Shady Math: How 5% back is actually 3.19%

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During the COVID-19 pandemic, I took the opportunity to apply for some of the cards with less than lucrative sign-up bonuses but had value to keep for the long run. This included the Chase Freedom Unlimited and the Fidelity Rewards card. I’ve been surprised at how valuable the cards have been over the last several months, with Freedom Unlimited adding 3% back on restaurant and drugstore purchases while earning 2% cashback with all purchases with my Fidelity card.

The last thing I was expecting to get a bonus spending offer from a no-annual-fee card but that’s exactly what hit my mailbox recently.

I was excited to earn 5% back on purchases by using my Fidelity Rewards card, but then I read the fine print.

The offer says that AFTER spending $1,000, you earn 3 EXTRA points up to a maximum of 2,000 bonus points.

To break this down, I need to do some math.

• I’ll need to spend $1,000 to activate the offer, on which I’ll earn 2,000 points.
• Then I’ll earn 3 bonus points on the next $667 of spending (667×3=2,000 points)
• That’s on top of the normal 2 points per dollar on the same $667 = 1334 points

For spending $1.667, I’ll earn 5334 points worth $53.34 or a 3.19% return.

Don’t get me wrong, earning over 3% cashback on a free card is a good return, but it’s not 5%.

I’d rather earn 5 Ultimate Rewards per dollar for shopping at Office Depot or 4 Membership Rewards points for my restaurant spend, but those rewards are only for specific categories.

Will I take advantage of this offer? I’m still deciding if it’s worth it since I have other ways to maximize my non-bonused spending and I’m also meeting my minimum spend for a new AMEX card. As usual, Your Mileage May Vary.

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This post first appeared on Your Mileage May Vary