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American DreamCard - Play Lottery by Charging

Contributed by mm | August 30, 2004 10:58 AM PST

American Dreamcard is yet another example of how credit card issuers can always find fresh ideas to promote their plastics, and squeeze more money out of your pocket. If you swipe this card, each $1 charge will entitle you for one entry in a monthly sweepstake with the jackpot size worth 0.50% of the total net charges by all Dreamcard consumers in that month. Issuer Direct Merchants Credit Card Bank, N.A. also guarantee a minimal jackpot size of $25,000. (Source: CardWeb.)

Is it a good idea? Hardly.

Now that everyone with an acceptable credit level has access to some forms of reward card, you are actually paying for participating in the monthly Dreamcard lottery. Why? Let's say you have another card that gives you 1% flat cashback, by diverting $1,000 of credit card purchase to Dreamcard, you are sacrificing $10 cashback money. In other words, you are paying $10 for the entries into the lottery with the payout rate of 50%.null

As I am using the 1.5% cashback Fidelity Investment Rewards® MasterCard® for many expenses, the cost for me would be $15 per $1,000 spend on Dreamcard and the payout rate would be 33%.

If you believe in your luck in such games, you will be better off by charging your cashback card, and using the cashback check to buy scratch tickets in grocery stores -- the payout rate on scratch tickets is usually between 50% and 60%.

(A small opportunity may exist: as the issuer guarantees the $25,000 minimal jackpot, if you participate early enough, the payout might be more than 100% for the first few months -- you just don't know when there will be enough gamblers in the same game that dilutes the value of the jackpot.)

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