Continually astounded by the cluelessness of old media...

written by bryan on April 5th, 2007 @ 10:14 AM

Two of the stories in the Ottawa citizen reference popular YouTube videos. I’d seen the funny Alanis Morissette sendup of My Humps. But they also had a story about this video from Montreal. It sounded interesting, so I decided I wanted to watch it. It took me about 6 tries typing in names from the video into the Youtube search box until I found it. I finally gave up on that and searched for m├ęgots. That got it.

Choosing a Credit Card

written by bryan on April 1st, 2007 @ 06:09 AM

Bethany and I are encountering a large number of shared expenses, so we decided that it’s probably a good idea to get a shared credit card. We both currently have 3 credit cards, two of which are never/rarely used. So the simple thing to do would be to get a spousal card for one of the unused accounts. Unfortunately, these unused cards are sub-optimal for frequent use.

We both pay off our bills in full every month; once every few years a payment may be missed through carelessness. So interest rate is not a factor in credit card choice. The primary factor is rewards and fee levels.

I’ve worked up a spreadsheet comparing the best credit cards from the six different companies we currently have cards with.

The hardest part of the task is to value each individual reward.

Rewards

The simplest rewards are the cashback programs. They usually give you $1 back for every $100 you spend. A dollar is worth a dollar, right? Not quite. They limit you in two ways: they only give you your rewards once a year, and you can lose all your rewards if something happens to your card. In my spreadsheet I’ve therefore valued a cashback dollar at 98 cents to make up for the opportunity costs of not having the dollar for an average of 6 months. There’s also a column in the table for “reward loss” because these programs are often structured as “up to” X%. This reward loss assumes that you spend enough to reach the highest tier. If you don’t, the card gets overpenalized. Penalizing a card for over-complication is fine with me!

Another common type of reward is store points. For example, 1000 points can be “spent” at the store. If this is a store you frequent, one dollar of store credit is worth pretty much a dollar. In fact, it can be valued as worth more than a dollar since you often can take advantage of special deals to get extra points.

In this vein, I’ve valued PC Points from President’s Choice at par, since I shop at Loblaws, Superstore and Hartman’s frequently.

Petro points are harder to value. I’ve used the 20000 points for $5 of gas deal for valuation. This is slightly unfair since they do have better deals in their catalog.

Costco points have been heavily discounted because they require a Costco membership and there is no Costco nearby. If you shop at Costco, they are likely worth well above par.

TD points are nominally worth 1.5 cents per dollar on the card, but I’ve discounted them heavily because they have to be spent at the TD travel rewards web site, limiting the freedom to comparison shop when booking flights, et cetera.

With 40000 aeroplan points, you can fly anywhere in the United States or Canada. I’ve arbitrarily valued this at $400. That’s probably generous. I’ve similarly valued Air Miles at 1600 points = $400. I’m unsure about these calculations; if anybody has any input, please comment! These valuations make it appear that the Air Miles offers are much better than the Aeroplan offers. These change over time; when I did a similar valuation ten years ago, the results were reversed.

Benefits

There are a couple of optional benefits that are important to me. The first is the collision/damage waiver (CDW) for rental cars, which can save lots of money if you rent cars, which we sometimes do. This is usually included with gold cards.

The AMEX “front of the line” benefit may also be useful if you live in a major city and go to shows.

The other “gold card” benefits are less important to me.

The Cards

Bethany and I have each had exactly one instance where we wished to use a Mastercard but the retailer only accepted Visa. Therefore we have a very slight preference for Visa.

Amex cards are less widely accepted and cannot be used without carrying a Visa or Mastercard as backup.

Results

For our situation, here are the results:

If you spend less than $8000 a year, President’s Choice is the winner, followed very closely by CITI Enrich.

Above $8000 a year, the winners are Amex cards. This is unsurprising, since they charge the merchants much more than the other cards do. The only surprise is that their lead is so slight. Air Miles cards also do well, followed by the low price winners.

I’ve attached a spreadsheet . Download and change the annual spending assumption and discount rates to your values and see what will work for you! The spreadsheet is saved in the Open Document Format. I’ve also converted it to Excel format for those of you still locked into Microsoft formats. There’s also a pdf, but I do recommend that you use the spreadsheet instead so you can play with the figures.

Lottery Math

written by bryan on March 29th, 2007 @ 06:23 PM

It’s been said that lotteries are “taxes on those who don’t know math”. If you buy a ticket for every draw, on average, each 2$ 6/49 ticket sold is worth 94 cents. The lottery commission gives out 47 cents on each dollar, so the math is pretty easy.

But the 6/49 has an interesting property: if the jackpot is not won, it rolls over to the next draw. So they pay out more than 47% of the take on draws where a really big jackpot is won. So this leads to the question: is it worth buying a ticket for these really big jackpots?

They tell us what the jackpot is, and they even tell us what the odds are, but they don’t calculate the expected returns for us. That’s because to calculate those numbers you need to know the number of tickets sold, and even the lottery commission doesn’t know those numbers until the draw date. However, we can guess based on previous draws. The only numbers I found were for the $54 million dollar draw (50 million tickets) and for the preceding 30 million dollar draw (27 million tickets). Source. If anybody has any other sources, let me know!

I punched the numbers for those two draws, and have published the results. For the 30 million dollar draw, the expected payout on a $2 ticket was $1.62. Not quite worth it yet, but a significant step up from the normal 94 cents. However, on the $54 million dollar draw, the payout per ticket was an astounding $2.94! The lottery commission actually lost money on that draw, but that was more than compensated for by the huge number of losers on the previous draws where the jackpot wasn’t paid out.

One interesting note is how the payouts change when a 30+ million dollar prize is unclaimed. ( Look at the bottom of this page ). I’m not sure why they do this, but I guess it’s to make it less obvious that the odds are usually in your favour on these draws. For instance, if they wouldn’t have done this on the $54 million game, it would have actually been a $109 million dollar jackpot. And since they only sold $100 million dollars worth of tickets for that draw, it would have been obvious from the press release that the odds were actually in the player’s favour, for that draw only. They want things to look good, but not too good; there are enough problems with gambling in Canada as it is. Overall the house is taking 53 cents on every dollar, and that hasn’t changed.

Is it a Good Idea to Join a Group?

Group lottery ticket buys are very common. Everybody in the office pool throws in $2, a group of tickets are bought, and you split the winnings if you win. This generally increases the value of the “dream”: it turns it into a shared dream, something to talk about. They can really be a lot of fun. Usually these pools buy one ticket per person, but that’s not really necessary, given the above principle of buying as few tickets as possible. 20 people could throw in a dime, and you could still talk over coffee about what you’d do with your share of the winnings. Your office pool dream cost less than the office pool coffee!

There’s another good reason to join a group. Most people who win give some of their winnings to friends and family. I’d do that, too. But if you’re going to share the winnings, shouldn’t you share the cost, too? Get your friends and family to join your buying group!

My Modest Proposal

Taking all these principles into account, I’m proposing a buying group. The group will buy a single ticket for every lottery where the odds are close to even. I’ll set that at $30 million and above. It’ll cost $2 to join the group, and the group will keep going until it’s out of money. $5 and $10 wins will be reinvested, everything else will be paid out on a pro-rata basis. I’ve already purchased a ticket to Saturday’s draw. If you want in on it, just e-mail me. If I know you, I’ll take your word that you’ll eventually send me the $2. Otherwise, you’ll join the group as soon as I get the $2.

The spreadsheet with my calculations is available on Google in a read-only format. If you want to double check my formulas or play with the numbers, you can download the spreadsheet exported to Excel format.

Good luck!

Getting rid of pennies

written by bryan on March 8th, 2007 @ 05:45 AM

Bethany and I were sitting around talking about pennies. The way she phrased a comment made me realize something:

We don’t need a government mandate to get rid of pennies.

This can be done at the grassroots level, and it would benefit both consumers and retailers. All that would be required is that if a retailer owes you a few pennies in change, they give you a nickel instead. A lot of them occasionally do that already, but why don’t they always do it, program it into their till, and advertise it?

I know that a store with a sign saying “No pennies here: we always round down to the nickel.” or “No pennies here: any time we owe you one or several pennies in change, we’ll give you a nickel instead!” will score karma with me. Goodwill for the price of 0-4 cents on every cash purchase? Stores pay a lot more than that for goodwill!

If you use a credit card or a debit card, they’d still charge full price, but when you pay in cash, they’d knock 0-4 cents off the final bill to make it an even multiple of 5 cents.

And once somebody’s doing it there’d be pressure on other stores to do it. It’s a cheap way to make customers happy. And happy customers are repeat customers.

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