Let’s get this over with. You’re going to say “You love Starbucks and you love credit cards! You must love the new Starbucks credit card!” And when you do, I’m going to roll my eyes and tell you to read this post (but also fully appreciate the fact that you think of me when you think of both of these things).
In this post, I’ll walk you through the Starbucks credit card “benefits” and why they don’t add up. I’ll also share two better credit card options to earn even more on your coffee habit than with the Starbucks credit card. Hat tips to The Points Guy and One Mile at a Time for their coverage of this card, which is also worth a read.
Co-Branded Cards Are Mostly Garbage
Co-branded cards are cards where you earn points in a program other than one specific to the bank issuing the credit card. Cards that earn airline miles are the most common. Aside from their signup bonuses and perks, co-branded credit cards are mostly garbage. Because you can get 2% cash back with cards like the Citi Double Cash and the Fidelity Rewards Signature Visa, any card that earns miles at a 1X per $1 rate is asking you to pay 2 cents per mile, usually a ripoff.
But again, if there’s a good signup bonus, getting the card can make sense. And if there are good perks, using the card for those can make sense. For example, the Chase Disney Visa credit card has great perks (10% off some dining being notable), but it is a bad card to put everyday spend on. Similarly, the United MileagePlus Explorer card from Chase has enough perks to justify the annual fee for us, but we put next to no spend on it.
The Starbucks Card Doesn’t Surprise
I didn’t expect this Starbucks co-branded card to be an exception. It wound up being better than I expected, but I stick by my tweet from before the details were released:
There is little in life I love more than #Starbucks, but there’s no way I’m going near this card with a 10-foot pole. You want 7.5+% off Starbucks? Stack a Chase Sapphire Reserve with a Freedom 5X gift card purchase. https://t.co/I724jO8UZk
— Disney Travel Hackers (@mousehacking) January 31, 2018
Let’s break it down.
A Review of Starbucks Rewards
Before we get to the card, let’s review Starbucks Rewards. Starbucks has a ridiculous rewards setup where you earn 2 “stars” per dollar spent and you get a free drink after you earn 125 stars. I can’t imagine being the guy in finance who suggested that setup and was shocked when he won.
Throughout this post, we’re going to assume that your standard Starbucks drink costs $5. Individuals who spend more get more value out of Starbucks Rewards and the credit card. Individuals who spend less get less. But $5 is a good baseline. At $5 per drink you need to buy 12.5 drinks to get a free one and you’re getting essentially 8% back on Starbucks purchases. Remember, this is all before we even get to the credit card.
Signup Bonus – Roughly $100 for $500 Spend in 3 Months
The card offers 2500 Stars for $500 spend in 3 months. Those 2500 stars are worth 20 free drinks or $100 at our valuation. That’s worse than the $150 offers on the Chase Freedom and Chase Freedom Unlimited. It’s far worse than the bonus on pretty much every premium credit card out there. You don’t have to dig deep to beat this offer.
Earning Rates – Another Confusing Mess
You’ll earn 1 star for every $4 spent outside of Starbucks with this card. At a $5 beverage valuation, that’s…4 cents for every $4 spent! Wow, 1% back. That’s as bad or worse than pretty much every usable card on the market! So the card is definitely not worth it to spend outside of Starbucks.
You’ll also earn “up to 3 stars” per dollar spent at Starbucks (which yes, means using your Starbucks credit card instead of your Starbucks Rewards Card). This sounds amazing, except that it includes the 2 stars per dollar you get just for being a Starbucks Rewards member. The credit card actually is just getting you the 1 star per dollar spent at Starbucks. Sticking with our $5 beverage valuation, that is at least 4 cents per dollar, which is a respectable amount. This is the only semi-redeeming aspect of this card. A 4% return at Starbucks is better than what many cards offer. But it also isn’t hard to beat. Here are two ways to easily beat this 4% return.
Option 1: The Chase Sapphire Reserve Gets You 4.5% Back at Starbucks
The Chase Sapphire Reserve earns 3X points at restaurants, including Starbucks. Those points are worth a conservative 1.5 cents each, meaning the card earns at least 4.5% back at Starbucks.
Option 2: The Chase Freedom Can Get 5% to 7.5% Back
The Chase Freedom earns 5X points back on rotating categories annually. Those categories often include places like grocery stores or gas stations, which tend to be places where you can by Starbucks gift cards. So if you spend $1000 at Starbucks in a year, you can either:
- Put the $1000 on your Starbucks credit card and earn 1000 stars worth 8 drinks or $40
- Buy a Starbucks gift card for $1000 at a location in the 5X rotating category on the Freedom and earn 5000 Chase Ultimate Rewards points worth at least $50
If you combine the 5X back with the Chase Sapphire Reserve’s 1.5 cents per point on travel, you’re looking at 7.5% back on Starbucks.
Neither of these options even touches on the fact that Chase Ultimate Rewards points can be worth far more than 1.5 cents each if you use them right.
So, the signup bonus is weak, the everyday spending is worthless, the special category spending is mediocre at best…things aren’t looking good. Let’s continue.
You’ll Get Gold Status And 8 Barista Pick Drinks
You’ll also get Gold status as a cardholder, which usually requires you to spend $150 in a year (so, not much for a regular, which you probably are if you’re considering this card). Starbucks has also given away Gold status for single purchases before. This just isn’t a valuable perk.
And the barista picks? So, this is 8 drinks, picked by Starbucks or its baristas. I don’t really get this perk, and it seems like we can just value it at $40. That’s at least something.
You could maybe get the card for that perk except…
This Card Has An Annual Fee!?
Yea. No. You’ll pay $49 for the perks of this card. Thats a $9 loss after the barista pick beverages, and we’ve already covered why the earning rates aren’t that great. This is pretty incomprehensible.
Is This Card Worth Anything?
In short. No. But there is a longer answer of “maybe.” If we put aside any premium credit cards because they have annual fees, we can compare the Starbucks credit card to a 2% cash back, no annual-fee card. To cover the $9 loss on the annual fee for the Starbucks credit card, you’d just need to spend $450 annually on Starbucks, which isn’t much for many regulars.
But seriously, just consider the Chase Freedom instead. Use the 5X back rotating categories to buy Starbucks gift cards. Or just try eBay, where you can often find cards for 10+% off.
Was this post a little direct? Certainly. Why? Because we love Starbucks, and we love credit cards. And we know a lot of our readers love Starbucks. And we know some of you love or want to love credit cards. But this is a bad, bad way to show that love. Don’t consider this card. Don’t suggest it to us. Let’s all just move on.