • Median Household Net worth is now $97.3k up from $83.7k (up 16.2%)

Additional News Articles

Minorities and Americans without college degrees showed greatest gains in wealth since 2013, new data says  – The newest survey has reported show double digit percentage gains in net worth and income for certain minority groups and less educated households. The nominal gains are relatively low.
The top 1% of Americans now control 38% of the wealth