Retail

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Chase Ink Card: Get 3% Back?

There are many credit cards out there offering a 1% rebate on purchases. And there are just a couple that pay you back 2% on everything. Now, imagine getting a business credit card that rebates 3% on all your purchases, with no cash back limit! Wow.

Keep imagining. At the bottom of Chase’s full screen ad (which you see after clicking “learn more”) is a not particularly conspicuous link labeled “*Ink Offer Details”. Funny, there was no asterisk in their headline qualifying their 3% claim.

*MOUSE PRINT:

So, the real deal is that you only get 3% back in selected categories (gas, hardware, home improvement, dining, and office supply stores). Otherwise, this is really just a 1% card. And they seem to exclude superstores, discount stores, and warehouse clubs. Hmm, isn’t Home Depot a superstore or discount home improvement store?

And as to the claim that you get “unlimited cash back”, in fact they will limit your extra cash back in the 3% categories to just an extra $40 a month.

So what appeared to be a credit card offering a flat 3% back with no cash back limits, is nothing of the sort.

Mouse Print* pointed out to Chase the potentially misleading nature of their advertisement and asked, “Will Chase revise its advertisements to more accurately say “up to 3% cash back” and qualify its “unlimited cash back” claim?”

Chase replied:

“We are committed to being straightforward in all of our advertising and customer communications. The small banner ad that you are referring to for Ink Cash is referring to the 3% cash back in specific categories and [sic] the then the unlimited cash back for the 1% on everything else.

Our team is reviewing the copy now and although limited by the small space on the banner ad itself, wants to ensure that all applicants fully understand the true value of the card and rewards.” –Chase spokesperson

Trying to cut through the “spin”, Mouse Print* replied to Chase: “There is PLENTY of room to add ‘up to’ in that ad! The question is ‘will you’?”

The company wrote back:

“Up to” is not accurate, though. Customers earn the full 3% on their spending in the select categories, so it’s not an “up-to” and then they earn a full 1% on everything else from the first dollar they spend. We will do our best to make sure that it is more clear.

I could have replied that “up to 3%” is absolutely accurate for the ad they published because there is no mention whatsoever in it about that rate only applying to certain categories. I resisted, and will just leave it to the reader to imagine whether Chase is really inclined to fix their ad.

One other word about the email exchange with Chase. Attached to one of the emails from Chase, clearly by mistake, was a document listing the times over the past several years that I was quoted in major media. It listed the full text of these articles including ones from local television, Chicago Tribune, Fox Business, Associated Press, Washington Post, New York Daily News, etc. Nice to know that Chase PR folks do a little investigation into the reporters or editors who pose questions to them before they respond.

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Don’t Pee on My Leg and Tell Me It’s Raining

Judge Judy certainly has a way with words, and these retailers certainly try to use them to make a lousy deal or non-deal seem beneficial to consumers.

Example #1:

Best Buy recently unveiled a buyback program whereby purchasers of certain electronic equipment can buy a policy that guarantees a certain trade-in value for their new purchase.

*MOUSE PRINT:

Their ad only promotes the best case scenario — up to 50% back. When could you get 50% back?  Only  if you want to get rid of your purchase within six months of purchase. More likely, you may wish to trade your item after a couple of years of ownership. In that case, you will get zero back for your phone or computer, and only “up to 10%” for your TV. In our opinion, most consumers would be crazy to PAY a company to offer you a lousy buyback price or no buy back at all during such a short period of time. Selling the item yourself on eBay or through Craigslist would more likely yield a greater return on your purchase.

Example #2:

Earlier this year, Office Depot promoted TurboTax Deluxe with a free state tax download.

*MOUSE PRINT:

What Office Depot didn’t tell you right there was that they added $10 to the price of TurboTax Federal in order to offer the “free” state download:

Bottomline: they are giving you NOTHING extra for free, they are charging you $10 extra for that supposed free benefit.

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The $2.2 Billion Lie

There is a high profile move in Michigan to repeal that state’s item pricing law — the law that requires most products sold at retail to have a price sticker affixed to them. The deceptive tactics being used to turn public sentiment again the law is the subject of this Mouse Print* story.

[Note: MrConsumer is the author of the Massachusetts food store item pricing law, and therefore has a personal interest in efforts to water down similar statutes elsewhere.]

It was bad enough from a consumer protection standpoint that the Governor in Michigan came out swinging against the law. A few days later, the retailers’ association there released a headline grabbing “study” claiming that item pricing was costing Michigan shoppers $2.2 billion a year.

In tight economic times, who wouldn’t be against something that costs consumers $2.2 billion, or an average of $562 a year per household?

The trouble is, that $2.2 billion price tag for item pricing is just plain wrong.

*MOUSE PRINT

The missteps in the study are numerous:

The Michigan report used data from a 2001 price survey — a full decade old — that purported to show that prices in New York (an item pricing state) were 8-10% higher than prices in New Jersey (a non-item pricing state). They said the average item was 25 cents more expensive in New York because of item pricing.

How can anyone conclude anything legitimate about Michigan prices based on what prices were in New York 10 years ago?  Michigan retailers did no study whatsoever comparing Michigan prices to those of neighboring states to see if in fact there were any price differences today. And even if they had done a survey and found a difference, who is to say that item pricing would be the cause?

So how did the 2010 Michigan study come up with their claim that item pricing is costing Michigan consumers $2.2 billion a year needlessly? They said that Michigan consumers spend $24.2 annually on groceries and household goods, and since grocery prices were 9% higher in New York, on average, that means that Michigan goods are $2.2 billion more expensive than they should be.

*MOUSE PRINT

Remarkably, the 2010 Michigan study contained data that definitively disproved their own claims.

They say there are two basic cost components of item pricing: the cost of labor to put prices on items, and the cost of the labels and price guns. As to labor, they say a typical supermarket spends 2083 man hours a year item pricing 5 million units of groceries. Let me assume the wage there is $15 an hour. That works out to $31,245 as the labor cost component of item pricing in a typical supermarket. The study also confirms that the labor necessary to do item pricing is the equivalent of one full time worker.

The second cost component of item pricing is the paper price stickers and label guns. They say that stickers and label guns cost $6000-$10,000 per store. I will take the middle number, $8000, and add that to the labor cost. Therefore in total dollars, the initial cost of item pricing based on THEIR REPORT is $39,245 per supermarket per year. Since they say that such a store sells five million units of groceries per year, that works out to a mere $0.008 — 8/10ths of one cent per item as the true cost of item pricing — not the 25 cents per item (9% of total cost of groceries) they claim. Therefore the $2.2 billion claimed cost is wildly exaggerated, has no basis in fact, and serves only to wrongfully fuel public outrage and anti-item pricing sentiment.

Since the actual cost of item pricing BASED ON THE RETAILERS’ OWN FIGURES is only 8/10ths of one cent per item, not 25 cents per item, that works out to only $17.98 a year per household as the real cost of item pricing — less than 35 cents a week — not the $562 per year that they claim.

*MOUSE PRINT

The retailers indicate that costs are higher for them because of item pricing, and most of that cost is in the form of labor costs. However, the report’s own statistics show that Michigan has fewer employees on average per retail store than 39 other states. And the report quotes retailers as saying that “their Michigan staffing levels are the same as those in non-IPL [item pricing] states.”

So, if Michigan retailers do not have more employees because of item pricing, how is it costing consumers there $2.2 billion extra? And, if retailers are to be believed that they will not fire workers, but rather reassign them to other tasks in the store like customer service, where are the savings?

The implied message in the retailers’ argument that item pricing is costing Michigan consumers $2.2 billion extra a year is clear. If you get rid of item pricing, prices will fall to the tune of $562 a year per household ($2.2 billion). If you believe that, I have a bridge in New York to sell you too.

The media in Michigan can also be faulted for blindly reporting the $2.2 billion lie without a critical reading of the study.

My guess is that Michigan consumers will be the big losers in this battle.  Without item pricing, it will be harder to find and compare prices in the store.  Shopping will take more time  if  a consumer has to find a distant self-service aisle scanner to verify prices. And it will be more difficult to catch scanner errors both at the checkout and at home since there will be no price on the item to act as a double check.