What is the definition of “value”?

A bank (which shall remain nameless) is offering “valuable rewards” if you enroll your check card in their program. They’ll even kick in a bonus 650 points for signing up.

Here’s how it works: You use your card for nearly everything (including paying bills) and you get 1 reward point per each $4 spent (but you have to use it as credit, not debit, for it to count). Rack up those points, and turn them into valuable rewards! All this amazing stuff only costs you $12 annually!

Here’s the catch: Remember that 650 bonus points you get? That amounts to the value of a $5 gift card. That’s right, only $5. I know it’s bonus points, so you didn’t spend to get them, but just to illustrate how it works, you would have had to spend $2,600 in goods and services to earn those points. Therefore, you spend $2,600 to get a $5 reward (and you pay $12 annually for this privilege). According to the leaflet that was mailed to me, the “rewards” just keep getting better! For instance, once you have amassed 5,000 points, you can get a $50 gift card from Outback Steakhouse (but you had to spend $20,000 to get those points).

Now maybe my math is off (wouldn’t be the first time, as I hate math) but having to spend $4 to get one point is fairly straightforward math. How in this world can they claim this deal has anything to do with “value”? Granted, they assume this is spending you’d already be doing, so you may as well get something for it, right? Hmmm…. Then there’s that little matter of paying $12 a year. Why would I pay $12 a year for the privilege of spending $20,000 to get $50? If they dreamed this up in Vegas, it would definitely be the house plan, not a gambler’s idea! Take that $50 and minus the $12 – that’s $38. If I ever spend $20,000 in order to be given $38, I will expect one of my close friends to smack me in the head.

What’s the bottom line? Odds are, these “rewards” are being put up by the companies involved. I doubt if the bank is buying gift cards from Outback Steakhouse. Most likely they have their own deal going. I think the bottom line is that if enough people pay $12 a year, the bank could make a lot of money, essentially for nothing. I’m not all that versed in bank dealings, but maybe it helps them to have their card used so much, too, over other bank cards.

I suppose in the end, I’m arguing semantics. However, it is clear that this bank and I differ vastly in our definition of the word “value”.