The math behind reward sites like Swagbucks and MyPoints

I’ve used both MyPoints and Swagbucks to get gift cards for doing such things as reading emails, doing web searches, and other low-stress, quick-turnaround activities.

Both MyPoints and Swagbucks have been flawless with delivering the gift cards I’ve earned.  No issues, ever, and I’ve earned hundreds of dollars of gift cards through them.

Rewards for doing easy stuff

MyPoints has been around for over a decade.  A friend introduced the site to me around that time and I wish I had used it more back then.

MyPoints rewards actions on their site with these things called Points.  (Yeah, crazy, huh?)  Reading an email and visiting the site, for example, gives a reward of 5 Points.  Shopping at Walmart currently results in a reward of 8 Points per dollar spent.  I make a $50 purchase within the terms and conditions, and I just got 400 Points.

Similarly, Swagbucks (which goes back to at least 2008 according to Archive.org) rewards actions on their site with … Swagbucks!  Some actions, like doing a one-question multiple choice survey each day, is worth 1 Swagbuck (SB).  A web search could earn nothing … or it could net 6 SB, 11 SB, or even more, so it has more of a jackpot flavor to it.

Swagbucks also offers SB based on purchases from online stores.  They’re currently offering 6 SB per dollar for qualifying purchases at Hotels.com.

What are these things worth?

OK, all well and good, but … what is a Point from MyPoints actually worth?  What is a Swagbuck actually worth?

By themselves?  Nothing.  I can’t go to the grocery store with 4,500 SB and expect to buy groceries with them.  I’d be foreclosed on if I sent in 50,000 Points for my mortgage payment.

But I can redeem them for gift cards.  Each gift card “costs” me a certain number of Points or Swagbucks.

I usually save up for a $25 Starbucks gift card on MyPoints, because my wife loves her tall sugar-free vanilla half-caff whole-milk latte.  Currently this card would cost me 3,700 Points.

From Swagbucks, it’s an Amazon gift code.  They used to offer $5 gift codes for 450 SB; the one I’m aiming for now is a $25 gift code for 2,200 SB.  Other amounts are 300 SB for a $3 gift code, and 1,000 SB for a $10 gift code.

The math part

Now we’re in a position to calculate the actual US Dollar value of a Point, or a Swagbuck.

We’ll start with Swagbucks because it’s a bit easier.  For most of the gift cards they offer, 100 SB gets you $1 worth of gift card.  This means that each SB is currently worth about 1 cent.  (The $25 Amazon gift code is a bit better than this, which is why I’m after it. :) )

Similarly each 1 SB/dollar reward for shopping is like a 1% rebate in the form of gift cards.  So the Hotels.com 6 SB/dollar I talked about above is like a 6% rebate.

The value of a MyPoints Point is a bit trickier.  Some of the more popular cards are a tad more “expensive” in terms of Points.  Also, the higher-value gift cards are usually a bit cheaper per dollar than the lower-value cards.

For this case, it’s best to go backwards from the rebate equivalent that MyPoints states, and match up the Points earned with what the cash rebate would have been given they percentage they stated.

Follow that?  No worries.  Here’s the calculation, and I’ll give the answer.

Magazines.com currently is rewarded at 50 Points per dollar spent.  MyPoints draws the line in the sand and calls this a 34.0% rebate.

OK, awesome.  We have what we need.

So let’s say I spent $1 at Magazines.com through MyPoints.  MyPoints would reward me 50 Points for that purchase.  If this represents a 34.0% rebate, then those 50 Points would be worth 34 cents (34.0% of $1).

Now, doing the division, 34 cents / 50 Points = $0.0068 per Point at MyPoints.

This matches pretty well with what I’ll pay for my $25 Starbucks card: $0.0068 times 3,700 is $25.14, so pretty close to $25 (within rounding error).

More transparency with rewards = Very Good Thing

Actually, both Swagbucks and MyPoints give the equivalent rebate percentage for each store their members shop through.  I remember times when they didn’t offer up the equivalent percentage.

For my two cents (or 2 SB, or 3 Points) this was a smart move on their part.  They’re not the only ones in town offering the equivalent of cash-back rebates and making the conversion for their members allows them to show that they’re competitive with the other sites out there.  They’re saying, in essence, “Sure, compare us.  See for yourself how we stack up.  We’ll wait.”

Because if it’s not clear what you’re getting, you won’t come back, right?

So, they made it straightforward to figure out.  Here it is again:  100 SB = 147 Points = $1.00.

Now you can go get all the Swagbucks and all the MyPoints! 😀

This is how your bank feels about your loan payoff

As I posted about recently, we paid off our van loan, something we’re very happy about.

The financial institution that held our loan recently sent us the title to the van.  They also sent a separate letter notifying us of such.

Here’s the text of the letter:

RE:  Loan: *******123-4567
Collateral Description:  [Our Van]
Payoff Date: 03/27/2015

Dear John Wedding,

The above referenced load has been paid in full. If this loan was secured by a vehicle, the lien will be released and the paper title mailed to you within 30 days unless you have a delinquent obligation to the [financial institution]. If you have an outstanding delinquent obligation, the lien may not be released and the title may be held in accordance with the terms of your loan documents.

Thank you for allowing [financial institution] the opportunity to assist you with your financial needs. We hope that you will consider us again in the future. Should you have any questions concerning this or any other matter, please feel free to contact us at [number] or submit a secured e-mail request via our website at [url].

Sincerely,
[Representative]
Loan Department

This letter came with a flyer for the current car loan promotion.

Did you notice anything about this letter?

Here are a few things I noticed:

  • It was clearly a form letter.  There were unnecessary sentences in the letter.  “If the loan was secured by a vehicle” was unnecessary, because it was, of course, a car loan.  I wouldn’t have gotten the loan without the collateral.  “If you have an outstanding delinquent obligation” was also unnecessary, as I had none.  But the boilerplate didn’t change.
  • It doubled as a marketing opportunity.  Now that this loan was paid off, the selling for the next one began immediately with the flyer.  (I guess I can’t fault them for that.)
  • It was pretty sterile.  But I guess one doesn’t usually expect financial correspondence to be witty and breezy.

But the biggie was that it was completely devoid of any congratulations.

The letter was perfunctory.  It informed me of the loan payoff, but also explained in sufficient detail the recourse that they had which might prevent me from getting clear title.  “You paid this off, but not so fast.  We’re going to make sure you don’t owe us anything else.”  Nothing puts a damper on celebration like the threat of negative action.

Frankly, I kind of expected as much.  Why?

  • Me paying off my loan is a sad day for them.  They lost an income stream: the interest on my loan balance.  Not only that, they lost it almost two years faster than they bargained for, because we paid the loan off early.
  • They don’t want me to be happy about paying off the loan.  If I enjoy paying off the loan it too much, I may not want to get another one.  Then the sadness continues for them:  no income streams from me.
  • The congratulations came when I got the loan, not when I paid it off.  Unfortunately I don’t have the correspondence when I received the loan, but I do remember things being a lot cheerier back then.

One person’s liability is another’s asset

With our personal balance sheets, we have things we own (assets) and things we owe (liabilities).  The money in our checking accounts are assets.  The loans are liabilities.

For a bank or credit union, it’s the other way around.

Deposits by the customers or members are liabilities for the bank or credit union, because they are owed to the customers or members.

Loans, however, are assets for the bank or credit union.  The terms of the loan result in regular payments to them until the loan is paid off.

Another indication that loans are assets to the bank or credit union is that, under certain conditions, they can sell the loan to another party.  The mortgage on one of our properties has been sold twice to different lenders, but we just keep making the payments.

It’s not personal

The people who underwrote the loan are nice enough.  But business is business.  What’s good for people isn’t necessarily good for business, and it’s the business that serviced the loan, and sent me the letter, not the individuals.

And when it gets down to it, me paying off the loan wasn’t directly good for business.  So, the business wasn’t celebrating along with me.  And they shouldn’t.

I forgot about the #1 source for tax information

This week (and probably part of this weekend) I’ll be wrapping up my Tax Year 2014 activities.  As always, there will be much celebration afterwards.

Since 2009 I’ve used H&R Block® Online Tax Software every year I’ve been able. In tax years 2012 and 2013, I had an investment vehicle unusual enough that the interview software wasn’t able to navigate through it, so some of the streamlining that I might have achieved had I used it every year was lost.

Appreciation for depreciation

Now that the complicated investment vehicle was out of my hands, I went back to using the software.

In the preceding two years, I had figured out the depreciation of some assets for my rental property by hand.  I searched around online and found a calculator that seemed to be giving me the correct numbers.  It’s here.

The two depreciable assets that go back the farthest are the house and the dishwasher.  They’ve both been in service almost five years.  The dishwasher is almost completely depreciated; next year will be the last year.

So, I plug numbers in the calculator:  $314 depreciable part, 5-year useful life, half-year convention.  And I got these numbers:

2010 $63
2011 $100
2012 $60
2013 $36
2014 $22
2015 $7

So, according to the calculator, my depreciation for tax year 2014 is $22.

I had trusted this calculator for Tax Year 2012 and 2013 because it gave numbers that agreed with what H&R Block Online had calculated for 2010 and 2011.

And, as it turns out, the calculator had given me the correct numbers for 2012 and 2013.  More on that in a minute.

But after entering the information into H&R Block® Online it told me that my depreciation for 2014 would be $36.

Wait, that’s last year’s amount!  I was thinking.  This year should be $22!

The #1 source of tax info. It's Really Simple!So, I tried all kinds of changes to get H&R Block’s software to spit out $22 like I thought it should.  Maybe I was misinterpreting what information it was asking for.  Stubbornly, though, it didn’t ever give me $22 for my answer.  Even after a couple of hours of banging my head on the table.

I neglected to consult the #1 source of tax information

I received an answer to my question on the Personal Finance and Money Stack Exchange site from FireJava:

[S]econd column doesn’t equal 1.0. Year 2014 should be 0.1152 of 314. Yes, year 4 and 5 will have same depreciation expense amounts.

Tax Year % Amount Amount of Depreciation
2010 20.00% 314 63
2011 32.00% 314 100
2012 19.20% 314 60
2013 11.52% 314 36
2014 11.52% 314 36
2015 05.76% 314 18

You can find the table in the Publication 946 from IRS. I hope this helps.

That will teach me to forget the #1 source for (United States) tax information: The IRS.  As they say, “The buck stops here.”  For real.

H&R Block Online arrived at exactly the right answer:  The IRS’s answer.

Now, on to the rest of my taxes.