Enough “Stop Abusing The System” Comments Already!
Every so often I get a comment on one of my posts complaining about people abusing the system, whatever that means. Some even celebrate when things go badly for others because they are “getting what they deserve”. I felt like it was time that I let out some of my frustration with these comments because they are not rooted in reality in my opinion. There was one such comment on my Aspire retention phone call article.
The House Always Wins
I am sure most of you have heard the saying, the house always wins. Usually this talks about gambling and how the casino always has the edge. But as the consumer you are essentially the player going up against the house. They hold most of the cards and you are just trying to get the best odds you can.
These financial institutions’ reach goes much further than credit cards and welcome offers. They have a hand in your mortgage, IRA, 401K, checking account, car loans, student loans. The list goes on and on.
The point I am trying to make is saying that you are a bad customer for taking an offer on a card and then deciding it doesn’t work for you doesn’t make you unprofitable in their eyes. They are trying to get all of your eggs in their basket because the more you have with an institution the less likely you are to leave. They will take a hit in one area to make it up in total sum. It is the same reason grocery stores have products they sell at a loss, they want you to walk in the door. Why do you think banks offer credit card points for checking accounts and mortgage loans etc? Because they want to lock you up.
It’s All About The Money
We got the first part of business out of the way. The institutions are trying to lock you down from all angles. And they want to do that because they want to make a profit off of you. This is about dollars and cents, plain and simple. The time of valuing customers and having a relationship with your financial institutions is long gone. The personal touch left with technology. Why do you think bank tellers tell you to go to the ATM to make that deposit…they don’t even want to deal with you.
So now that we know what value you bring to the table, profit, should you change your expectations or decision making to match? What does loyalty get you in a set up like this?
What About The Moral Angle?
Now that we have the business aspect out of the way what about the moral side of things. Is it immoral to take an offer for something you don’t plan to keep? Is it immoral to ask for a retention offer on a product when you already received a bonus on said product? Before I go deeper into this let me run some other scenarios by you:
Cable Company Analogy
Have you ever asked your cable company to lower it’s price after an increase, like when that teaser offer ends? Did you think it was immoral to ask for a reduction in price for your loyalty? Did you feel bad going to another provider for their teaser offer when they were unwilling to budge?
Free Sample Anology
Have you ever taken a free food sample at the store even though you were almost positive you wouldn’t purchase it? Did that cost the provider money? Did you feel bad about it? Most importantly, have you ever thought you wouldn’t buy it but did after trying it?
Do you find these two things immoral or wrong? If not then why do you think trying out a card with a welcome offer is immoral or wrong?
What Is The Point Of Welcome Offers
Now that the analogies are over let’s get back to the task at hand. Why do these banks offer welcome offers in the first place? It is to entice you “to try” their product. It isn’t a life long commitment. If it was they would offer a tiered bonus over many years etc.
If you take an offer from someone to try their product but at the end of that trial, say one year, you didn’t find it useful then why should you continue to pay for it? Are you going to pay that cable company more money because you owe them something when the teaser rate is up? Are you going to buy that food product because they gave you a small taste and you are morally obligated to buy it now? Nope! So you don’t need to do it with a credit card either.
Some will complain that you knew that you weren’t going to keep the card when you signed up for it. That may be the case to start out but the truth is that you don’t know it for sure. Remember when I asked if you have ever bought that food item after trying it when you were sure you wouldn’t? I have, the point is that things change and products change.
Banks and card issuers add and take away perks all of the time. The product may not be the same 6 months down the road. The Amex Gold card had a major overall that turned many cancellations into renewals etc. The changes to the Platinum cards turned many sure thing renewals into cancellations as well.
Last Thought On The Subject
Canceling or renewing a card is the purest form of feedback a bank could get. What do you think makes them decide to roll out new perks or to reduce perks? It is all based on new accounts, profit, and retention numbers. If the product is worthy I will keep it long term, if it isn’t I won’t.
When the Citi Prestige card came out I planned on keeping it forever and I ended up cancelling it after 12 months because they removed all the best perks. The opposite happened to my wife’s Hyatt card. I planned on canceling it after a year because it was not a great card but with the relaunch I decided to pay more to keep it.
If the banks want more loyalty then they need better products. Don’t reward them by keeping and using inferior products. That leads to stagnation, a lack of urgency and a lack of innovation. Why do you think the Chase Hyatt card got a revamp? Because the retention and usage levels required it. Our “feedback” led to a better product.
Conclusion
This is sometimes called a game or hobby. It is a game we are destined to lose when you look at the big picture. But we are able to level the playing field some by being smart and informed consumers. And we are able to help create better products by voting with our wallet and which cards we use and keep. There is nothing immoral or wrong making a decision based on what is best for your financial situation, that is what the house does after all.
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Hmmmm…since you’re responding here I’m guessing you are reading this in order to see what others are sharing so you can take advantage of their ‘schemes’. This world is filled with givers and takers…
I don’t care what other people do, and I typically do not advertise my schemes. Many of them are of limited inventory and if you take advantage, there may be less for me. Sometimes it is a zero sum game, so why should I share?
Case in point: there was a method late last year that allowed you to buy almost any gift card at 20-30% off. Amazon, eBay, Netflix, gas cards, Home Depot/Lowe’s, all the good categories. There was about $20,000 of inventory available, and I bought about $8,000 to use for myself. I told some friends, and they bought a few thousand dollars each. That deal lasted about a month, and then that was it. In retrospect, I should have kept quiet and bought all $20K.
It is hard to keep things like that to yourself. Natural tendencies is to share a great find.
These people should seriously go talk to insurance companies. It’s the obvious inverse yet everyone agrees on.
Mark- agree with your response to the comments.
Glad to know I am not alone in my thinking 😉
They do it for a reason. They do it to hook the consumer, and hope the consumer doesn’t pay in full and charge the consumer 18 to 22% interest. And they make more money doing that then what they pay out in their free offers. So when someone starts yelling immoral, direct it toward the greedy banks. They aren’t stupid, they KNOW that there are lots of us smart ones that grab up points.
There are many companies, like the one you mentioned, that offer freebies in hope of getting the few long term paying customers. Your Costco analysis is the best, but many more. I also buy $1.00 burgers and don’t pay $2.50 for their sodas. Is charging $2.50 immoral? I’d also say there aren’t that many SAINTS out there. Sorry,,there just arent. They are making their immoral comments without thinking about every aspect of what they do, each small lie or secret. Maybe it is slightly immoral to take something we don’t expect to renumerate the giver for. Too bad… I tend to take any discount or promotion I can. I go to Walgreens or CVS when they are offering deep discounts they can’t possibly be making money on, and I buy NOTHING else. Are they immoral for charging twice on theirmeveeyday products over Walmart? tell you what, there are so many companies doing these so called immoral things, really, in fact, taking advantage of regular everyday people who don’t know math (which is the majority). ATMs charging $2 or 3.00 to give someone $40.00. That’s like 60% annual interest!!! Be serious, people who spout immoral! Great thought provoking comments,
Good points – thanks Frank
Good comments. Generally, agree but there are moral barriers that some cross and some bloggers endorse. The way some justify being immoral in “gaming the system” is justified by banks and some of the actions they take. I’m going to judge the actions of people or banks here but there are limits. What mostly bothers me is the people who “game the system” at the cost of destroying the benefits we get outsized value from. I think we will be seeing the result of this more in late 2019 when many with lounge access cards will see themselves being denied access to the lounges because they don’t have a same day boarding pass with that airline. It’s a huge devalue to some cards. Much (not all) of this is because people try to “Game” that and bring 5, 10, 20 people with them as guests. The banks are at fault as well on the lounge issue. They have allowed it and endorsed it to some degree until the system can’t handle it. Immoral? No, but it has helped destroy part of the golden age of the points and miles world.
Mistake fares {as others have brought up} are a whole other animal. I found a great backdoor {long term) value at flying international long haul business recently. It’s been so hard not to tell others. The trouble is if I do it will ruin it for me and those that know about it. I would imagine if I even posted it in these comments it would be on a blog or two by the end of the day. I won’t do that to myself or the hand full of others that benefit but I hope they keep their mouths shut also.
The best things are kept under lock and key for sure. And I agree it is so hard not to share them 🙂
I agree that some people push it too far and some endorse things that they probably shouldn’t etc. But as others have said they are providing info and it is up to the individual to decide. I know many people think MS is immoral or crossing the line and I can tell you that the FBI has checked out people in the past and approached them and once explained they were fine with it. They even asked questions so that they could be better at catching money launderers. They could tell by looking at the money trail what the person was doing before they even approached them.
I think it’s fair to play the game. A lot of the points & miles game happens in the margins. And if too many people do it, the banks will clamp down, like with repeat bonuses. I’m not sure how many time you need to “try out” a Citi AA card – but hey, if the banks allow it, it’s fair game.
We all have different values to determine where the “grey zone” ends and turns black, for example with business cards or MS.
You live your values, I live mine and neither should tell the other how to live.
If somebody breaks the law, they risk being persecuted, their tisj. If you violate contracts, you get shut down or penalized, your risk…
You share your tips and people have a choice to follow – or not! They don’t have a choice in what YOU do…but they get to voice their disagreement – and you get to vent our frustration or nuke the more odious comments, such is blogging…
IMO, the game also includes to not whine how “unfair the banks are” when they close a loophole – if you play in the grey zone and get caught, it’s your choice and your responsibility, so acknowledge it and move on…
You win some, you learn some… that applies to both sides. Let the games continue, may the better one win the next round…
And thanks for blogging about what you do, keep doing it! I like some, I ignore some, but it’s all good!
Thanks Rupert awesome comment!
Wonder how many think that our hobby is bad for them? My sister-in-law thinks that she has to pay more for her airfare because I take out the credit cards that allow me to fly free. Same with her hotel rooms. I’ve shared credit card offers with her, but don’t think she wants to take the time to do some of the work, even though I’d do most of it for her. Guess it’s easier to say that I’m costing her extra money and abusing the system!
Tell her the airlines are making so much money off selling their miles to credit card companies they probably prefer you to her 😉
I would be very disappointed in any travel blog dealing with points and miles that didn’t discuss all aspects of ‘the game’. I consider what we all do with the pursuit of our precious points and miles to be a game. From the banks perspective it’s a business strategy. The banks try to entice us to try their goods and services in the hopes that we become a customer and more importantly a long term client. It’s about turning a profit, about making money. As a credit card consumer interested in free travel, it’s our job to find a way to ‘earn’ as many as possible. This is the dynamic between the two sides. All that was done here is an exchange between business and client discussing what is needed to continue a business relationship. The bank makes the rules and weighs the rewards offered against their eventual profit. We all hear the cries all the time about how much these points and miles are costing the banks. PLEASE!! In every city in the country the tallest buildings belong to insurance companies and banks. They don’t build these structures by using business strategies that lose them money. So, read the material and make a decision…use the strategy or don’t. I look at it as win/win for both sides.
Agreed Lenny – thanks!
One thing to think about. The card companies are making money every time you swipe the card. As well as everyone along the way. As a merchant who takes $45K++ per month, the card fees add up. My bank told me that the rate on “Rewards/Points” cards are HIGHER to cover the point payout.
This is why you are seeing some Kroger brands stop accepting Visa etc. because the rewards swipe fees are too high.
Me thinks you doth protest too much! Your readers are as entitled to their opinions as you are. Some of the difference in thought is generational. Gen X, Gen Y and Milennials are more comfortable pushing the envelope than Boomers or the Greatest Generation.
This article is me voicing my opinion. I will continue to approve comments complaining about abusing etc. as I always have and I will continue responding them because discussion is the best way to new ideas.
Bah. I’m a boomer. Using credit for one’s own purposes is not pushing the envelope. It’s good business.
Agree from Japan
Enjoy Karim! We gotta get another MtM meetup on the books
Thanks, sounds like a good idea!
The weirdest part is that these people are on your site, are they lost?
That is an astute observation 🙂
I think the banks are doing just fine (until the next recession when they need billions in bailouts of course):
https://www.pymnts.com/news/banking/2019/fdic-interest-income-loan-revenue-profit-bank-failure/
here’s the actual FDIC press release:
https://www.fdic.gov/news/news/press/2019/pr19009.html
To be clear “Full-Year 2018 Net Income Grows to $236.7 Billion”
Agreed their profits are at an all time high. Even with Chase losing money on the CSR they made record profits because they got all of the Millennial cardholders to open up other accounts with them too.
The high net income is not based on their credit card products but investment banking, commercial banking, wealth management, brokerage, private bank, and consumer mortgage divisions. If the credit cards are not making enough money for banks because of manufactured spending and churning they are going to put in place more restrictions and limit bonuses and have 5/24 rules and such. In a lot banks credit cards are making money but the credit divisions are feeling pressure because of the points war.
“If the product is worthy I will keep it long term, if it isn’t I won’t. … If the banks want more loyalty then they need better products. Don’t reward them by keeping and using inferior products.”
Can I get an “AMEN!”? 😀
You sure can….AMEN! 🙂
The “Big Banks” who are offering these credit card deals, are also offering .02% on their brick and mortar savings accounts. If they can still be profitable by offering such meager current rates, then I offer no sympathy and cry “Full steam ahead!” What has always confused my curious nature is who are the idiots who loan them money today at .02%????? To them I extend an appreciative note of thanks…
They are offering .02% on deposits because they have to maintain in BOFA’s case a 4500 branch network plus all the atms and backend infrastructure. Online banks are much smaller and much cheaper because they don’t have 4500 hundred locations and 100,000 employees. Yes it is dumb to have huge amount of money in these banks but for regular checking and a few months of savings it makes sense because of the large branch and atm network. There is much more added security with being a customer of a mega bank versus an online bank or community bank that can go bancrupt easier. FDIC can take 6 months. Also if problems arise in a transaction big banks are better equipped to remedy the situation. Big banks also offer multiple products like mortgages, brokerage accounts, credit cards, wealth management and etc. which does have a lot of benefits for linked accounts.
I agree that a brick and mortar place is useful to go along with an online bank and then keep most of your money in an online bank. The neat thing about many credit unions these days is they join and ATM network with many others throughout the country that allows you to make deposits etc. at other credit union’s ATMs.
Take advantage whenever possible. The banks are not Angel’s in our hobby. It’s a mutual screw**g between the bank and the hobbyist. There is no moral high ground.
In Pirates of the Caribbean, “take all you can….and give nothing back”. Sounds like a wise life lesson to me.
Their hands are far from clean that is true
I agree with your comments.
If promotions were not meant to be had, then they would not be out there as promotions!
This is totally unrelated to credit card points and airfare offers, but my Dad would always question my giddiness when I got an email birthday freebie coupon/promotion. He felt that since I got so many of them, I was gaming the system. I always retorted with….if they did not want me to use a coupon, they would not have sent it to me!
IMO, gaming the system would be signing up for things under multiple names or multiple email addresses. Playing it above board and being offered something in exchange for contact information to bombard me with solicited spam is worth it to me.
Like other comments, this form of marketing, bigger-picture speaking only, is a way to get you so entrenched with their products and services that you don’t leave. I get it. But I must admit…..feeling like I am winning, even if short term and in the moment only….feels pretty good.
Yup same thing with the birthday freebies. They want your whole family to come in so they will eat the cost on that $7 appetizer etc. to make it up on the back end.
The banks fund these enticing offers by charging exorbitant interest rates on the fools who either don’t or are unable to pay off their balances each month. They have also earned swipe fees on your required 3-month spend. If it were a money loser for the banks, they would go back to gifting toasters as gifts. Banking has become so competitive. Just check the fantastic savings rates offered by on line banks. As a side note, I really appreciate that this blog informs us when Staples and Office Depot/Max are having credit card promos. Keep up the great work!!!!
Not to mention they are raking in record profits right now. That has more to do with the belt tightening and rules being added than anything else imo. When the going is good you can demand more.
Right on point.
“This is how it is supposed to work. American Express had to spend a very tiny amount of money to keep a premium cardholder. ” (from your other aspire article)
i think it’s THIS sentence that really showcases the sense of entitlement. Yes you’re free to play the game as long as its’ within the provided sandbox, i’m not challenging that, but it’s quite galling to call yourself “a premium cardholder”. A cardholder who happens to hold a premium product (and esp during the low risk intro / promo / bonus point period) doesn’t make the cardholder herself or himself become premium in the eyes of the issuer. You’re premium when your long term aggregated spend at that issuer showcases it, and that applies equally to those who revolve and those who pay off every month.
One’s willingness to pay the eye-watering annual fee past the first year free period doesn’t’ qualify either. Say in my case, I paid the $450 UA Club card year over year because i’ve calculated the cost-benefit of it to waive PQD requirements on UA was easier than spend the cash on actually flying that much. And at no time I pretended I was premium.
And yes, to answer your other question, i’ve done risk management at 4 US card issues, including all 3 of the Big 3. I don’t condemn anyone for figuring out certain promos are net positive for the customer, even net of annual fees and such, and I join into the fun once in a while too. But let’s skip the “I have Aspire so I’m premium” unless you’re trying to compare yourself to Discover or Capital One instead of the customers Amex and the other Big 2 works with on a regular basis.
I was talking about it in a business sense and it was not an entitled statement in any way. Does it make sense for a company to spend $30-50 to keep a current cardholder or spend 15 times that to get a new one? That is what I was talking about. Anyone who knows business knows it is cheaper to keep a current customer and that should be your key objective. Retention turns into growth.
As for it being a premium card with a large annual fee. This is the market they all want and why so many products have been introduced in the market when only the Amex Plat used to be in the space really. That means they are most likely more willing to fight for that customer since that is the market they are all fighting over right now. And it is a market Amex used to dominate and has since lost a large portion of the market share.
The comment was made from a business perspective. I’m sorry you read more into it than that.
I think this was triggered by your spelling: there is a difference between “premium cardholder” (your spelling) and “premium card holder” (what you explained you are talking about)…
That could be. This is the post when you don’t snip it
This is how it is supposed to work. American Express had to spend a very tiny amount of money to keep a premium cardholder. Those 10,000 points cost them a lot less than the 150,000 points they use to draw in new cardholders. I am not sure why they don’t offer retention offers on more cards but who am I to judge I guess.
It is more clear as to what I was talking about it you don’t take a part of it out of context.
As long as the offers and such are used as they are intended to, it’s fine… However, when we start talking about manufactured spending, business qualifications (I sold grandpa’s watch on eBay type of business), double dipping on offers, etc. That I have a problem with.
What is the problem with MS per say though? Does the credit card company not get their swipe fees and earn the same as every other purchase?
Falsifying a business is something that I agree is pushing it too far.
The swipe fees don’t cover the cost of points if you are getting bonus catergories. In the model that banks use to create their rewards program they figure a certain amount of spending for each category and offer bonuses in some to entice customers but those categories are at a loss. Swipe fees are 1.7-2.2% so 3x points is a money loser if people aren’t getting charged interest, If people are exploiting a bonus category through manufactured spending against the terms of the card agreement it hurts the bank. They did not agree to manufactured spending. It hurts customers in the long run.
Depends on what card you are using. A lot of ms at Simon’s mall etc is done for no bonus or with a 2% back card. If someone is just hitting bonus categories then for sure they are losing if they aren’t racking up interest but a huge amount of it is done in non bonus categories.
“What is the problem with MS per say though? Does the credit card company not get their swipe fees and earn the same as every other purchase?”
Must be a good reason if the cc shuts you down for ms…it’s called exploitation
Why? There’s a rule of thumb with contracts: whoever writes the contract writes it to benefit themself. In this case, the giant bank VS me, the person who runs around liquidations debit cards, so I can trade Membersip Rewards points for Air France miles, and we can go spend 10 days with our daughter in the foreign country where she lives with her family.
MS is both legal and ethical. I’d be hard put to find a bank whose practices are 100% legal, or even slightly ethical. The fact that you don’t want to MS is your choice. But you haven’t the right to judge those of us who do.
I agree totally with your statements.
Actually, I’m more perturbed by those who comment, “how dare you post this mistake fare publicly (I want to be the only one who gets the info). You’re gonna ruin it.”
That is a whole ‘nother post Colleen 🙂
Unless you found said fare on your own (unlikely) someone told you about it too…right? 😉
To take the analogies further back in 2007, if a bank lend you more money than the house was worth and took that house as collateral, is it immoral to profit and leave the bank with said house?
Most critics don’t realize how vital cross-selling is to banks. They lock you in for that 100k CSR bonus and then sell you other products like mortgages. They’re essentially playing the long game. The sing up bonus is just a bait.
Yup – that is pretty much every businesses main goal. Get you into as many of their products as they can. The more entrenched you get into their ecosystem the harder it is for you to leave.
They got me hook line and sinker. Car loan, sapphire checking, all from credit cards.
They get us all at some point Steve 🙂
amen
Thanks Christian
Agreed!
Marty with the quickest comment on a post ever! 🙂