If you are a financial nerd like me, you’ve likely tried out a ton of different cash back apps over the last few years. Honey, Rakuten, Pei, Ibotta, Dosh, and Drop are the ones that come to mind for me, but there are so many out there and you could have an equally long list that is completely different than mine. The value proposition for these apps is clear enough: get a small percentage of cash back whenever you make purchases with the app’s partners.
This is awesome and can be thought of as either a discount or a kick back (just make sure you were already going to purchase whatever item). The much-less advertised problem though is that these apps often make you hit some arbitrary threshold of $5/$10/$20/etc. in cash back before you can withdraw. Additionally, you are usually “cashing out” in the form of gift cards. These gift cards incentive you to shop more and the partner companies benefit from the sales.
Bumped is a relatively new app that takes an approach I much prefer to traditional cash back. Bumped rewards you in stock as a percentage of your purchases instead of cash or gift cards. From a FIRE-enthusiast perspective, this has some clear benefits in comparison to getting cash back:
- Cash loses value to inflation over time. If you can’t reliably pull out your earnings or capitalize on them, you are missing out. Investing your money into stock though is a time-tested strategy for long-term returns. Stock rewards > cash rewards.
- Stock rewards are less liquid than cash/gift cards. When you get cash or gift cards back, you spend them. Receiving your rewards in stock doesn’t incentivize you to shop and spend more money. Cutting down expenses and spending below your means are pillars of the FIRE mindset.
While the premise for Bumped is that you can get a percentage of equity in the companies you shop at/consume, I actually think the default setting of $VTI is what everyone should utilize instead.