Whether its in the caf, on Lone Mountain, fair trade or regular trade, any real USF coffee drinker knows that coffee on this campus sucks. It even sucks at Crossroads where it’s sold under the Peet’s label. Why Peet’s allows Crossroads to serve its coffee at such a substandard level escapes me.
But thankfully, we have Starbucks right down the street, even if it is down the street. And all day long a steady stream of students, faculty and staff make their way to that Mecca of Java, determined not to squander their dollars on Bon Appetit’s weak, often over roasted blend.
Recently, Starbucks rolled out a new product that should perk the interest of the heavily caffeinated among us. The Starbucks Gold Card is not a credit card, it’s a membership card that costs $25 a year. In return for buying the card, members get 10 percent off purchases at participating Starbucks stores, a free drink when they buy the card and a free drink on their birthday. The card program also offers two hours of free Wi-Fi every day.
$25 is no small sum for the college student to shell out, especially in light of harsh economic times and a weak job market, so I use this column to help you decide if paying $25 for the Starbucks Gold Card is a good buy for you, and if so, how long it will take to realize a positive return on your investment.
In finance-speak, the Gold Card behaves a lot like a bond, so we can determine its value much the same way we would calculate the value of a bond, albeit an unusual one. You buy the card (bond) for $25 up front, minus the free drink, and then the card issuer makes periodic payments to you in the form of a 10 percent discount on your coffee purchase.
Doing the actual valuation requires making a few assumptions about your coffee intake. Lets assume you go to Starbucks once every day and order a grande Americano for $2.15. Lets also assume that you don’t care about the free wireless and forget about the complementary birthday drink.
With the card, you are paying $25 minus $2.15 for the free drink which is $22.85 up front. You then get daily “payments” of 10 percent of $2.15, which is tiny_mce_marker.215.
Using the discounted cash flows I receive from Starbucks, I would break even on this $22.85 investment in the card in my 16th week of the program, or the length of one semester. After that, it would be like getting the 10 percent discount for free.
Lets say, however, that I don’t have $25 in cash, but in stead want to purchase the Gold Card on my credit card. Even when paying an 18 percent interest rate on the $25 credit card balance, it would only take a little longer than a semester for the 10 percent discount to offset the cost of the interest payments. However, I would have to treat the 10 percent discount as money earned and use that money to pay down the balance of my credit card.
It seems to me that the new Starbucks Gold Card is a good buy for the daily coffee drinker, even without factoring in free Wi-Fi or that the 10 percent discount applies to purchases of food and merchandise.
But of course, if USF’s on-campus café’s could get their act together and produce good coffee at a competitive price, I would save myself the walk down Fulton street.
Hunter Patterson is a senior economics major.