In the hopes of delighting café loungers and coffee devotees, Starbucks recently announced the release of a new Visa credit and rewards card.
The card carries a $49 annual fee and charges 3% for foreign transactions. Its APR ranges from 17.24% to 24.24% — close to the average sky-high retail card APR of 24.99%.
Those figures might not scare off the biggest Starbucks fans who believe that the sign-up perks are worth it.
Cardholders are initiated into the current loyalty program at Gold status and can earn points (dubbed "stars") from non-Starbucks purchases. However, stars must be used toward drinks and food at Starbucks locations. (One star is earned for every $4 spent outside of Starbucks stores.) Customers also earn 2,500 stars after spending $500 on purchases in the first three months of signing up. (Equal to 20 food or beverage items, the company estimates.)
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ValuePenguin crunched the numbers to determine whether the hype is worth the swipe, and the verdict was ... not really. Here are some of the main reasons why.
Being A Cardholder Doesn't Place You In Rarified Air
The point of getting a rewards card — especially one with an annual fee — is to earn exclusive benefits. In the case of the Starbucks Visa, those advantages aren't far afield from the ones customers would earn by joining the loyalty program for free.
"Be wary of the Starbucks pitch that the card allows you to earn three points per every dollar spent at the chain. While true, technically anyone — Starbucks card holder or not — can earn two of those points per dollar by merely being in the loyalty program. It’s only that final one point per dollar spent that accrues specifically from the use of the card," ValuePenguin explains.
Other Cash Back Cards Offer Bigger Rewards
As mentioned, cardholders earn one point for every $4 spent on non-Starbucks purchases. Translated into rewards, that equals one cent per dollar spent or a 1% return, ValuePenguin explains. "In contrast, it’s easy to get 1-1.5% from a typical cash back card."
"Even the Uber Visa, another high-profile co-branded card, offers a hefty 4% cash back on dining, including purchases at Starbucks," Robert Harrow, ValuePenguin's head of credit card research told Refinery29.
You Would Need To Drink A LOT Of Coffee — Quickly — To Reap The Benefits
ValuePenguin estimates that after the first year of signing up, the card "will only pay off for people who spend close to $30 a week at Starbucks." (Marketwatch came to a similar conclusion, that it requires spending at least $1,250 in a year at Starbucks for the card to be worth it.
Also, the stars (rewards) expire six months after they post to cardholders' accounts. "A dedicated Starbucks customer might use up all those rewards at that time, but a less frequent visitor could see some of them expire before they were used," Harrow says.