I have one of those General Motors MasterCards that credits me with 5% on every charge I make toward the purchase of a new GM car. Which means — sort of — that everything I charge on the card costs me 5% less.
I say “sort of” because there’s a limit of $1,000 credit a year for a maximum of $7,000 over seven years . . . but if you do wait seven years to use your credits, then, because of the time-value of money, those earned in the early years are worth somewhat less. You “earned” $1,000 rebate in year one, but it sits fallow and is still only worth $1,000 seven years later. Which means that in today’s dollars, that $1,000 is really only worth $547 (if you think if you think you can compound your money at 9% after tax — few can) or $759 (at a more realistic 4%).
So maybe the nominal 5% discount for using the card is more like 4% when you take this time factor into account. (It all depends on what you think you could earn on your money, but also on how long you wait to cash in those rebates.)
It’s also only “sort of,” because the assumption is you’ll be buying a new car (until recently, I always bought used cars — a great way to save money), and that it will be a GM car or truck. What if you’d rather buy a Taurus or a Honda? Or even a Saturn — the rebate doesn’t apply to a Saturn (nor to a Saab or Lotus, which are also GM products). It’s hard to quantify, but for most people there is a “cost” in this lack of flexibility.
So it can be a good deal — a lot of people DO buy new GM cars! — but it’s only sort of 5%.
But that’s not what’s got me exercised. For that, please tune in tomorrow.
Tomorrow: The GM MasterCard: Don’t Do Me Any Favors
Quote of the Day
Money is a singular thing. It ranks with love as man’s greatest source of joy. And with death as his greatest source of anxiety. Over all history it has oppressed nearly all people in one of two ways: either it has been abundant and very unreliable, or reliable and very scarce.~John Kenneth Galbraith, The Age of Uncertainty
Request email delivery
- Jun 1:
Listen To Bobby. Listen To Trevor.
- May 29:
- May 28:
- May 27:
- May 26:
- May 25:
- May 23:
Every So Often There’s A Column You Just Have To Read
- May 22:
Have A Great Long Weekend
- May 21:
Two Things To Keep Strongly In Mind
- May 20:
The World’s Stupidest Version Of A Discussion
- Jun 1: