nako

Common sense (to me, anyway) dictates that we play by the rules that we're given. I don't think it's particularly honest to engage in an activity - knowing full well it's against the rules - that is going to hurt a business. This is mostly because in the long run, we're the ones who pay for it (in the form of higher prices).

Theft risk is, as I said before, just a part of why these policies are in place. The other reason is that each transaction will cause the business to lose money, due to the merchant transaction fees. If I go in and use a credit card to buy $5,000 worth of gift cards with the sole intention of cashing them out, the store not only would have to give me the $5,000, but they'd also have to pay the credit card fee. Of course, that's the cost of doing business, but if a 2 percent fee means that they'd be losing $100 per transaction, then they have little incentive to offer that service on a permanent basis. Not only that, but they would have great incentive to stop the flow of loss out the door by raising prices on other items, which will have a negative impact to me and to other people.

I've said it before, and I'll say it again - I have no problem with mileage schemes that play by the rules. When PIN-based debit card transactions earned miles for money orders, then that was the rule we played by. But if we're going to sit here and find new ways to beat the system that violate the rules, then I think we also have the duty to realize just how that activity will affect other people - as well as ourselves as consumers.

I do also realize, though, that I'm in a distinct minority here, and that situational ethics reign supreme here on FT, so your mileage may vary.

Mike

seoulmanjr

Situational ethics indeed. (sarcasm dripping a bit..) I don't think its fair to call Marathon Man out for lost merchant fees on a CC transaction and meanwhile defend exploiting loopholes or mileage runs that occur within the rules when it comes to a purely ethical debate. In both cases, your actions to get the points fly in the face of the intent of the program and in the end are costing the merchant money rather than making them profit. Being content to justify the fact that you did so within their rules or beyond them ignores the fact that the merchant faces a negative impact from you doing so when all is said and done. It may be simpler to calculate a 2% merchant fee and be able to point to it as real losses, but just because it is harder to account for the cost of abusing an ebay anything points program or unrealized potential revenue on a 12 segment mileage run during a busy day that all technically occur within the rules doesn't change the fact that they have real-world negative impacts on the merchants.

My beef with your posts is that you're calling someone out for one thing that has a remarkably similar impact as something you're defending. Even if you exploit a merchant within the rules, you are still exploiting them. For the record, I'm on the low ground. I will go for MRs. I love loophole schemes. I am willing to bend the rules. But I don't for a minute pretend that it all doesn't have just as much of a negative impact on the merchant as when someone is breaking their rules outright. Judge me as you may, but I'm OK with that so long as I don't feel like I'm really doing something I'm uncomfortable with or breakign the law, committing theft of services, fraud, etc. If you're going to take the high ground, take the high ground all the way.

Diff'rent strokes for diff'rent folks. YMMV.

peace,
~Ben~

nako

seoulmanjr -

We're going to have to agree to disagree, because I still don't think that you can completely equate the two scenarios. I think a business has the right to set its policies the way they do, and if they want to have it set in a way that may cause them to lose money, then that is their prerogative. If they don't want to lose money, they can change the rule. That choice is theirs.

My opinion is that there is a fine line between okay and not okay, which is largely dependent upon the policy set by the business. If an airline, bank, or store sets forth a policy that might cause them to lose money, then that is their cross to bear. Either they accept the loss as a cost of doing business, or they change their policy. In the schemes where we violate their policies, they don't get the choice. The financial loss is forced upon them, which then comes back upon us - the consumers.

I won't deny the fact that these schemes "fly in the face" of the intent of the program. (In fact, I've expressly acknowledged that - it's the whole idea behind the definition of a loophole.) Nor will I deny that the allowed loopholes don't have negative financial considerations for the business involved. But a business has the right to make their rules the way they want them, even if it does lose them money. Where I have a problem is when we take that choice out of their hands by violating their rule.

Mike

scooper

Although its not for miles, local grocery store allows additional cash back up to $50 (over grocery cost) for Discover card purchases. And no, Discover does not treat them as cash advances -- on statement looks like total amt is for groceries. So, I try & use instead of ATM when I need cash. I've never heard of a limit, I suppose one could withdrawal $50/day or more(.50 Discover cash back rewards..frankly, I don't have time for that.

chexfan

Realistically... a possible situation.

MONTH 1-
You start w/ 20,000 miles in your FF Acct.
You drop $5000 at Home Depot on... whatever.

Month ends. You pay your CC bill. Miles get deposited.

You have 25k in miles and you redeem an award ticket. Your FF balance is 0.

Month 2-
You return the $5000 in goods to Home Depot. Your account is credited. You don't use that credit card again. End of the month comes w/ a -$5000 CC balance. But now your short 5000 miles.

What happens then?

ned

[QUOTE=nako]
When PIN-based debit card transactions earned miles for money orders, then that was the rule we played by.

Please explain to me how it is ethical to use a miles earning debit card to buy money orders while it is unethical to use a miles earning credit card to buy money orders. Someone pays for those miles. Or in your judgement, is it ethical to take advantage of a credit card issuer but unethical to take advantage of a merchant?

lin821

If the CC you use is WorldPerks Visa, you won't get any more miles for using the card until you "pay back" the 5Kmiles by charging the card with equal amount. The miles-earning wheel will starting turning again when you hit the $5001 mark. It doesn't make any difference if you request a "refund" check from the CC company. Not sure if the other banks are on the same boat though.

gemac

At this point, nothing happens. You are sitting there with a $5,000 credit on your CC account. It you proceed to use the credit card normally, the next $5,000 of charges will not result in miles, until you get your balance positive. At this point, you have paid $5,000, and gotten 5,000 miles.

If you try to cancel the credit card, and get them to issue you a check for $5,000, it depends on the T & C they sent you when you got the card (and you did read all those pages and pages of tiny print didn't you?). They could either refuse, and require you to charge $5,000 more, which puts you in the situation above. They could refund slightly less than $5,000, say $4,750, in which case you have paid $0.05/mile for your 5,000 miles. Or they might write you a check for $5,000 if you have been a customer for a long time, and charged a lot for that time.

cordelli

It's a violation of every merchant agreement I've seen to return cash for a credit card transaction, because it becomes a cash advance, and the credit card company loses out big time on the cash advance fee. Some stores do it, and I know of several places where say you buy $20 worth of gas, they will let you charge $400 and give you $360 back in cash, with the clerk making a fast $20.

You would be better to find a friend with a paypal account willing to launder it for you until Paypal catches on.

Meilensammler

There are possibilities to create miles without doing harm to anyone. my company for example has a merchants agreement with Visa and Mastercard with a disagio of about one percent. So in theory I could sell you a travel voucher for lets say 10.000 Dollars, charge your card for this amount and you get the miles for this transaction. If you decide not to use the voucher you could return it for a full refund. However somethimes it happens that you no longer have your card or for whatever reason you want the money back in cash. So I give you 9.900 Dollar (because the cost for the disagio has to be covered). Now you have 10.000 miles in your account that cost you 100 Dollars. According to citicorp this is against the rules but "if you do it at your risk we would not mind since we earn money on every transaction". Dont get me wrong: I would not do this but it certainly will work.

seoulmanjr

Good post & well said. ^

peace,
~Ben~

cepheid

nako's post involved PIN-based debit cards, which operate quite differently than credit cards. First, being PIN-based, the user of the card must have the right PIN on the spot or the transaction won't go through. On the other hand, you don't need any verification to use a credit card, so it's much less secure (most clerks will never ask for ID). So that makes debit cards less likely to be stolen and hence significantly reduces the liability for the merchant. Second, merchants pay a lot less for PIN-based transactions than they do for non-PIN transactions (whether with credit or debit). The card issuer charges less for these because they're more secure and hence there is less overhead with chargebacks and other liabilities.

Finally, if the merchant ALLOWS using a PIN-based debit card to purchase a money order, then that's their prerogative and there's no reason that it's unethical to do so. They will pay the transaction fee for it, but they've agreed to do so. Chances are likely that the fee they charge for the money order (probably around $1.00) more than compensates for the card issuer's fee for the PIN-based transaction. If the merchant chose to allow using regular credit cards to purchase the money order, it wouldn't be unethical either, because the merchant understands the costs and risks associated with allowing this. However, because it's inherently much more risky, merchants won't allow credit cards for money order purchases even if they DO allow PIN-based debit cards (which they no longer do). The point being if they DID allow it, they must understand the costs associated with it and there's therefore no ethics issue.

I should point out that neither of these scenarios takes advantage of the card issuer at all. The card issuer gets paid by the merchant and by the consumer (through fees or interest).

On a related note, I use a credit card that pays me 5% cashback for shopping at grocery stores. I always pay the balance off each month so I never pay finance charges, late fees, or any other fees. The credit card company charges less than 5% for their transaction fees, meaning they are actually LOSING money by me using the card (since they make no money from me directly and the cashback they pay me is more than the commission they earn from the merchants). Do you think it's unethical for me to do this, knowing that the card issuer is losing money on me despite the fact that everything I'm doing is exactly within their rules and card agreement?

Alternatively, many stores offer so-called "loss leaders" that are being sold BELOW cost just to bring in customers, in the hopes that those customers will purchase more products and bring in increased revenue. If I go to a store and purchase ONLY the loss leader items, using a credit card no less, then the store will be losing money at every step of this transaction. Is this also unethical?

(I'm not trying to flame, I'm interested in your opinion on these. Both situations "take advantage" of the merchant [or card issuer, in the first case], but through a totally legitimate means that follows all of the merchant's rules and policies. They have specifically enabled and invited people to "take advantage" of them in this way, so is it unethical to do so?)

ned

“I should point out that neither of these scenarios takes advantage of the card issuer at all.”

If one is using Pin based debit card transactions to purchase money orders for the sole purpose of churning large charges through a miles earning debit card does this not take advantage of the card issuer who is purchasing those miles?

crossover

If a merchant has policies that allow for the possibility of getting a cash refund for items that were originally purchased with a credit card, then how is it "not playing by the rules" to take advantage of these policies?

Moreover, as a customer do I even have an ethical obligation to familiarize myself with any policies in the first place? I simply make requests for what I would like to do, and if my request is against policy, then it's up to the merchant/employee to enforce the policy since I am under no obligation to even be familiar with the policy at all.

nrr

Previously, one could purchase US Savings bonds as a credit card transaction (I think the limit was $50,000 per year per type.) Bonds purchased before 2/2003 could be redeemed after 6 months; after that date it is 1 year. This was a very good way of accumulating miles, bonus points, etc.. (I got lots of Delta miles that way...)
Unfortunately this method of purchasing sb's is no longer available.
Does anyone know of something similar?