Are unprofitable customers "creditworthy"?
Dec 19, 2018, 12:34 pm
#16
Join Date: Aug 2015
Location: SFO
Programs: AS 75K (OW), SK Silver (*A), UR, MR
Posts: 3,332
Let’s say we move the bar. What if the ultimate goal is not merely to distinguish between good and bad risk, but rather to identify bad risk to the extent it’s still profitable?
Judy: It's not very complimentary. And nothing else?
Scottie: No.
Judy: It's not very complimentary either.
Vertigo (1958)
Judy: It's not very complimentary. And nothing else?
Scottie: No.
Judy: It's not very complimentary either.
Vertigo (1958)
Dec 23, 2018, 11:11 pm
#17
Join Date: Aug 2017
Programs: Hilton Diamond, IHG Spire Ambassador, Global Entry
Posts: 2,825
I know Chase and Barclays are trying not to let churners like me get new cards. But there's a downside to this as well. I used to make sure to put regular monthly spend on my Chase/Barclays cards, hoping to have this help get me approved for new cards in the future. Now that it's clear that won't happen any more, I only spend where the ROI on that spend is worth it to me. So DW and I put a cumulative $6K each month on our HHilton cards, as that gets us 6X points on GCs at grocery stores. And $6K yearly "grocery" spend on each of our Everyday Preferred cards, as that gets us 4.5 points per $. But now our Chase cards, with the exception of the quarterly bonus on the Freedom card, only see a few small charges a year, just to make sure Chase doesn't close them for lack of activity. The ROI on our IHG cards, which we keep just for the annual free night certificate, is just not good enough to reward spending any significant amount on.
Dec 25, 2018, 10:44 pm
#18
Moderator: Manufactured Spending
Join Date: Jul 2011
Posts: 6,578
Who is profitable for the airline is different from who is profitable for the issuer, but it is generally the card issuer that is absorbing the risk of people exploiting these loopholes. When a customer takes the 100K signup bonus and then stops using the card, the card issuer bears the brunt of it. The airline is simply selling them miles.
If an airline insisted that all creditworthy customers be approved, the issuer would have to take a much larger risk. They would either refuse to do this, or compensate for it in some other way, such as by demanding a lower price for the miles they are buying. I don't think it is in the interest of the airline to go to bat for people who are clearly abusing the program.
Dec 26, 2018, 2:04 am
#19
Join Date: Feb 2011
Location: San Francisco, CA
Programs: Amex Platinum, Chase Sapphire Reserve
Posts: 809
Banks look at metrics like the average/median FICO score of their customers. Adding a churner (or even a spender who always pays bills on time) lets the banks also add a low-FICO customer - and collect interest from them - while maintaining the average risk of their portfolio.
Dec 26, 2018, 8:38 am
#20
Suspended
Join Date: Oct 2017
Location: Miami, Florida
Programs: AA ExPlat, Hyatt Globalist, IHG Spire, Hilton Gold
Posts: 4,009
Banks look at metrics like the average/median FICO score of their customers. Adding a churner (or even a spender who always pays bills on time) lets the banks also add a low-FICO customer - and collect interest from them - while maintaining the average risk of their portfolio.
Dec 28, 2018, 12:46 pm
#21
Join Date: Aug 2017
Programs: Hilton Diamond, IHG Spire Ambassador, Global Entry
Posts: 2,825
I don't understand how so many churners think they are somehow bringing good business. It's quite clear from all of the action banks have taken to limit welcome bonuses, is it is intended to get long-term customers in the door, and like you said, using other services as well.
Dec 28, 2018, 2:34 pm
#23
Suspended
Join Date: Aug 2010
Location: DCA
Programs: UA US CO AA DL FL
Posts: 50,262
An issuer (bank) might well be willing to accept lower creditworthiness, e.g. accept a higher risk of default from an otherwise more profitable customer. In the reverse situation, the same issuer might have less tolerance for poorer credit for a lower margin customer.