The rationale for switching from Bluebird/Serve to the Target Red Card

 

Updated 4/26/15  – As of 4/15/15, AMEX stopped letting you load with a non-AMEX credit card.  This has changed the math.  I’ve also removed the Softcard Serve since that product is no longer available to new customers.

I had been debating on whether to make the switch from my Isis Serve to Redbird lately and wanted to share my thought process. Hopefully all of my readers know what I am talking about when I say the Target Red Card.  If not, you can do some homework and read about it here:

• http://frequentmiler.boardingarea.com/the-complete-guide-to-redbird-the-target-prepaid-redcard/
• http://frequentmiler.boardingarea.com/2014/10/14/bluebird-redbird-softserve-which-is-best/
• http://frequentmiler.boardingarea.com/2015/02/05/switching-between-bluebird-redbird-and-serve/

Advantages of Bluebird/Serve:

• AMEX offers!  If you have 4 subaccounts, that’s 5 total cards.  You can probably get about ~$100 of free offers with AMEX offers per card per year, and so 1 Serve + 4 subs can equal ~$500 worth of value.
• An additional $1K of online credit card loads on top of the $5K “cash load” at Walmart if you use certain cards.
• Loading at Walmart if you find a working machine (no cashier involvement)

Advantages of Redbird:

• Can load at Target using a credit card
• Avoiding Walmart, the armpit of America

The math using a 5% cashback card at grocery stores to load Bluebird/Serve

With both cards, you can load $5K per month at either Walmart or Target.  Currently, I have the WF 5% card.  That is about to go away soon.  But let’s say that you still have a 5% card at grocery stores.  To fully load the $5K on Bluebird/Serve, you’d have to buy 10 x $500 Visa gift cards at a cost of $5.95 each from a Kroger store:

• Cost – 10 x $505.95 = $5,059.50
• 5% cash back = +$252.98 gross profit
• Gift card fees = -$59.50
• Net profit = +$193.48
• Margin – $193.48 / $5,000 = 3.87%
• Additional $1,000 of online loads using FIA AMEX 2% – $20; new profit – $213.48; new margin – 4.27%

The math using the Wells Fargo 5% cashback card to load Redbird

Now let’s say you had the Target Redcard and also happen to have the Wells Fargo 5% card.  Most Targets are coded as grocery stores with the Visa card; therefore, you’ll receive the full 5% on your Redbird loads at Target.  The math:

• Cost – $5,000
• 5% cash back = +$250 gross profit
• Net profit = +250
• Margin – $250 / $5,000 = 5%

Of course this is the best possible scenario for the 6 months that you have the 5% promo on the WF card.  Since this is time-limited, the more likely scenario will be below.

The math using an Arrival card to load Redbird

The best route to go would be to buy an American Express gift card through a shopping portal (when it’s at 2.25%) and then loading the Redcard at Target with the AGC.  The cost to buy $5,000 of AGC is $3.95 per $2,000 card (you won’t get cashback for denominations over 2K).  Assume you’ve paid for the sunk annual shipping cost already.  Let’s say we buy $10K of cards (5 cards of $2K) instead of $5K to save us on fees.

• AGC cost – $3.95 * 5 cards = $19.75 for $10K worth of AGC.  Let’s then assume only $9.88 for 5K
• Cash Back portal rebate of 2.25% on $10K = $225 / 2 = +$112.50
• Barclays Arrival card 2.2% on the $10K spend = $220 / 2 = +$110.00
• Net profit = $112.50 + $110.00 – $9.88 = $212.62
• Margin – $212.62 / $5,000 = 4.25%

I know the portal rate is usually 1.5%, but let’s assume you go nuts when those 1 day 2.25% rates pop up.  As you can see, you are making an additional $19.14 profit loading Redbird instead of Bluebird/Serve.  If you factor in the credit card loads, you are actually making  $13.86 less. But that scenario assumes you have a 5% cashback card at grocery stores, which most people either had and got banned or only have 6 months of 5%.  Here is the more likely scenario if and when you don’t have a 5% cashback card anymore:

The math using an Arrival card to load Bluebird/Serve

Let’s say you don’t have a 5% cashback card and only have the Arrival card with 2.2%.  You would still have to go through a shopping portal to buy AGC and then use the AGC to buy gift cards at either a Kroger (somewhat difficult) or maybe you can use them at a Simon Mall (even more difficult).  Let’s work the math on that:

• AGC cost – $3.95 * 5 cards = $19.75 for $10K worth of AGC.  Let’s then assume only $9.88 for 5K
• Cash Back portal rebate of 2.25% on $10K = $225 / 2 = +$112.50
• Barclays Arrival card 2.2% on the $10K spend = $220 / 2 = +$110.00
• $5,000 of gift card fees at Kroger – $59.50
• Net profit profit = $112.50 + $110.00 – $9.88 – $59.50 = $153.12
• Margin – $153.12 / $5,000 = 3.06%
• With additional $1,000 of online loads – $173.12 / $5,000 = 3.46%

As you can see in this situation, you are only making $173 or a 3.5% margin.  That is assuming you can convert your AGC to a gift card at Kroger or a Simon Mall, which is becoming increasingly difficult.

On an annual basis and Factoring in AMEX Offers

First off, I do believe that once the Redbird goes nationwide, AMEX will eventually allow the cards to qualify for AMEX Offers.  But if they don’t let’s work out the math on an annual basis –

• 5% cashback card with Serve – total annual profit – $2,717.76
• Arrival card to load Redbird via AGC – total annual profit – $2,551.44
• Arrival card to load Serve via AGC – total annual profit – $2,077.44

Now you have to ask yourself how much you value AMEX Offers for 1 Serve + 4 subs.  In 2014, you could get $30 for Small Business Saturday, a $25 Best Buy offer, a $20 offer to Staples, a $25 offer to Newegg, etc.  That right there is $100 and not counting any other offers that I missed.  Therefore, if you value every Serve card to give you $100, then every Serve account is worth $500.  The new numbers:

• 5% cashback card with Serve – total annual profit – $3,217.76
• Arrival card to load Serve – total annual profit – $2,733.44
• Arrival card to load Redbird – total annual profit – $2,551.44

Since #1 is a short lived option, let’s only look at #2 and #3.  That difference is about $182.  Now you have to factor in the convenience of Target versus Wal-Mart.  I think most people would say they prefer going into Target more than Wal-Mart .  Some Wal-Marts no longer allow using gift cards to load BB/Serve.  It’s almost impossible to find a working Moneycenter machine.  The lines at Wal-Mart are usually longer.  So far in my few weeks of loading Redbird at Target, because I go in pretty late, I always see the same people and there’s never a wait.  I love it.  And I am even able to load the daily max $2,500 in 3 transactions in one visit.  This cuts down on a lot of driving time.  This also removes the need to make a trip to Kroger to buy gift cards too.  So I would value those intangible (my time) and some tangible (gas money) benefits more than $182 a year.

It’s not all roses

I think most people believe that Target will eventually stop allowing credit card loads.  If they do, then the math between “Loading Redbird with Arrival” will be almost identical to the scenario “Loading Serve with Arrival” because now you’d have to take your AGC to Kroger and buy gift cards to load at Target.  And if Redbird still has no access to AMEX Offers, then the intangible benefits will no longer be greater than the monetary benefits of Serve.  At that point, I would probably switch back, but let’s hope that day doesn’t come in a very long time.