RedSun

You can go into the details if you like. I'm sure Costco is not paying more than 2% swipe fees to Citi.

It is known that Citi DC gets probably most of the shut-downs. Do not think Citi would be prepared to payout $2,000 in this case. This is not what this intended for (credit cycling). It poses risks to the bank.

ChrisFlyer66

I was just trying to say it is not really a $2000 loss (maybe a loss, but much less than $2000). I wasn't disagreeing with anything else you were saying or suggesting. I absolutely agree that cycling your credit limit can lead to shutdowns, especially with Citibank.

RedSun

I agree with you. You can certainly calculate the true "economic loss" and more. Some of the large banks, like Citi, BA and Wells Fargo are known to be pressing very hard on those credit card portfolios to generate profit. The cost cutting will certainly gets into the credit card payouts.

Lobachevsky

This argument makes no sense. If the bank loses on $100,000 in purchases with a 2% card in a month, doesn't it also lose on a $20,000 purchase with a 2% card in a month? The swipe fees are the same for spending $20,000 over 5 months as for spending $100,000 in 1 month.

RedSun

You are the one has been arguing it again and again.

If Citi does have net loss from paying out the 2% CB, it would certainly rather lose on the $20,000, not on the $100,000 for the month.

josephstern

So then why come out with the card at all if they lose on accounts large and small?

As a merchant who just reviewed his July 2019 interchange statement, I can tell you that my average fee was 2.3%. That's average. That includes debit cards. Plenty of fees per card are over 3%.

Lobachevsky

Moi Where did I ever say the banks lose money by offering rewards cards?

If the banks lose money, why would they raise anyone's credit limit for active spending (which is what many do)?

And, getting back to the earlier discussion, if the banks thought a credit limit should be the limit for a month's spending on a card, they could easily program it in. Simply don't make any more credit available, regardless of payments, until after the monthly statement closes.

DBFL

RedSun

Then sure just cycle the CL. Good luck. At least I get chance to see the light and won't get shut-down with the cycling.

There are always some people who just like to argue....

Lobachevsky

RedSun

Shut it down.

RedSun

Just like to add it. The manager at my local S&S grocery store says there are several HTs who come to the store and buy the max $5,000 GCs everyday. So it is about $150,000 per month. And she said some are couples. So it is $300,000 per month just one grocery store alone. They certainly could be doing Stapes, OD/OM, GCC, GCM and more. Sky is the limit.

I really admire their work ethics and courage. They generate a good return and take a lot of risk at the same time. I wish them the best luck.

littlewinglet

In this business if you haven't been shut down once or twice, you're not working hard enough

Chris58

You're not considering a Bank's Government Regulatory Requirements under the BSA, "Bank Secrecy Act", I.E. "Know Your Customer".

Don't assume ALL Credit Card shutdowns are in any way related to a bank's perceived rewards losses.

Most banks issue Credit limits based on a combination and consideration of the external risk model they purchase from FICO, their own internal risk model, and the prospective customer's DTI, (Debt-To-Income Ratio).

If a prime borrower. (based on Internal/External risk model scores), tells a bank they make $100,000/year, is then issued a Credit card with a $20,000 credit limit, and then proceeds to charge and pay back in full their full pre-tax annual income reported in a single month, (perhaps repeated for several months in a row). What exactly should the bank conclude from this activity?

radonc1

From Google:
Cash equivalents are stored-value products such as gift certificates and gift cards. The IRS specifically defines these instruments as cash equivalents and states that their value is considered taxable income to the recipient, regardless of dollar value. (when talking about giving a GC to an employee).

So if Discover says that they do not give the 2% rebate on cash equivalents, then GCs are excluded.
The fact that it took them 1 year to discover that a person was receiving a disallowed benefit has nothing to do with their TOS.
And since, logically, it is impossible for them to claw back the already received payments, they just went the next step and shut down the transgressor's account.