MilesBuzz! - Credit Card Mileage ethics

Wonder where your ethical barometer kicks in. I've tried to arrange the scenarios in increasing order of questionability:

1. I need a new widget. I go down to the widget store, pick out a nice one for $5000, and pay for it with my credit card. I get the miles.

2. My buddy is excited about my new widget. We go to lunch to discuss it. The bill comes to forty bucks. I tell him "Give me a twenty and I'll take care of the bill." I put it on my credit card. I get the miles.

3. My buddy likes the deal, so we go down to the widget store and he picks out a nice one. He doesn't like credit cards, so he tries to pay by check. No dice - the store doesn't take checks. I know his check is good, so I put the widget on my credit card. The widget is in his name, and he gets the warranty, etc. I get the miles.

4. The widget store owner is now my friend. He tells me that any time anyone pays by cash, he'll put it on my credit card and give me the cash. The customer gets the widget and the warranty, I get the miles.

5. The owner is really my friend. He says he'll "sell" me a widget every week and put it on my credit card. When the payment comes back to him, he'll turn the money over to me and I pay the CC bill. I get lots of miles.

6. I force the owner to credit me with miles at the point of a gun. (I put this one in so we all know where to stop http://www.flyertalk.com/forum/smile.gif ).

OK - when does clever manipulation become cheating? How is this different from buying 100 magazine subscriptions for the miles? With a T&E card (AMEX,DC), it's expected that I will be paying for things that other people use or consume - where does one draw the line?

I just had some dental work done - I'm going to put it on a mileage-earning CC. How would anyone know whether or not you were having $15,000 worth of dental work done? (assuming you have a friendly dentist).

Where does it all end?

Here's how it works: The credit card companies make their money by first charging the merchants a fee on every transaction (around 2% - 3%) and then by charging interest to the cardholders (for ones that don't pay off the balance each month). They use the part of the money they make to buy miles from the airlines. The airlines are happy to sell them the miles and your credit card company would probably be happy to have you charge lots of things for your friends
(because they are making money every time you do so). As far as getting the widget store owner to charge items to your card and give you the cash when it comes in from the credit card company, yes he could do it, but he would lose money every time he did (For example, if you charge a $100 item, the credit card company takes a 2% or 3% cut and reimburses him $97 or $98).

the percentage of the charge that it costs the merchant is why people cant abuse the system too much.... if it was free to charge a credit card then im sure each one of us would have our own merchant accounts and would be maxing out our airline cards every month with 1 charge...but at 2.5% those are very expensive miles.

I agree with the previous two posters. I don't find any of the possible scenarios (save the one involving a gun) to be unethical. But that's only b/c fees are involved. If there were no fees, and it was taking advantage of the credit card company, then it would be unethical.

Yeah - I know about the fees.I wanted to address the ethics first.

Suppose the fee is 2%. Suppose I use my Diner's Club card to charge $100. The fee is $2.00. That transaction gets me 200 DC points, which I can converts to 200 BA miles, at one cent per mile. That's cheaper than I can get them pretty much anywhere else.

[This message has been edited by BigLar (edited 10-05-2003).]

so what's the issue?


<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by BigLar:
Yeah - I know about the fees.I wanted to address the ethics first.

Suppose the fee is 2%. Suppose I use my Diner's Club card to charge $100. The fee is $2.00. That transaction gets me 200 DC points, which I can converts to 200 BA miles, at one cent per mile. That's cheaper than I can get them pretty much anywhere else.

[This message has been edited by BigLar (edited 10-05-2003).]</font>

There are 2 huge ethical lapses and 1 small one, both committed by the airline.

The small one is selling miles to a credit card to give to customers w/o regard to their loyalty to the airline. This devalues the miles the airline gives to its own customers.

The big ones are more subtle. In order to get you to sign up for the card, you calculated that you needed to spend $25,000 to get an award ticket. But the airline did not disclose to you all of the strings they attach on redemption, the availability of award tickets, etc. That is not ethical to me.

Second, the airline records the liability at a fraction of its value. So its selling miles to credit card issuers for about $.02 per mile while recording a liability of maybe 1/100th of $.02 per mile. This either defruads investors and creditors as a result of inaccurate accounting, or loyal customers who buy into the loyalty scheme (really just another form of creditor). Its this shady accounting that allows them to perpetrate the fraud in the first place; if they had to accurately account for the liability, then they would be less interested in distributing their miles so broadly and diluting their own loyalty program.

In addition to the 2-3% credit card fee, there is also the fraud risk.

Consider this situation: the store owner gives you the cash so he can put someone's sale on your credit card. You take the cash, and file a charge-back 3 weeks later. The merchant is now out of money. You can claim that you never got the merchandise etc.

No store owner, no matter how friendly s/he is, will want to take this kind of risk.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by MeLike2Travel:
so what's the issue?
</font>

Well, the issue is can I use any or all of these tactics to build up my mileage balance without running afoul or either the cc company or the law.

Outside of the scenario involving the gun, it would seem that most of the scenarios are legal, assuming you can line up a cooperative vendor. The last scenario, where the transactions are made up out of whole cloth, seems like it might be illegal. In fact, wasn't there someone who got busted for something similar to that recently?

Anyhow, if the cc companies in don't care where the business comes from, it might be worth my while to see what I can do. I was just wondering whether I would get a call from Diner's Club or whatever inquiring what I was doing with 13 plasma tv's or some such. http://www.flyertalk.com/forum/smile.gif

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by MoreMiles:
In addition to the 2-3% credit card fee, there is also the fraud risk.

Consider this situation: the store owner gives you the cash so he can put someone's sale on your credit card. You take the cash, and file a charge-back 3 weeks later. The merchant is now out of money. You can claim that you never got the merchandise etc.

No store owner, no matter how friendly s/he is, will want to take this kind of risk.</font>

There's always a fraud risk. One doesn't do this sort of operation with strangers. If my brother owns the store, for example, there's little chance of me stiffing him. Doing that charge back thing is probably fraud in the broad criminal sense, as opposed to screwing the merchant.

I don't have anyone lined up at the moment, but there are possibilities...

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by BigLar:
I don't have anyone lined up at the moment, but there are possibilities...</font>

If you don't mind about the fees... then it's very possible. Just go ahead and transfer yourself some money using Paypal. You can get all the miles you want... at the cost of paypal merchant fee.

Your original hypothetical question will have no ethical or legal problem. It is however finanically not feasible due to the fees. Why would you want to change cash into miles? Reward miles are not considered commodity. They can be voided by the airlines at any time, using simple excuses.

Also, if you charge too much (let's say a few million $ / year)... IRS will knock on the door soon asking for audit.

I think 5 & 6 are unethical, but 4 also smells a little fishy. But, when you think about the fact that lots of us use mileage cards for company expenses (or even entertain for work at Idine restaurants to get miles through AAdvantage or Mileage Plus Dining), that is sort of like 4. And, since I don't think anyone would say that paying for expenses you're going to get reimbursed for in the manner that happens to earn you miles is unethical (assuming, of course that you don't intentionally take an important client to a hideously overpriced, terrible restaurant solely to rack up miles), I think 4 is fine.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by MoreMiles:
If you don't mind about the fees... then it's very possible. Just go ahead and transfer yourself some money using Paypal. You can get all the miles you want... at the cost of paypal merchant fee.

Your original hypothetical question will have no ethical or legal problem. It is however finanically not feasible due to the fees. Why would you want to change cash into miles? Reward miles are not considered commodity. They can be voided by the airlines at any time, using simple excuses.

Also, if you charge too much (let's say a few million $ / year)... IRS will knock on the door soon asking for audit.

</font>

Why would I want to change cash into miles? Well, if a First Class ticket costs $7000 or more, and I can get the miles needed for between $1000 and $2000, it's a no-brainer. If I was planning on "banking" the miles (for my retirement?) then your argument is more valid, especially in light of the changes to various programs recently.

As far as the fees go, I'd have to do an analysis on a card-by-card/airline-by-airline basis. The best deal is Diner's Club/BA and the annual 2-for-1 deal. Other cards/airlines might not be as attractive.

IRS - if what I'm doing is not illegal, they may take a dim view of what I'm doing but I don't see any basis for tax liability. I could be wrong, and in any event I'm not planning on any million-mile deals in the near future.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by BigLar:
Wonder where your ethical barometer kicks in. I've tried to arrange the scenarios in increasing order of questionability:

1. I need a new widget. I go down to the widget store, pick out a nice one for $5000, and pay for it with my credit card. I get the miles.

2. My buddy is excited about my new widget. We go to lunch to discuss it. The bill comes to forty bucks. I tell him "Give me a twenty and I'll take care of the bill." I put it on my credit card. I get the miles.

3. My buddy likes the deal, so we go down to the widget store and he picks out a nice one. He doesn't like credit cards, so he tries to pay by check. No dice - the store doesn't take checks. I know his check is good, so I put the widget on my credit card. The widget is in his name, and he gets the warranty, etc. I get the miles.

4. The widget store owner is now my friend. He tells me that any time anyone pays by cash, he'll put it on my credit card and give me the cash. The customer gets the widget and the warranty, I get the miles.

5. The owner is really my friend. He says he'll "sell" me a widget every week and put it on my credit card. When the payment comes back to him, he'll turn the money over to me and I pay the CC bill. I get lots of miles.

6. I force the owner to credit me with miles at the point of a gun. (I put this one in so we all know where to stop http://www.flyertalk.com/forum/smile.gif ).

OK - when does clever manipulation become cheating? How is this different from buying 100 magazine subscriptions for the miles? With a T&E card (AMEX,DC), it's expected that I will be paying for things that other people use or consume - where does one draw the line?

I just had some dental work done - I'm going to put it on a mileage-earning CC. How would anyone know whether or not you were having $15,000 worth of dental work done? (assuming you have a friendly dentist).

Where does it all end?</font>

This post borders on the ridiculous, but I also believe you and the merchant may have criminal and tax problems with example #5. The merchant has to carry the weekly sale on his books, so he would be liable for tax purposes, and if he just "runs" the charges through for you without actual sale and bookeeping, I believe there are some criminal and civil charges possible against both of you. (for example, the feds may see this as money laundering)

Example #4 - If I'm a stranger at your friends store, buying a $5000 widget for cash, I want the receipt to show that, so just in case I need to return it I get cash from the merchant. So again this would defeat any possibility and the merchant and you would have to resort back to #5, which could be very costly in your time(jail) and money(civil and tax)

The first 3 examples are all ethical and legal, but how many friends do you have to buy a $5000 widgets on a regular basis. Why don't you get all your friends together and offer to put them on your CC and have them charge everything and just give you cash? Somehow I don't see your friends jumping at this idea, but hey you never know.

What if you go to lunch, and you are at an Idine restaurant. Your friends gives you cash for their share, and you use your credit card because you are getting 10 miles per dollar.

Or, if instead of earning miles from Idine, you get 20% back in cash.

I see this as a bigger ethical problem than the others - in the ones involving a friend who is going to let you make many purchases you have a friend who knowingly is costing himself a lot of money so you can get miles. And I don't expect that too many friends like that exist.

In the Idine case, though, you are intentionally benefitting from your friend - in effect letting them pay more than their share of the bill.

Is this ethical, or should you feel obligated to tell them and ask if it is okay, or should you pay more than your share since it will balance out later?

Speaking of charging for miles, does anyone know what the current yearly maximum is on traditional AA Citibank cards (MC) and on AA Citibank Business Platinum?

It won't work!

There is no such thing as a Widget!

http://www.flyertalk.com/forum/biggrin.gif

This plan runs into a couple problems.

1. The aforementioned fees for credit card use. Most people are not willing to eat the fees for the miles, as it usually is not worth it.

2. If you charge a lot to a card and are getting cash/checks from friends, the IRS may come after you and want you to pay tax on that "income". I have heard stories of people who could pay their rent with credit cards. They had friends who paid with checks and simply asked the friends to write them the checks so that they could use the credit card to charge the rent for the miles. The IRS sees that you are getting this money from friends and they decide to view it as taxable income and you are left to prove that it is not income. I will pay restaurant bills and collect the cash from friends and such, but I have not sought the opportunity to do it for larger amounts on a regular basis. If you did end up paying income tax on it, those would become some pretty expensive miles.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by andrzej:
This post borders on the ridiculous, but I also believe you and the merchant may have criminal and tax problems with example #5.

</font>

This is not a problem if your friendly merchant records it on his book as a cash refund for a returned item.

The real problem is that this is a violation of his merchant credit card agreement. Credit card companies don't like deals that result in cash advances disguised as purchases, since most cardholders have much lower cash advance limits than credit limits. As a result they are very strict about enforcing rules intended to prevent this : In this case they would almost certainly catch it and cancel the merchants credit card account (ruining him since he can no longer accept credit cards) and perhaps even cancel the customer's credit card account.

Strangly credit card companies are not too concerned about your airline miles, since those are paid by the merchant discount fee.

Many credit card agreements also forbid you to use your personal credit card to charge buisness expenses : the rationale is that they offer buisness (corporate) credit cards which cost the merchant a higher discount rate and usually have higher annual fees. I have had a relative threatened by Discover card because he bought 3 computer in 1 month on the grounds that if he continued they would assume he was buying stuff for his employer (which wasn't far from the truth) and cancel his card.

You have not concept on how merchant agreements work...Your "merchant friend" is dumb or your dumber. Someone is eating the Merchant fee of 1% to 3.5% so on five grand your friend is losing over a $100 bucks which could be in his pocket.

Now if you really mean your merchant friend is not trully a meachant but acting as a sales agent such as travel agency..then both of you are "putting it" it to the real merchant like an airline.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Centurion:
You have not concept on how merchant agreements work...Your "merchant friend" is dumb or your dumber. Someone is eating the Merchant fee of 1% to 3.5% so on five grand your friend is losing over a $100 bucks which could be in his pocket.

</font>

No ... I was just trying not to muddy the waters.

I assumed I would make good on the fees so that he would not be out any money. This is the figure I would use to determine whether it was worth it or not.

To repeat the numbers used above, 2% of $5000 is $100. On the DC/BA deal, this represents 10,000 miles, or one cent/mile. I repay the merchant the hundred bucks he is out, and I get the miles at a price I find agreeable.

Other percentages/airlines make the math different.

My merchant friend may be crooked, but not stupid. http://www.flyertalk.com/forum/smile.gif

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by VolleyballFerd:
What if you go to lunch, and you are at an Idine restaurant. Your friends gives you cash for their share, and you use your credit card because you are getting 10 miles per dollar.

Or, if instead of earning miles from Idine, you get 20% back in cash.

I see this as a bigger ethical problem than the others - in the ones involving a friend who is going to let you make many purchases you have a friend who knowingly is costing himself a lot of money so you can get miles. And I don't expect that too many friends like that exist.

In the Idine case, though, you are intentionally benefitting from your friend - in effect letting them pay more than their share of the bill.

Is this ethical, or should you feel obligated to tell them and ask if it is okay, or should you pay more than your share since it will balance out later?</font>

All my relatives and friends know that I am a FF mile junkie, and I always tell them about the many opportunities to get miles without flying but they don't want the "hassle."
I see nothing unethical with getting miles from your friends' and relatives' transactions as long as there is full disclosure. I let our adult sons charge on my credit card -- I get the miles and sometimes let them keep a little of the cash. http://www.flyertalk.com/forum/smile.gif

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by VolleyballFerd:
What if you go to lunch, and you are at an Idine restaurant. Your friends gives you cash for their share, and you use your credit card because you are getting 10 miles per dollar. ...</font>

My friends and I have this worked out to everyone's satisfaction: I keep the miles, but I'm pretty generous when we all go on vacation!

fiat_owner

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by BigLar:
5. The owner is really my friend. He says he'll "sell" me a widget every week and put it on my credit card. When the payment comes back to him, he'll turn the money over to me and I pay the CC bill. I get lots of miles.</font>

You really don't need a friend to do this. You can open your own sole proprietorship and sign up with a credit card clearing house. You can do MC and Visa transactions for less than 2%. The credit card charges go directly to your business bank account; you can write yourself a check from your business account, deposit it into your personal account, then write a personal check to the credit card company.

So there's a whole lot of money going through your business account, but you're not claiming any revenue on your tax return. So what? Banks don't report deposit and checking activity to the IRS, so you don't have to report all deposts as revenue. If the IRS audits you and sees a bunch of money going in and out, it's pretty easy to explain. There's no money laundering, because you're just recirculating the money every few days and the money's easy to follow. Fraud? Sure, as far as the airline is concerned - but the IRS won't care that you're defrauding the airline out of frequent flyer miles; they're only concerned with defrauding the government.

Will the airline know? Probably not - there are more people than you would realize that charge hundreds of thousands of dollars a month on their mileage-earning credit cards. Look at OzFlyer - over 35 million miles on his Diners.

Is it worth it? If you think you miles are worth a lot more than $0.02/mile and you can use a lot of miles, then it just may be.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by BigLar:
Yeah - I know about the fees.I wanted to address the ethics first.

Suppose the fee is 2%. Suppose I use my Diner's Club card to charge $100. The fee is $2.00. That transaction gets me 200 DC points, which I can converts to 200 BA miles, at one cent per mile. That's cheaper than I can get them pretty much anywhere else.

[This message has been edited by BigLar (edited 10-05-2003).]</font>

Well, the typical 2-2.5% rate is for visa/mc.. amex is somewhere around 3 and discover is even higher at 3.5% or so.. diners club is probably higher... if a friend with a merchant account were doing this for you and was audited like someone else mentioned they would see these thousands of dollars of extra deposits from the merchant account that wasnt on the books and assume it was other income.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Leona Helmsley:

Look at OzFlyer - over 35 million miles on his Diners.
</font>

Huh? How would you know this? Is there some way he did this and let everyone know about that I missed? 35 million miles is a lot of miles.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by BigLar:
Huh? How would you know this? Is there some way he did this and let everyone know about that I missed? 35 million miles is a lot of miles.</font>

http://www.flyertalk.com/pasttalk/ftpasttalk_forum/Forum1/HTML/006564.html

Mind you, I would never accuse OzFlyer of doing anything illegal or unethical. You have to admit - 3 million Diners points on one transaction is pretty sweet.

Also check this thread:

http://www.flyertalk.com/pasttalk/ftpasttalk_forum/Forum1/HTML/006565.html

He talks about doing $5M (I assume AUS) per year on credit cards. Someone laundering a million or two a year probably wouldn't show up on the radar.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Centurion:
You have not concept on how merchant agreements work...Your "merchant friend" is dumb or your dumber. </font>

No need to go postal dude...it seems like an interesting conversation to me.

Interesting that the BigLar originally asked about the ETHICS of the scenarios, and most of subsequent posts are about the COSTS of the scenarios. Ethics should really have nothing to do with whether it is financially advantageous to do so.

As far as the ETHICS of the scenarios --

I have to go with the poster who commented about cash advances 'hidden' as a charge. That is clearly against most CC rules of usage. IMHO, the ethics tips from OK to not-so-OK (and to a resounding NO for #6 http://www.flyertalk.com/forum/smile.gif )when the magnitude and intention become substantial. When dining, I often take my friends' cash and charge the meal, but usually more for convenience or I am short on cash (I confess, the miles aspect lurks in the background). But to do it routinely and for 'large' amounts of money (not sure how much that is), then the ethics get iffy.

So, IMHO -- 1&2 seem innocent enough, probably 3 too (an isolated case); but 4&5 are a pattern of deception and, to me, are ethically deficient.

And finally -- dude, where are you buying your widgets? I get mine for $3K tops!

http://www.flyertalk.com/forum/biggrin.gif



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Da DOK

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by 1K_From_SNA:

It won't work!

There is no such thing as a Widget!

http://www.flyertalk.com/forum/biggrin.gif</font>

Well if that is true, then BigLar is getting 5000 miles for an impossible purchase -- REALLY unethical http://www.flyertalk.com/forum/biggrin.gif

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Da DOK

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by quinella66:
This plan runs into a couple problems.

1. The aforementioned fees for credit card use. Most people are not willing to eat the fees for the miles, as it usually is not worth it.

2. If you charge a lot to a card and are getting cash/checks from friends, the IRS may come after you and want you to pay tax on that "income". I have heard stories of people who could pay their rent with credit cards. They had friends who paid with checks and simply asked the friends to write them the checks so that they could use the credit card to charge the rent for the miles. The IRS sees that you are getting this money from friends and they decide to view it as taxable income and you are left to prove that it is not income. I will pay restaurant bills and collect the cash from friends and such, but I have not sought the opportunity to do it for larger amounts on a regular basis. If you did end up paying income tax on it, those would become some pretty expensive miles.</font>

Just have your friends make checks payable 2U or your CC bank with "Rent--Oct. 2003" or whatever on the memo line. It should be easy to prove to the IRS that you are not their landlord & show CC charges to the landlord on your bill.
My co-workers ask me to buy cigarettes for them when I'm on the other side of town & I see Buy 1 Get 1 Free units of their brands. I charge $700 a month in cigs to my card & I am a lifelong nonsmoker!

I do believe that one should give such fiends something in retrun for their co-operation. As for me, I give a no-interest, no-cash-profit tab until payday.

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Play the travel game 3 vacations into the future!

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by f00sion:
Well, the typical 2-2.5% rate is for visa/mc.. amex is somewhere around 3 and discover is even higher at 3.5% or so.. diners club is probably higher</font>

I am a merchant too, I agree with the number by f00sion. so will everyone STOP using the 2% number.

how about let's ask this question:
IF YOU WERE A MERCHANT, HOW MANY PERCENT WILL YOU CHARGE TO LAUNDER THE MILES?

for me, it would be more than 5%, because with the credit card fee / time / effort / possible tax issues.

One of the silliest discussions I’ve ever seen. Biglar, please tell us, you doing this for the school project http://www.flyertalk.com/forum/smile.gif
I don’t grasp where you’d find any ethical issues:
#1 and #2 are just daily life occurrences.
#3 might represent slight ethical problem, but you’ve asked for a favor after all.
#4 - #6 are related to only to credit processing and frequent flyer industries, and they very effectively operate on commercial, not on ethical basis.

There’s absolutely no need to “launder” miles through the credit cards, if you value them priceless for your first class travel, most airlines will gladly sell them to you at 2.5 cents per mile retail. If you are in for a big $$, contact airline and you will get miles wholesale – somewhere btw 1 and 2 cents. This is their business; they sell miles to make a profit!

If you still insist on using credit card and eating merchant fee – be their guest, credit industry makes their money this way. Charge any zillions you want, no boogey man will show up, no IRS will care, there’s no law against doing silly business yet.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by neophyte:
One of the silliest discussions I’ve ever seen. Biglar, please tell us, you doing this for the school project http://www.flyertalk.com/forum/smile.gif
I don’t grasp where you’d find any ethical issues:
#1 and #2 are just daily life occurrences.
#3 might represent slight ethical problem, but you’ve asked for a favor after all.
#4 - #6 are related to only to credit processing and frequent flyer industries, and they very effectively operate on commercial, not on ethical basis.

There’s absolutely no need to “launder” miles through the credit cards, if you value them priceless for your first class travel, most airlines will gladly sell them to you at 2.5 cents per mile retail. If you are in for a big $$, contact airline and you will get miles wholesale – somewhere btw 1 and 2 cents. This is their business; they sell miles to make a profit!

If you still insist on using credit card and eating merchant fee – be their guest, credit industry makes their money this way. Charge any zillions you want, no boogey man will show up, no IRS will care, there’s no law against doing silly business yet.</font>

No, it's not a school project. It's exactly what I said it is.

No airline is going to sell me the 100,000 or 150,000 miles I need for a First Class international ticket - if they did, nobody would ever buy them for $7-10,000.

If this whole subject is such a non-event, we might as well close down Flyertalk - there's a lot of interest on this entire board in acquiring miles through cc programs, and many people are willing to make that little bit of extra effort to get them. I suspect that if it were just a matter of a phone call and bingo! there's your miles, we (they) would all be doing it.

And, without putting too fine a point on it, there were ethical issues involved in the various scenarios. A common pedagogical device is to "bookend" a series of choices with obvious extremes (everybody agreed #1 was OK - everybody agreed #6 was not) and then see where the opinions fell on the stuff in between. That's really what I was interested in.

And, also hoping to get a couple of tips on getting some more miles. http://www.flyertalk.com/forum/smile.gif

So there.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Leona Helmsley:
You really don't need a friend to do this. You can open your own sole proprietorship and sign up with a credit card clearing house. You can do MC and Visa transactions for less than 2%.</font>

Are you sure ??

If it was that easy...
http://www.flyertalk.com/forum/biggrin.gif

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by BigLar:
No airline is going to sell me the 100,000 or 150,000 miles I need for a First Class international ticket - if they did, nobody would ever buy them for $7-10,000.</font>Sure they'll sell them to you. Continental has a program called "Miles of Thanks" and other airlines have similar programs. How many miles would you like to order (http://www.insidecoair.com/imot/documents/IMOT_ORD.pdf)? They'd be happy to take your money.

[Edited to add this:]
Oh, and CO will even take a credit card for the 2c each miles they are more than willing to sell you!



[This message has been edited by xyzzy (edited 10-09-2003).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by BigLar:
No airline is going to sell me the 100,000 or 150,000 miles I need for a First Class international ticket - if they did, nobody would ever buy them for $7-10,000.
</font>

Go to the Business & Agency Programs section of AA's website. You can buy 1,000,000 miles for $24,650. If I owned a business where I was flying my employees overseas in Biz or First, I'd give this a serious look.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by singlemalt:
Go to the Business & Agency Programs section of AA's website. You can buy 1,000,000 miles for $24,650. If I owned a business where I was flying my employees overseas in Biz or First, I'd give this a serious look.</font>

There are a couple of problems with doing this with the AA program. From the Terms and Conditions:

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">In no event will Company distribute AAdvantage Miles to Employees for use in Company's business travel.</font>

Obviously, this sort of scheme has occurred to them. Since I suspect that it was one of their major concerns when they launched the program, I would imagine that they're going to be on the lookout for suspicious activity.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">In no event will Company provide more than (i) 35,000 AAdvantage Miles to an individual Employee, Customer or Donor during any 12-month period ... unless an alternative mileage cap is agreed to by American.</font>

Even if you ignore the first rule I quoted, the annual limit per account effectively puts a damper on any plan to use it as an alternate way for the business to pay for international business or first class travel.

OK - ya got me. I have to admit I was unaware that airlines would sell me unlimited amounts of miles. In the past, I was aware you could buy miles, but it was typically limited to 10 or 15 thousand miles per year.

Shows you what I know.

Is the all airlines, or just AA and CO and maybe a couple more.

Still not as cheap (BA only) as buying Randy's magazine, but still attractive.

I think all the airlines (or at least the US ones) do this. I recall hearing that UA took in $2 billion from selling miles (to car rental companies, credit card companies, etc.) last year.

I see no real problem with points 1-5. At the end of the day, you are paying the card company 1.5-2% and the card company is most likely paying about .85c per mile.

As such, this would lead to (in Australia) a business class flight from SYD-LAX return for $1360 (160,000 miles). Now this seems cheap but when you think about it is not really. Firstly, the banks are buying as billions of dollars worth of travel off the airlines. I am sure if my company was buying a billion dollars worth of travel off an airline (note at $2000 per flight this is 500,000 seats per year or 1369 per day!) I would want business class flights for under $2k between SYD-LAX and NYC-LHR etc. Secondly, they are VERY VERY tight with the number of seats they release (at least Qantas is). So the airline wins, the credit card company wins and you win.

At the end of the day, they are not losing any revenue from you (as most people with points would not have bought any other fare but Y) and they can select the flights they want you to be on or even decide they you can not travel between two points during some period.

Note that this model does not even mention all the money the banks pay the airlines that result in miles never ever being used.

If you're an eBay seller (really a sole proprietor), you can build up a lot if eBay fees, postage costs (a biggie) and, where possible, your own purchases for resale are charged on a good rewards-paying card.

Then again, if you accept PayPal (which is almost mandatory), you give it away and then some in the fees they charge. It's likely to get worse before it gets better, too - the eBay integration makes it harder for someone else to compete, and PayPal acts more like a monopoly with each passing month.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by 1K_From_SNA:

It won't work!

There is no such thing as a Widget!

http://www.flyertalk.com/forum/biggrin.gif</font>


Actually, there was a product sold back in the 80's called "widget", it was a straight edge razor blade attached to a plastic holder that allowed the purchaser to scrape, say a sticker on a window, with ease. It did not cost $5,000 though.