Why do banks care if you MS?
Oct 31, 2022, 1:04 pm
#1
Original Poster
Join Date: Dec 2014
Posts: 200
Why do banks care if you MS?
Whether you spend $100k on gift cards or random junk, they get to collect their processing fee regardless, no? So I'm curious why they care. Clearly the points categories they offer are profitable for them otherwise they wouldn't offer it to begin with, so if anything I would have thought that banks would like MS to rack up transaction fees.
And I know people talk about money laundering suspicion at times and I'm sure it's an issue....but it's clear that tons of MSers are just trying to rack up points.
And I know people talk about money laundering suspicion at times and I'm sure it's an issue....but it's clear that tons of MSers are just trying to rack up points.
Oct 31, 2022, 1:25 pm
#2
Moderator
Join Date: Jun 2003
Location: Miami, Mpls & London
Programs: AA & Marriott Perpetual Platinum; DL & HH Gold
Posts: 48,958
The same reason that the Cash Advance limit is typically less than the card's Credit Limit. Credit risk. Gift cards are simply another form of Cash Advance. They are readily convertible to cash without paying the credit card bill, and without paying a Finance Charge which would compensate the bank for the risk.
As consumers our responsibility is to understand card issuer policies and practices. It do not even slightly matter if we think they are mistaken or ineffective.
As consumers our responsibility is to understand card issuer policies and practices. It do not even slightly matter if we think they are mistaken or ineffective.
Oct 31, 2022, 1:33 pm
#3
Join Date: Mar 2009
Posts: 2,295
Additionally, it's not solely true that "[c]learly the points categories they offer are profitable for them otherwise they wouldn't offer it to begin with" - the reason "regular spend" is often a bonus category (such as groceries) is to keep that card top of wallet. If the card issuer breaks even giving double or triple points on grocery or travel spend, they make more when you use that card at places where they only give 1x.
Oct 31, 2022, 1:35 pm
#4
Join Date: Jan 2013
Programs: All of them, Katie
Posts: 224
A bank PR representative couldn't have stated this in a more anti-consumer way. The countless instances of banks being fined or successfully sued for misleading, deceptive, or predatory practices would serve as counterexamples to this viewpoint.
Oct 31, 2022, 2:06 pm
#5
Join Date: Jan 2015
Location: Champaign, IL
Programs: Total Rewards Diamond, Wyndham Diamond, Marriott Gold, AA Gold
Posts: 564
The "top of wallet" theory listed above is correct.
Additionally, MSers have a near 100% redemption rate. Most of the general public is more like 70%. Also the general public let's points expire at times. MSers do not.
The overall profit picture of an MSer is very different than that of the general public.
This information came from a financial industry professional(credit card program specifically) that is not myself.
Last edited by pwd847; Oct 31, 2022 at 2:36 pm
Nov 1, 2022, 12:25 am
#7
Join Date: Jun 2012
Location: New England
Programs: American Gold, Marriott Gold, Hilton Silver
Posts: 5,644
In the US, there is the Bank Secrecy Act which requires financial institutions to keep records of your activities, and to assist US government agencies in detecting and preventing money laundering. MS looks like money laundering. Even though what we are doing (MS) is legal, most institutions would rather not have you as a customer, than to have to keep all those records and do all the paperwork required by law, because they risk huge fines should they mess up that paperwork and recordkeeping.
Nov 2, 2022, 2:11 pm
#8
Used to be 'Travelergcp'
Join Date: Jul 2003
Location: New Orleans
Programs: AA Plat, Marriott Gold, Hyatt Globalist
Posts: 2,826
That’s an excellent point. There are two sides to this- the credit card side, which largely doesn’t care as long as they’re not losing money on the rewards, and the bank deposit side, which absolutely cares due to the compliance issues you mentioned. And sometimes they’re they same institution…
Nov 16, 2022, 7:10 pm
#11
Join Date: Mar 2005
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