MONEY online shopping

5 Companies That Happily Lose Money to Get Your Business

Business models might be brilliant, crazy, or both—and can save you big money.

Handy workery
courtesy Handy

Losing money, it seems, is a great business model. In 2011, it was reported that Amazon lost $11 per customer on the annual shipping charges incurred by each Amazon Prime subscriber. For that matter, Amazon has famously lost money for much of its existence through exceptionally low prices, fast and (often) free shipping, and constantly expanding the business into new spheres. Yet experiments like Prime, which has come to be seen as a huge, all-powerful moneymaker, have paid off handsomely: The e-retailer is now worth more than Walmart.

Naturally, the cult of Amazon and its lose-money-to-make-money model has inspired legions of followers. As New York Times columnist Farhad Manjoo put it, “giving away real money is a key part of business” for startups like Jet.com, which is using hundreds of millions of dollars in funding to defray the costs involved with marketing a new business and offering the lowest prices on the web.

Of course, one hopes the plan isn’t to simply keep losing money indefinitely. The long-term goal of losing money is to make money by attracting bajillions of customers and perhaps easing back a bit on the discounts once a critical mass has been converted as fans of the company.

At least in the early days, when these businesses are desperate to attract new customers and the discounts remain extraordinary, “consumers could be in for a boon,” according to Manjoo. “After all, from the perspective of customers, what’s so bad about companies giving away their venture-funneled cash?”

We’re certainly not going to complain. Here are five businesses that’ll essentially pass along some of their funding cash to you, in the form of cheap prices on goods and services, so long as you become a customer.

 

  • Jet

    Jet.com
    David Solodukho

    The new all-purpose members-only shopping site is being presented to the masses as a mashup of Amazon Prime and Costco, and a competitor to both as well. Jet promises prices that are 10% to 15% cheaper than anywhere else online, and it boosts shopper orders by using a unique algorithm that offers deeper discounts with every purchase. To get these great prices, customers must pay Jet’s annual $50 membership fee—which is where the company plans on making its money.

    But Jet admits it won’t make a profit for at least five years. In the meantime, it loses money on each order placed by many—if not most—members, who have likely signed up for three-month free trial subscriptions. As the Wall Street Journal noted, in some cases Jet is actually purchasing items from other retailers (like Walmart) to complete orders placed by Jet members. And it’s losing a ton of cash in the process.

  • Groupon

    Papa John's Pizza in Oklahoma City, Oklahoma
    Betty LaRue—Alamy

    Groupon helped bring the concept of loss leaders to Main Street businesses all over America. Restaurants, spas, and what have you were encouraged to offer dirt-cheap daily deals that might lose money when the customer redeems the promotion, but theoretically help the business in the long run when the customer comes back later and pays full price. Groupon fired founder and CEO Andrew Mason in 2013, and as the company’s business model has evolved, its market value has gone from $6 billion to $1 billion and back up to $5 billion. And over the years, Groupon has spent a fortune in marketing and subsidies to acquire and keep subscribers.

    Groupon’s latest discount product is Groupon To Go, a food takeout and delivery service that just launched in Chicago and will expand to Boston and Austin this fall. To attract customers in the space already crowded with food-order specialists like Seamless and Eat24, Groupon To Go is indefinitely giving a flat 10% off orders at chains like Papa John’s, Subway, and Quiznos. These and all restaurants have pretty small profit margins to begin with, so a flat 10% off is substantial. Groupon gets a commission for each order placed, but it’s hard to see how the daily deal purveyor or the restaurants wind up actually making money in the big picture.

  • Postmates

    A bag of food from McDonald's ordered through the Postmates service next to a Postmates delivery bag.
    Chandice Choi—AP

    The courier service, which uses independent workers to offer ultra-fast same-day delivery on everything from hamburgers to sneakers, normally charges at least $5 for a pickup and dropoff, and a $20 delivery fee isn’t unheard of. To make its service an even better value, Postmates is planning on offering delivery for just $1 on some orders. How can it pull that off? Well, the firm recently raised $80 million more in funding, and it’ll use some of that money to subsidize the cost of $1 deliveries.

  • Luxe

    Luxe App on iphone
    courtesy Luxe

    Offered in seven big cities around the U.S., Luxe is a valet service that’ll meet you at a specified location, take the keys, and park your car for you. Not only does it eliminate the hassle of finding a parking spot, but using Luxe or a similar services like Zirx usually costs less than putting the vehicle in a private lot. Again, it’s funding, like the $30 million raised by Zirx, that allows these startups to charge about $15 per day for their services—and to not have to worry about making profits for quite some time.

  • Handy

    Handy workery
    courtesy Handy

    In addition to cleaning services, Handy allows customers to order someone over to fix a faucet, paint a room, and even change a light bulb. Its core product, home cleaning, usually costs $54 for a two-hour booking. But to attract new customers, Handy rolls out discounts that bring the rate down to $29 or even $19. Still, Handy is quick to point out that it has been easing off heavy discounting, and that in most instances the business model works even if a customer books only once.

    “You’re absolutely right that we don’t make money on certain customers on Day 1, but on the average customer, on Day 1, we make money,” Oisin Hanrahan, the co-founder and chief executive of Handy, explained to the New York Times.

MONEY Shopping

10 Things Millennials Buy Far More Often Than Everyone Else

For real, snakes?

Roughly a year ago, we at MONEY rounded up a fun list of 10 things millennials won’t spend money on—at least not to the same degree as older generations. Cars, cable TV, and Costco were all on the list, as were houses. A freshly released Pew Research Center study indicates that a larger-than-expected percentage of young people are still living with their parents rather than moving out and perhaps buying a place of their own.

Yes, millennials are stingy when it comes to spending in certain categories. Yet even as they aren’t following in the footsteps of their consumer forebears in terms of embracing big-ticket items like houses and cars, millennials spend far more freely on certain other items compared to older generations. Here are 10 things they buy more often—sometimes a lot more often—than Gen Xers or Baby Boomers, including a few big surprises.

  • Gas Station Food

    Customers line up for their free Slurpees in a 7-Eleven store in New York
    Richard Levine—Alamy

    Millennials have been referred to as the grab-and-go generation, with 29% saying that they often purchase food and drink while on the run, compared with 19% of consumers overall. You might think that Chipotle or perhaps Starbucks would be the biggest beneficiary of this habit. But according to the NPD Group, Gen Y restaurant visits are actually on the decline, particularly among older millennials who are more likely to have families. What’s more, in terms of drawing millennial food and beverage visits, the fast-casual segment is handily beaten by an under-the-radar retail category: the gas station.

    Whereas fast-casual accounted for 6.1% of millennial food and beverage stops in 2014, NPD researchers point out that 11.4% of such visits took place at convenience stores like 7-Eleven, Wawa, Cumberland Farms, and Sheetz, where the hot to-go offerings include salads, wraps, healthy(ish) sandwiches, pizza, and wings alongside old standards like hot dogs and microwaveable burritos. Some even have espresso and smoothie bars, which is probably news to most older folks. “If you’re 50 or over, you still think the convenience store is primarily a gas station,” the NPD Group’s Harry Balzer explained to USA Today.

  • Same-Day Delivery

    FedEx Same Day delivery truck
    courtesy FedEx

    Patience is not exactly a virtue among consumers who grew up with smartphones and social media. Consumer psychologist Kit Yarrow sums up this mindset as “I want what I want, when I want it,” and points to a Shop.org survey indicating that millennials have been twice as likely as other generations to pay extra for same-day delivery of online purchases.

    Earlier this year, the New York Times took note of a surge in same-day delivery, in particular among services supplying alcohol directly to the customer’s door. “It has not hurt that millennials, who are used to ordering food for delivery on their smartphones, have come of legal drinking age,” the Times noted.

  • Hot Sauce

    Sriracha bottles on shelf
    Patti McConville—Alamy

    Sriracha is everywhere. It is spicing up potato chips and croutons, adding some extra kick to Heinz ketchup, and offering a strange twist at Pizza Hut. Heck, it’s even in beer. And the overwhelming reason Sriracha is ubiquitous is that it’s evolved into the go-to condiment of the all-important millennial demographic. More than half of American households now have hot sauce on hand. Sriracha specifically is stocked in 9% of them—and in 16% of households headed by someone under age 35.

    The hot sauce craze has translated to a constantly changing roster of ultra-spicy items on fast food menus. Part of the reason that millennials prefer spicier foods is that they were exposed to different tastes at fairly young ages. “Millennials like hot, spicy foods because of their experience with more ethnic foods, like Hispanic and Asian,” said Kelly Weikel, senior consumer research manager at Technomic.

  • Snakes

    snake collar
    Luca Gavagna—Getty Images/iStockphoto

    This past spring, an odd extension for Google Chrome was desisnged to allow users to sub the phrase “snake people” in the place of “millennials” on screens. It was a fun goof that now seems like ancient history. But it turns out that millennials really are snake people, in the sense that they have more interest than other generations in buying and keeping snakes—and all reptiles—as pets.

    “This age group, 15-35 years old, is the generation that is most active in reptile keeping and searching for related material online,” Keith Morris, national sales manager for the reptile product site ZooMed.com, told Pet Age last summer. Data collected by Pet Age also indicates millennials are more willing to splurge on their pets with luxuries like custom beds: 76% said they’d be likely to splurge on pets rather than themselves, compared with just 50% of Baby Boomers. Yet another survey indicated that millennials are far more interested than Boomers and Gen Xers in pet healthcare as a job benefit. So the big takeaway is: Millennials really love pets in all shapes, sizes, and species.

  • Athleisure

    Yoga Pants
    Kirsten Dayton—Alamy

    The demographic that overwhelmingly gets the credit for yoga pants replacing jeans as the mainstream go-to casual bottom of choice (and even coming to be seen as legitimate work clothes at the office) is of course the millennial generation. Yoga pants, hoodies, sweatpants, and other leggings are lumped into the “athleisure” or “leisurewear” clothing category, which has been most warmly embraced by millennials—and in turn inspired retailers ranging from Ann Taylor to the Gap to Dick’s Sporting Goods to ramp up their selections of women’s exercise wear that’s not necessarily for exercise.

    “When I look at athleisure bottom business—the yoga pant, sweat pant, sweat short—it has displaced the jean business one to one,” NPD Group retail analyst Marshal Cohen said recently. Sales of such clothing rose 13% during a recent 12-month span, and now represent roughly 17% of the entire clothing market, according to the market research firm. “For every jean we are not selling or used to sell we are selling an athleisure bottom. It has become as important to the market as denim would be.”

    Side note: Yoga pants aren’t the only skin-tight garment getting a boost from millennials. During the 12-month period that ended in May, spending on women’s tights was up 24% among millennials, who now account for 45% of all sales in the category.

  • Organic Food

    Organic produce sections in The Whole Foods Market in Willowbrook, Illinois
    Jeff Haynes—AFP/Getty Images

    According to a Gallup poll conducted last summer, 45% of Americans actively seek out organic foods to include in their diets. Millennials are a lot more likely than average to feel that it’s important to go organic, however, so the preferences of younger consumers skew the overall average up. Whereas only 33% of Americans age 65 and older actively try to include organic foods in their diets, 53% of Americans ages 18 to 29 do so.

  • Tattoos & Piercings

    Millennial with the words "Hustle" and "Money" tattooed on each leg using his iPhone
    Petri Artturi Asikainen—Getty Images

    It’s been estimated that 20% of Americans—and nearly 40% of millennials—have at least one tattoo. Surveys conducted for Pew Research several years ago indicated that about 30% of millennials had piercings somewhere other than their ears, which is six times higher than older Americans.

    Despite the growing acceptance of tattoos simply by way of them becoming mainstream, millennials remain somewhat cautious about getting one because it could hurt their chances of being hired. Or at least they’re careful when deciding the placement of a tattoo. In a recent University of Tampa poll, 86% of students said that having a visible tattoo would hurt one’s chances of getting a job. It’s understandable, then, that 70% of millennial workers with tattoos say they hide their ink from the boss.

  • Energy Drinks

    Monster brand energy drinks on sale in a convenience store in New York
    Richard Levine—Alamy

    American parents, likely exhausted by nighttime feedings, hectic schedules, and such, understandably feel the need to resort to energy drinks. A recent Mintel survey shows that 58% of U.S. households with children consume Red Bull, Monster, or other energy drinks, compared to just 27% of households without kids.

    Meanwhile, millennials are even more likely than parents in general to throw back energy drinks: 64% of millennials consume them regularly, and 29% of older millennials (ages 27 to 37, who are more likely to be parents themselves) say they’ve increased the number of energy drinks they consume in recent months.

  • Donations at the Cash Register

    signing electronic bill at register
    Juan Monino—Getty Images

    Some shoppers feel annoyed and put on the spot when a store clerk asks if they’d like to make a charitable donation while ringing up a purchase at the cash register. This isn’t the case with the typical millennial, however.

    According to a report from the consultancy firm the Good Scout Group, of all generations “Gen Y likes being asked to give to charity at the register the most.” What’s more, millennials say that they donate at store cash registers more often than any other generation, and they also felt “most positively about charities and retailers once they gave.”

  • Craft Booze

    Growlers on a table outside Faction Beer Brewery, Alameda, California
    Silicon Valley Stock—Alamy

    More so than other generations, millennials have demonstrated a distaste for mass-market beers and spirits—and a preference for the pricier small-batch booze. In one survey, 43% of millennials say craft beer tastes better than mainstream brews, compared to less than one-third of Baby Boomers. As millennials have grown up and more and more have crossed the age of 21, craft beer sales have soared at the same time that mass-market brands like Budweiser and Miller have suffered. A Nielsen poll showed that 15% of millennials’ beer money goes to the craft segment, which is impressive considering the limited buying power of this college-age demographic. By comparison, craft brews account for less than 10% of money spent on beer by Gen X and Baby Boomers.

    Millennials are also given an outsize share of the credit for the boom in craft spirits over household brands handled by the big distributors. As with craft beer, researchers say that millennials like craft liquors partly because it’s easier to connect to the back story of the beverages, and there’s an air of “inclusive exclusivity” and uniqueness about them. For that matter, millennials seem to care more in general about liquor brands. In one survey, 64% of millennials said that including the brand of spirit in a menu cocktail description was important or very important, compared to 55% of Gen Xers and 50% of Baby Boomers who felt that way.

MONEY online shopping

It’ll Probably Be Years Before You’re Forced to Pay Online Sales Tax

man using credit card to make online payment on laptop
Martin Barraud—Getty Images

For that matter, you might never have to pay up.

Two separate bills working their way through Congress could theoretically close the loophole that allows consumers to skip out on paying sales tax on purchases from e-retailers located in different states. Even so, in all likelihood online shoppers won’t be forced into paying sales tax anytime soon.

Over the years, e-retailers and the consumers who shop online to avoid sales taxes have been accused of having a “free ride.” For the most part, the laws stipulate that online sellers must charge sales tax only when the merchant has a physical presence in the state where the purchase is taking place. The net result is that a consumer in state X might not have to automatically pay sales tax when he makes a purchase from an e-retailer based in state Y.

The scenario gives an unfair advantage to the e-retailer over local brick-and-mortar retailers, which obviously have to collect local sales tax. Consumers are supposed to keep track of their online purchases and pay the appropriate sales tax when filing their income taxes, but the number of individuals who do so is approximately … zero. (Well, it’s close to zero anyway.)

Amazon, all-powerful online entity that it is, has come under fire in particular for not universally collecting sales tax on purchases, and it has made agreements with states on a case-by-case basis to charge the appropriate taxes.

Even as the vast majority of Americans now pay sales tax on Amazon purchases regardless of where they live, there are still many e-retailers that aren’t required to collect sales tax on out-of-state purchases. If either the Remote Transaction Parity Act or the Marketplace Fairness Act of 2015 become law, this loophole would be closed and states could start requiring nearly all sellers to collect sales tax.

Yet, as InternetRetailer.com reported, it’s not looking likely that either of the bills will pass in the near future. What’s more, if and when either does manage to become law, in order to allow time for e-retailers to tweak their operations to be in line with new regulations, there will be a delay of at least 12 months before sellers will have to collect sales tax. E-retailers will also be given a reprieve from charging sales tax during the peak winter holiday shopping season in the first year after either bill becomes law.

The upshot for consumers is that even if one of these bills suddenly catches fire in Congress and surprisingly passes soon, “2017 would be the first holiday season it could take effect,” InternetRetailer.com states. Remember, that’s only if one of these bills passes. If neither does, then many online shoppers can continue enjoying their free ride indefinitely.

MONEY online shopping

Verizon Lost My Cable Box and Says I Owe $2000

200253686-001
Brian Finke—Getty Images

What should I do?

Question: Help! Verizon lost the cable boxes and remotes I returned to it via UPS after I moved out of my apartment. Now it’s trying to stick me with a $2,000 bill, even though UPS tracking showed it had been delivered, and even though the Verizon representative I spoke to agreed and updated my account to show that they had received the equipment.

Here’s the problem: I discarded the UPS tracking information after speaking with the Verizon rep in early December, never dreaming that it would come back to haunt me on my January bill.

Verizon is the one that provides the UPS return shipping label; I asked Verizon to connect me with the department that generates these shipping labels, naively thinking that they would have a record of mine. The three representatives I spoke with said they had no contact with the departments that handle equipment and shipping and were unable to connect me.

I don’t understand why the tracking number on the UPS shipping sticker that Verizon provides isn’t automatically linked to my Verizon account.

Meanwhile, UPS says it can’t track packages without the tracking number. My name and address are insufficient.

I’m at my wits’ end. As a young professional, I can’t afford the $2,000 Verizon is demanding. As a human being, I feel bullied by a big corporation that thinks it’s easier to stick me with the bill for their mistake. Is there any way to find that UPS tracking number? — Jean Schindler, Arlington, Va.

Answer: Verizon shouldn’t charge you for equipment representatives say it’s already received. But how can you prove it was received? Only the UPS receipt would work, and UPS can’t furnish you with a new one.

You’ve painted yourself into a little corner.

Looking back, you probably should have kept the receipt until your next bill. But there was no way to know you’d have this problem. Future Verizon customers would be wise to keep your case in mind; don’t throw away any receipts until at least one billing cycle is complete. You might even consider taking a picture of the paperwork with your smartphone. Got that?

I think UPS bears some responsibility here. I mean, here’s one of the most sophisticated companies, in terms of information technology, and they can’t generate a new receipt? They also can’t find a record based on an address? Did they use a carrier pigeon to deliver the receipt the first time?

Your next step would be an appeal to someone higher up at Verizon. I list many of the Verizon corporate contacts on my site. You can also turn to my consumer help forum for assistance from an advocate.

I contacted Verizon on your behalf. A representative was able to track down the equipment you returned. Verizon apologized for the “inconvenience” and credited you for the fees billed in error.

More from Credit.com

MONEY online shopping

Amazon Flies Higher Than Ever One Year After Epic Flop

Jeff Bezos, chief executive officer of Amazon.com Inc., unveils the Fire Phone during an event at Fremont Studios in Seattle, Washington, U.S., on Wednesday, June 18, 2014.
Mike Kane—Bloomberg via Getty Images Jeff Bezos, chief executive officer of Amazon.com Inc., unveils the Fire Phone on June 18, 2014.

The Fire Phone is old news—exactly like Amazon wants.

Amazon has arguably never been hotter. After posting a surprise profit for the quarter ending June 30, the company’s stock surged 20% overnight on Thursday, resulting in the world’s largest e-retailer being worth more than Walmart. The impressive sales figures don’t even factor in last week’s Prime Day, the manufactured holiday that Amazon created to juice sales in the middle of summer that wound up surpassing Black Friday in terms of orders and purchases.

What’s interesting is that almost exactly one year before Amazon hit its current peak, it offered up a product for sale that is seen as one of its biggest misfires. The Amazon Fire Phone officially went on sale on July 25, 2014. It was initially offered only combined with a two-year AT&T wireless contract at a subsidized price of $199 to $299.

Even before the phone hit the market, critics bashed it as “uninspired” and “just too expensive.” The smartphone’s unique features—a 3-D screen and a shopping-assistance tool called Firefly—were deemed largely to be gimmicks that few people wanted, let alone needed. Critics also hated the Fire Phone’s limited access to apps, and how the device’s overarching purpose seemed to focus almost exclusively on getting the user to buy stuff at Amazon.

Less than two months after first going on sale, Amazon’s phone was discounted to 99¢, one of the fastest price drops ever. By December, Amazon’s Jeff Bezos was referring to the phone as a “bold bet” that just didn’t work out, as the company took a $170 million writedown related to the flop.

How could Amazon have miscalculated so badly on the Fire Phone? And how did the company wind up shrugging off the failure and having a gangbusters 2015 anyway?

An in-depth CNET explores just this territory, and the conclusions it reaches are that even as most Fire Phone early adopters regretted their purchases and felt burned, plenty of them still shop at Amazon and pay $99 annually for Prime memberships. One of the prime (ha-ha) reasons for Amazon getting into the smartphone market was to boost sales via Amazon and Prime subscriptions. Fire Phone owners received one year of Prime membership free with their purchase, and the Firefly scanning feature made it exceptionally easy to buy almost anything via Amazon, in mere seconds.

Amazon Prime members spend far more at Amazon than nonmembers, so it makes sense that the company has been pushing Prime harder than ever over the last year. Among the strategies employed to boost Prime subscriptions in the months after the Fire Phone debuted:

• Heavily discounting Kindle and Fire tablets, which automatically come with free Prime trial subscriptions—the majority of which seem to turn into paid Prime subscriptions.

• Dropping the annual price of Prime to $72 in January to celebrate the Golden Globe nominations for “Transparent,” the show starring Jeffrey Tambor that can only be streamed via Prime.

• Producing original movies that can only be seen with Prime, adding to the value of the service.

• Hosting Prime Day sales on July 15, which were available only to Prime subscribers, thereby forcing anyone who wanted in on the deals to sign up for free trial memberships, which Amazon hopes will turn into paid memberships.

While Amazon declared Prime Day a rip-roaring success that greatly increased sales and boosted Prime membership, the reviews in social media and consumer circles were mixed at best. Many thought that Walmart actually won the day because it hadn’t overhyped and underdelivered on the deals like Amazon had.

Even if the consensus is that Amazon hyped Prime Day too much, it pales in comparison to how overhyped and underwhelming consumers deemed the Fire Phone to be. Amazon recently strongly hinted Prime Day would become an annual event, which didn’t come as much of a surprise. Meanwhile, if Jeff Bezos suddenly announced Amazon was introducing a new Fire Phone to the market, that would be viewed not just as a bold bet, but a shocking one.

MONEY credit cards

Should You Get the Amazon Prime Store Card?

Amazon Prime website
Alamy

The answer depends on what kind of shopper you are.

Everyone is buzzing about the new Amazon Prime Store Card, which offers 5% cash back on all Amazon.com purchases for Prime members. It was actually released without much fanfare back in March, but is getting attention now because of the marketing push around Amazon Prime Day, the company’s attempt to create a Black Friday-style retail frenzy in the run-up to back-to-school season.

The reasons that Amazon is pushing the card are clear: For one thing, by adding new Prime membership perks, it hopes to gain more Prime members, at $99 a year each. Perhaps less obviously, Amazon pays lower interchange fees to transaction processing companies for purchases made using the Prime Store Card than it does on those made using a traditional Visa, MasterCard, or AmEx.

But is the card good for consumers? The answer to that really depends on their relationship to Amazon and their credit.

Card Benefits

The rewards structure is pretty simple: 5% cash back on all purchases if you’re a Prime member. While the card doesn’t technically have an annual fee, you have to pony up nearly $100 bucks a year for the two-day shipping and media streaming service.

There’s currently a limited time offer of a $40 gift card if you sign up for the card. And Amazon won’t take long to make a decision on your creditworthiness: You’ll receive a response within a quarter of a minute.

The card also comes with a tiered financing option that’s meant to help consumers buy large purchases over time without interest. On items larger than $149, for instance, you have the option to pay off the full expense over six months without interest. But there’s a catch on this: If the purchase isn’t paid off at the end of that period, you’ll be “assessed on the promotional balance from the date of the purchase,” according to the card’s terms and conditions. If you carry a balance on non-financed purchases, you’ll pay a variable interest rate that’s currently at 26%.

Also, don’t expect a normal-looking piece of plastic if you’re approved. “The card itself is made out of paper, like an auto insurance card,” says NerdWallet’s Sean McQuay.

Pros …

So is it worth it? McQuay, who says he has used the card himself, notes that “5% is a great rewards rate and is generally only seen on rotating categories. To get 5% back on all purchases at a store as varied as Amazon is a great deal.”

Other cards do allow you to save money on Amazon purchases, but with more restrictions. The Discover it, for instance, offers 5% cash back on Amazon purchases, but only from July to September and only for up to $1,500. (And the Amazon.com Rewards Visa Card from Chase offers 3% back on Amazon purchases; 2% at gas stations, restaurants and drugstores; and 1% everywhere else.)

There’s also the simplicity: “The cash back appears on each statement balance automatically — no minimums, no opt-ins, no reminders,” McQuay adds.

And if you’re a heavy user who spends $200 a month at Amazon, using the card will earn you enough to cover the cost of Prime with some cash left over.

… and Cons

But the new card also has some serious downsides. For one thing, because the APR is very high, anyone who carries a balance should stay away. “A variable APR of 25.99% is horrible,” says CreditSesame.com’s John Ulzheimer. “If you carry a balance on the card then you’re funding your own rewards — and the rewards being enjoyed by others who are not carrying a balance.” By way of comparison, the Discover it’s APR ranges from 11% to 23%.

Another “benefit” could also get you in trouble, if you’re not disciplined enough. While the ability to pay for a big purchase without interest for at least half a year sounds appealing, you’ll end up with a much larger bill than you bargained for if you don’t pay off your new television on time.

Moreover, the credit limit might be much lower than you’re accustomed to. Matthew Goldman, the chief executive of credit card rewards site Wallaby Financial, received a credit limit that was a fraction of what he was offered on his other cards.

Even for the most creditworthy borrowers, a lower credit limit caps what you can earn in cash back. Moreover, using up a large portion of the available credit on an individual card can harm your overall credit score, says Goldman, making it more expensive to borrow in the future.

Finally, note that Amazon’s new product — unlike, say, the Amazon.com Rewards Visa Card — can only be used at Amazon.

The Verdict

Only apply for this card if you are already a Prime member who shops at Amazon frequently, doesn’t carry a balance and can hold yourself to spending about 20% to 30% of your available credit each month.

And realize that this is a difficult task when buying that shiny new toy is only a click away.

If that doesn’t sound like you, find a card that will first do no harm.

Read next: Amazon Prime Membership Should Come With a Warning

MONEY Shopping

Say Goodbye to Shopping at Walmart at 3 A.M.

Exterior of Walmart store at night
John Crowe—Alamy

24-hour Walmart Supercenter is fading.

Roughly 40 Walmart Supercenter locations are giving up on being open to shoppers 24/7, and many more Walmart locations could follow by closing for at least a few hours in the wee hours of the day.

According to Bloomberg, two dozen Walmart locations backed off 24-hour openings this spring, and more than a dozen others will follow suit. Affected stores include those in Pennsylvania, New Jersey, and Maryland. Shoppers in these areas will somehow have to figure out how to live without the option of heading to Walmart between the hours of midnight and 6 a.m., the period when most stores seem to be shutting down.

The most obvious reason Walmart is backing off 24-hour stores is that they’re not worth the cost or trouble. In the age of e-commerce and 24/7 Internet shopping, few consumers are compelled to head to an actual store in the middle of the night. Earlier this year, Walmart increased hourly wages for 500,000 workers. Apparently, the world’s largest retailer has decided it’s not worth it to staff nearly empty stores with cashiers and clerks overnight.

It wouldn’t be surprising if the changes are the start of a much larger trend. “I question if it is a test and could become a national rollout,” Edward D. Jones analyst Brian Yarbrough told Bloomberg. “There aren’t that many shoppers there overnight. How many people are going to Wal-Mart at 2 in the morning?”

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MONEY online shopping

Amazon Wants to Resurface Your Driveway and Teach You French

Amazon is expanding its Home Services operation, which connects customers with local contractors and small businesses.

Amazon.com is expanding its Amazon Home Services business, a clearinghouse for hiring independent contractors and small businesses. The online retail giant is competing with companies like Yelp and Angie’s List to connect consumers with local businesses Amazon says it has vetted. Among the help you can hire are home improvement contractors, home theater installers, French teachers, and even aerial yoga instructors. Amazon Home Services is already available in New York City, Los Angeles, San Francisco, and Seattle. It’s now opening up in Miami, Houston, the Dallas-Fort Worth metro area, Philadelphia, Phoenix, San Jose, San Diego, and Washington D.C.

 

MONEY Tech

Apple’s Annual Back-to-School Sale Could Be on the Way

The retailer traditionally has had a summer sales event by now, so why haven't we seen it yet?

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