Don’t Keep Money in Your Starbucks Account — You May Be Brewing Wealth for Starbucks, Not You
Written by
David Nadelle
Edited by
Cory Dudak
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After the Silicon Valley Bank and Signature Bank closures in March 2023, The Associated Press published a banking confidence poll that found 10% of Americans saying that they have high confidence in the nation’s banking institutions, while 57% have some confidence and 31% have hardly any.
It’s not surprising that confidence is flat. But even with bank closures, questions about government regulation and meagre rates and investment returns to customers, your money is still better placed with a financial institution than in the “worst” bank in the world.
What Does Starbucks Have To Do With Banking?
This assessment comes from former Wall Street trader and financial creator Vivian Tu. But it was said not about a bank per se, but rather about everyone’s favorite coffee retailer, Starbucks. When it comes to your relationship with Starbucks, you get their star, but they’ve got your bucks.
According to its annual 10-K filing with the SEC, Starbucks held about $1.6 billion in outstanding gift card balances. For fiscal 2022, the coffee giant reported $196 million in unused card balances, or “breakage,” which is basically donated money, per Motley Fool’s The Ascent.
“What most people don’t realize is that by pre-loading money onto your Starbucks card, you are giving them an interest free loan,” said financial influencer Haley Sacks, or “Mrs. Dow Jones” as she’s known across social platforms.
When rewards program members preload money on the Starbucks app or put money on a gift card, they earn two stars for every dollar spent. When they use a credit or debit card, they get one star. Accumulated stars can be redeemed for free drinks, food or merchandise.
Customers of the world’s largest coffeehouse chain are loyal to a fault and love gaining rewards through the convenient card use. “Starbucks’ strategy is genius because it gives the company access to cash flow and produces extra revenue,” according to Inc. “It also generously rewards customer loyalty, so customers don’t get offended if they leave a little unspent cash on a gift card somewhere.”
But is a convenient spending experience and brand allegiance worth giving a multinational corporation what is essentially an interest free loan that it will eventually pay back in overpriced coffee — or never, if outstanding balances aren’t used? Shouldn’t your money be in your company or at least earning you interest?
The Takeaway
So, what can a loyal, but offended, Starbucks customer do? “While Starbucks might be a nice treat, avoid preloading any dollars and instead just scan your app for loyalty benefits but pay like you normally would anywhere else,” said Tu on her Your Rich BFF YouTube channel. Or, as Mrs. Dow Jones suggests, “Always use your gift cards lol! Or give them to me, hehe. I love a passion tea lemonade.”
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