Ethics of hoarding points for free?
 

Over the past few years I and my family have accumulated $35k worth of points for free. I have also redeemed them for travel worth around $15k. It is incredible to receive so much for free. I have some scruples now about doing this. Is this ethical?

I see it as the cost of doing business for large companies. Also in a way you are capitalizing off the stupidity of average Joe's. The average Joe signs up for the credit card and only accumulates debt. Thereby their loss is your gain.

It is completely ethical. Why wouldn't be? The people giving you the miles are OK with it, so do it.

I think charging 18% interest on credit card debt (and jacking up fees and rates when legislation is put into effect to regulate credit cards) when the Fed charges approximately 0% is unethical. Whatever miles or points I have gained in exchange for obtaining and using a credit card or purchasing a product is totally cool with me. And noting is "for free". The companies award miles or point to generate business, and wouldn't do it if it it were not, overall, successful and profitable for them. No ethical angst whatsoever.

Send it to the Ethicist.

Yes, you are capitalizing on Average Joes, but how is this different from any other advertising campaign?

You could ameliorate your guilt by spreading the word about good money sense. Of course, that would put these companies out of business and there wouldn't be sign-up bonuses anymore.

Good one, but I don't particularly agree with The Ethicist many times..

I see nothing wrong with capitalizing off the stupidity of the average Joe. They have the same opportunities I do.

Mike

The miles incentives has you spending alot of money on their cards etc.... All about generating business!

Miles and points are an incentive program, just like any other incentive program - why would it be unethical? They are not free. Their cost is calculated and included in the cost of doing business, in the cost of the rates and fees they charge.

Nothing unethical whatsoever. They offer miles. You earn miles in accordance with their program. They have succeeded in their efforts, as have you. No one has been taken advantage of. Not everyone takes full advantage of sales promotions, but some do, and that was understood by all involved. Enjoy the fruits of you efforts. You earned every bit of them honestly, and I'm sure that the entities that issued you the miles would agree.

Research has shown that when a product is pretty much the same for everyone, and its repurchase frequency is high, one the most effective ways to spend marketing money is on loyalty programs. If airlines, etc., didn't have these programs, or if the programs didn't work, they'd need to do something else - which would cost them more.

So, think of it as doing them a favor!

(Slightly tongue in cheek, but the basic facts are correct.)

Higher Ethical Standards???
 

We rationalize lot of our activities and keep cashing in on "opportunities". It is only when our conscience starts to hurt that we stop and re-evaluate our behavior. It appears that you have reached that point. So, you must live with your newfound "higher ethical standards". As far the rest of us, we are happy with what we are doing. Please spare us the soapbox sermon. Thanks!

I have reached the point where I do not tell anybody else about it. I used to believe people thought I was "smart" for doing this. But after my advice falling on so many deaf ears I realize people just think I am crazy, cheap and unethical...

They can't think you are "smart," because that would mean that they are "stupid."

Here's another example. Companies regularly offer mail-in rebates on products, rather than simply lowering the price for everyone. Why? Because then they can market them at the net after-rebate cost, knowing full well that a substantal percentage of consumers will never bother to send in the rebate, or not provide all the correct documentation, or that some will even get lost in the mail. Overall, they calculate the marketing costs and return on investment and decide to offer the rebate as an incentive based on conisderably less than 100% participation. Same with gift cards. They are counting on all those who will lose or never fully use them.

So if you buy and send in and receive the rebate you are entitled to or use every cent of your gift card, are you unethically taking advantage of the average Joes who don't???

They are a bribe
 

Frequency programs are a really just a bribe. Society views them as acceptable though, so we don't actually call them that.

Don't get me wrong. I am a member of multiple programs myself......

I don't think it is true that getting rewards happen at the expense of the average Joe. The rewards are taken out of the merchant fees; if the credit card companies didn't make at least a small profit on us pay-on-time reward maximizers they wouldn't give us credit cards.

That said, I do think the whole system with merchant fees leading to rewards is a bit screwed up. It would seem that in this day and age the merchant and I could make a deal where I got a few percent discount and he was paid directly out of my bank account (~debit card), thus cutting out the credit card middle man. For reasons I don't understand, however, it is illegal for merchants to charge more for customers using credit cards, even if they have to pay steep fees.

That being the case, it normally isn't possible to get a cash discount directly so we frugal optimizers have to use a credit card for the cashback and rewards, even though we have no need for credit.

It is probably due to 50% (give or take a few percentage point) of consumers who use CCs, carry the revolving debts - in other words, about 1/2 of the credit cardholders spend what they cannot afford to pay off each billing cycle, let alone using CASH (debit card) to pay for what they buy.

So the cash discount become a "discrimination" to about half of the consumers.

I agree with your last paragraph - this is the few ways we the financially responsible folks can actually get some rewards to our good behavior, in a society that seems to constant reward BAD behaviors. (think the bail out of the banks and the housing market as the prime examples).

Why would you care about how others think of you? Your self-esteem does not rely on how others see you being smart, I hope.

As for the ethic front, others have offered lots of good arguments. I would add one more, we the financially responsible folks taking advantage of the marketing gimme from the banks, are far more ethical than those who took out Liar Loans to buy houses they could never afford and then default on their mortgages while blaming the banks and the society for their failures. (not to say the banks are not guilty, they are. But the homeowners who bought what they could never afford thru creative financing are just as guilty as the banks which loaned them the money.)

Right on!

I can't think of a business that practices in a more unethical way than credit card companies. How ethical is a 33% interest rate for example? Things happen to people (not all people in debt are stupid) and credit card companies show no mercy. In my opinion, I am doing the ethical thing by turning the tables and taking money from them that is freely offered.

No sermon was offered, just a point of view. Opinions are welcome here.

Here, here! (Or is that "hear, hear!"?) Anyway, well said!

I absolutely agree with this!
 

So true. Consider the fact that the recently passed CARD Act, which reduced interest rates banks can charge, has opened up a huge can of ingenious new fees and fines (see WSJ.com). The irresponsible masses whined and bleated to their congresscritters so that those of us who never carry a balance would feel some of their pain.

Increasingly, we will see mileage/cashback programs and the like discontinued as banks spread the hurt. So of your conscience bugs you don't worry too much, pretty soon your financial responsibility shall be properly punished.

I've got a couple - how about the cell phone business, and the tobacco industry.

definitely the cell companies....see the new at&t commercial where the guy is try to get away from the authorities using the GPS on the phone lol

I don't follow your logic. Companies pay for the miles, which as you correctly state becomes a cost of doing business, however they are getting something in return. They are getting your attention, your loyalty, your revenue. It might be in fees or sales now, it might be in advertising revenue later; it may take many forms. As for capitalizing on the stupidity of others... you might be in a position where the company spends more on you than you give them in return because there are enough other people who generate more revenues than they cost, but you aren't harming those people.

How is it unethical? If I'm willing to let you borrow money for 50% APR plus a $10 transaction fee, how am I being unethical if you have the opportunity to simply say "no thanks"? Banks aren't in it for philanthropy; they are profit-seeking entities, and perfectly entitled to be such. If none is willing to offer you a rate or fees that appeal, then don't use their products.

I agree. Banks need to be compensated for the risks they are taking by offering these people credit. For that reason, I believe the interest they charge is fine. What starts becoming unethical are the ways additional fees are assessed that seems to not cover cost of doing business but are sneakily added to bolster banks' bottom lines.

Excluding fraud (for example, not informing you of fees and charging them without permission), why would fees that are purely intended to increase bottom lines beyond break-even unethical? Banks should be trying to charge you as much as they can without losing their edge to competitors who might be willing to undercut them. More fees aren't always better... charge too many and customers will go elsewhere and/or reduce their activity level... but this is very distinct from being unethical.

I think of them as kickbacks. :)

If I'm negotiating a contract for my company and a vendor slides me a duffel bag with a 10% cash bonus under the table, that's considered unethical and likely illegal.

FF miles and hotel points aren't much different. I agree to consolidate my business travel with one vendor, and I get a nice personal kickback for doing so. It doesn't matter whether another vendor has a cheaper flight or room. Once I'm on the "status train", I'm not getting off.

Fortunately, the FF game is now so embedded in modern business travel culture than as long as a few common corporate travel policies are followed, the whole game is considered acceptable. Since it doesn't have to be hidden, it's generally considered ethical with perhaps a few gray areas...

Nail on the head ^. That is exactly why banks are doing it as well. Although we all would never -ever- have a late payment or leave a balance on a card, the banks are confident that one or two of us will slip up. All they need is you to do it once and they likely break even, twice and they start making money.

The use of FF programs as described by pinniped above does have some ethical issues. But regarding "taking advantage of the Average Joe" because he is enticed by the offer of miles but doesn't successfully exploit the opportunity is not an ethical problem, as far as I can tell. Joe would not benefit, as far as I can see, if you did not exploit the miles opportunity, and he does not suffer more because you do use the miles. As far as I can tell. Someone else may be able to enlighten me...

I think the main argument is the whole "total cost of doing business" bit.

For example, the very fact that a merchant accepts American Express means that I'm effectively buying 1 Starpoint (or whatever) per dollar by shopping there. If I use cash, I'm still paying for the Starpoint - I just don't receive it. Therefore, if a merchant accepts Amex, I must use Amex.

Perhaps oddball logic, but it's basically the same with all of these deals. The airline bakes the cost of a fraction of a future trip into every one of my paid trips. If I never take the future (award) trip, I've still bought parts of it over time.

Does it bother me? No. I definitely don't want to see non-EQM/RDM fares proliferate amongst the airlines I use. I definitely don't want to see merchants tacking on fees every time I use a credit card. But I can see where one might muse "What would the world without miles look like?" It's even more complicated now that the mileage programs are profit centers in and of themselves.

This is a specious argument.

If accumulating reward miles and points is unethical, so are so many other things in life, even everyday things such as using your credit card. After all, merchants have to raise their prices to cover the card transaction fees. Cash customers usually pay the same price as those who pay with credit cards. And what about grocery store coupons? I'm not a coupon clipper, but I know that I'm missing out on savings that some enjoy.

I have no ethical angst about using reward programs. It's a win-win situation. I win when I can redeem for an award. The merchant wins because they get me as a loyal customer. When I reserve flights and hotels, I am far more likely to reserve with those programs that offer miles/points that I accumulate.

But I will have to consider this seriously later this month. My wife and I will be flying round trip from the US to South America in J on AA using my miles. And we've got a week reserved at the Marriott Buenos Aires using my Marriott points. I promise to feel guilty during this trip.

The thread brings up questions about how kindly we view the credit card behemoths we travelers "profit" from. Has it been ethical for card companies to drive (ok, "implicitly encourage") millions of Americans to go into debt over the last generation and effectively break the financial backs of our middle and lower classes? No, it hasn't been. But, at the same time, we use their cards, pay their fees and travel on their dime, we perpetuate their largely unethical existence. Is that ethical? Hmmmm...

How have banks been unethical in encouraging irresponsible borrowing any more than Hershey's has been unethical in encouraging irresponsible overeating? If banks offer me appealing rates that I may use to swamp myself in debt or Hershey's offers me cheap chocolate on which I may gorge myself into obesity, they are providing me a useful products that I may use to my benefit if I'm responsible. Hardly unethical.

Banks buy miles and are selling them for a higher price than they pay for them. Sure - clever customers might be getting them for a much lower price than their peers, but the banks are happy to keep buying and selling them because on the whole they turn a profit doing so. It's no different than a retail store that is happy to lose money selling teaser items to frugal customers because it also leads some of these same people as well as others to splurge on their high margin goods.

If anyone became a victim (banks of their customers alike), there is an easy out... stop doing business involving miles.

Chase, Citi, et al have teams of lawyers and experts poring over the fine print of my dealings with them looking for any and every loophole and nefarious gray area they can use to screw me any way they can. From my tax dollars to my credit card agreement. If I let my guard down for a moment and exposed a weakness where they thought they could take another buck from me (of if my fine government exposed a weakness that I am on the hook to pay for) I am quite certain the fine folks in their management would go for the jugular, take no prisoners and leave behind nothing but scorched earth and then would pat themselves on the back and say job well done. Banking these days is an adversarial endeavor. I get a warm fuzzy feeling when I burn a bank for a bunch of miles and never give then another dime of undeserved business.

I am also happy that the airlines profit from selling them the miles as well. At least the airlines do deserve to profit from my business.

unless i am misunderstanding the OP point...and being a newbie to this board...as i read the forums i think it is totally legit and maybe even "foolish" not to accumulate points/miles from cc purchases and the like..maybe what the OP and i find myself thinking about is the gray line regarding opening and closing multiple cc(the same ones), churning coins, etc...if you asked 100 people nobody i think would have a problem with miles from everyday purchases but some percentage would think it was "unethical" to churn cc,coins etc..or at least not be willing to do it..that was how i understood the OP's dilemma..

Could you give an example or two? Certainly you don't mean to suggest that clear terms that don't provide much opportunity for bucking are tantamount to "screwing".

Shouldn't management's obligation to shareholders be to maximize profits in a legal manner? If customers are dissatisfied, as you are, they will move their business to another bank and thereby reduce revenues. For this reason, management has a natural incentive to be mindful of customer satisfaction. It is interesting that you are opposed to banks maximizing profits through fee structure but okay with the airline business, which does the same (and rightfully so).

Anyone thinking that way should be mindful of the fact that Citi finds the practice of allowing churning profitable because net revenues exceed the net costs. If this ever changed, they could simply make rules against it, reduce the bonus miles, or place additional restrictions on them. Recently, there has been suspicion they are doing exactly that, so there's no need for the OP or anyone else to feel badly for them... a failing business model will only last so long, as failure is the best form of regulation.

The banks define their own rules for allowable churning. There's no ethical question there whatsoever. It's clear that they own the rules; there is no way for the consumer to partially or completely evade them.

If you try to do so via identity theft or other false information, that becomes a legal issue not an ethical one.

These companies make their rules knowing full well that some people will look to earn miles with minimal cost to themselves and without benefiting the company. They are aware of the risks of offering miles and put in place the rules and requirements that make it worthwhile for them to offer these promotions. Following these rules as these "mileage hoarders" do does not cross any ethical or legal boundaries.