Biggest Ever Card Purchase + Maths
 

Biggest Ever Purchase on a Credit/Charge Card?

I understand that it is $2.5m for a painting on an AMEX card.

Which brings me toa an interesting question, the above trasaction woulfd hav earnt the cardholder 2.5m Membership rewards points. Enough for 25 Upper Class Roundtrip Flights to anywhere in the US from London. Now these would have an approx value of $150,000 (25*6000). Now does this mean AMEX is at a loss because if they made they std 3% handling charge on the purchase, they would have got $75k from the merchant?

Or has my maths gone wrong somewhere in the process?

Thanks,
Richard

Your error is assuming that AMEX's standard charge is 3 percent. The charge varies from one merchant and industry to another, but can be as high as 5.5 percent (and maybe even higher). AMEX's charges are much higher -- often double -- VISA's, which is why some merchants refuse to accept AMEX.

Bruce

The problem is really in the valuation of the award tickets. Amex doesn't pay for the tickets, it pays for the miles, perhaps at only about 1 cent per mile, which would leave it a tidy profit.

I take Amex as a merchant and have done for 20 years. They USED to be about double VISA, but now are about the same - about 2% for me, and often small business gets here for 1.8%. Yes, that seems lower than many USA merchants are slugged.

Lots of car dealers here take it for a $100,000 new BMW or Merc. They eat the fee as Amex does special deals on big numbers - always has for me anyway.

The painting deal mentioned above is no surprise if you have even seen what Sotheby's/Spink/Christies charge you at an Art auction!!! Think 15-20% "Buyer Fee/Commission". And the seller gets slugged darn near as much most times, plus Insurance, storage etc. For a few % they can live with a credit card, do the math. http://www.flyertalk.com/forum/smile.gif

Not to mention the worldwide publicity they got for it .. we still are talking about it!

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~ Glen ~

Another thought...Amex give 1.5 points per mile on Gold, Iam not sure on Plat, this guy may have even had the black card..

Another thought...Amex give 1.5 points per mile on Gold, Iam not sure on Plat, this guy may have even had the black card..

I hope it was a nice painting....I could do him one for a lot less.

Ferrari,

Re you sure about the points earning ratio. In the UK it is 1 point per pound regardless of card, I have UK Platinum and it still 1 point. The increased fee don't mean more points!!

Thanks,
Rich

I tried to charge a BMW about two years ago. (I checked with AmEx first to make sure it would go through - could be embarrassing otherwise!) The dealer declined, nicely. I said, equally nicely, something about their agreement with AmEx to take the card as payment for ANY transaction. They offered my LoJack (already ordered) at no charge.

Worked for me. The LoJack would have cost me a bit more than the miles would have been worth, but cost them much less than they would have had to pay AmEx. (It was a small BMW.)

BTW, I don't think all Gold cards get 1.5 miles per $. Platinum cards don't. I think it's just a special version of the Gold card with a higher-than-normal annual fee. It may be worth it if you charge a lot on an AmEx card.

What's a LoJack?

Actually, the aforementioned gold cards only earn 1.5 miles for transactions with certain merchants. I don't know of any AmEx that earns more than 1 mile/dollar for general purchases.

LoJack is an electronic system for tracking stolen vehicles. We have the equipment in several of our police cars to utilize if a stolen car comes through with the transmitter activated.

Efrem - Do you know if the agreement to accept the card for ANY purchase is correct with other cards as well? A couple of years ago I tried to use my AA-visa to purchase a car and was politely refused. They finally agreed to put about 1/3 of the price of the car on the visa, but not the whole thing. There was plenty of credit limit left, that was not the issue, they just did not want to pay the CC fee.

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Fundi

They also want the sale to be final. If you charge the whole purchase, you MIGHT be able to return the car under the Fair Credit Billing Act. That is a legitimate concern.

Bruce

Efrem, very interesting. The same thing happened to me about 4 years ago (BMW dealer, had the Amex card in the window...). I called Amex, and they said that it is the dealer's discretion as to what they will accept the card for, despite the apparent commitment they make by posting the card-accepted sign on their premises. Finally, they (BMW dealer) said that since they accept the card for repairs up to (I forget the exact amount) about $4,000 for repairs, they would let me charge that amount, which I, like FFFundi, did.

About the 1.5 points per $ spent... I don't know if it's available in the US or the rest of the world, but in Canada Gold Amex holders can pay CAD$50 for the Amex "Points Accelerator," and received 1.5 points per Canadian dollar spent. Canadian Platinum cardholders get this benefit for no extra charge. When converted to US dollars, it works out to more the 2.25 points per US dollar spent.

Based on today's exchange rate, that purchase would translate into CAD$3,843,207, and 5,764,810 Amex MR points. While airline ticket options in Canada using MR points have been significantly curtailed with the demise of Canadian Airlines, last year that would have gotten you at least 46 first class trips on BA from, for example, Vancouver to Cairo.
Having recently done that trip on a CP/BA award and priced it out on Travelocity at more that CAD$18,000, conceivably those MR points could've gotten you CAD$828,000 worth of flights. That works out to about USD$550,000, or 22% of the original transaction.

All this doesn't include other discounts and promotions that Amex and Canadian Airlines had, nor the 10% bonus that Platinum card holders received for the last half of last year. Geez, I miss CP...

In OZ we get one MR point per $AUD spent. That a 2.8 benter deal than a UK member or 1.8 better deal than a USA member. A weak currency is not ALL bad. http://www.flyertalk.com/forum/smile.gif

Re cars, most prestige dealers take them for full amount of car. GLADLY. huge signs at dealer yards (and I mean HUGE!) saying Amex accepted etc.

Here is the deal. Very simple -

A new BMW is $100,000. The CEO is allowed new car of his choice to 100K under his salary package deal, and the company will pay the $100,000 and it is budgeted for. Company writes cheque for $100,000 and gives it to executive and he places into his Amex account, placing him 100K in credit. Cheque stub says "New car for Bill Gates - Acme Car Sales". Car dealer chanrges car at list or thereabouts, so who gives a toss about 2% on that basis. Phones Amex anyway, and they do a deal at typically 1.5% of that figure for a single sale. Amex processes charge no hassles as card is in credit to that sum.

No one loses. http://www.flyertalk.com/forum/smile.gif

1. Amex make dough at 1.5%.

2. Company pays 100K for car, no more no less.

3. Executive gets 100,000 points in Amex MR

4. Car dealer gets a sale at close to list on a luxury car.



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~ Glen ~

I dealt with a wholesale business, who were putting 5 Million AUD per month through their personal amex cards.

THey had literally Millions of points.

Alexbs, yes I guess spending $5M a month WOULD give you millions of points. http://www.flyertalk.com/forum/smile.gif

Frankly I always wondered when Amex would re-rate the points based on the cruddy dollar. I have about a million points, and moved that sort of amount to Starwoowd previously.

Yes, we have relatively limited use of the points via the Qantas + affiliates etc, but when I can get 11,000 km round Australia J Class trips like this with rather little points, we KILL the USA schemes when you think about it! To do this on UA would need 5 times as many points.

http://www.flyertalk.com/forum/Forum94/HTML/002911.html



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~ Glen ~

It must just be in Canada that the 1.5 points are applied, i think its great, i brought my Range Rover with my Amex....the only draw back was when Amex withdraw from my airmiles program (AC)

The program cost $50.00 per year...well worth it......

Oz, (or any other merchants out there)
Just out of curiousity, what's to stop the following:

You and I are friends and in cahoots. I let you (your company) charge X amount each month. You then write me a check for 98% of what I charged. (98% or whatever would cover your fees from Amex.)

I use it to pay off the charge, and the cycle starts over. Especially if I could get 1.5 miles to dollar -- I could really clean up.

Am I missing something obvious here?

-levi aka eastwest

Lojack is a radio transmitter that is activated when your car is stolen. The police can activate it, and then it emits a tracing signal so the car can be located. It's very useful, but only in areas where the police are equipped to track it. If there are not any police with the equipment where the car is then it's of no use.

Levi - Yep. TAX!!!!!! Why would I want to let you put say $100,000 thru my business and get nothing out of it??? My turnover gets boosted by that fake 100K. And there is this nasty man here called the Tax Commissioner who wants a CHUNK of that increased turnover. Then there is GST, then there is .... http://www.flyertalk.com/forum/eek.gif

And I get audited and say .. "hey man, get off my case - Levi got a free ticket to Greenland out of this deal". http://www.flyertalk.com/forum/biggrin.gif

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~ Glen ~

Besides the fact that it violate most merchant account agreements and the merchant can lose their teminal and merchant priveleges, etc. ?

cpd

Besides the fact that it violate most merchant account agreements and the merchant can lose their teminal and merchant priveleges, etc. ?

cpd

Most recently I used my Starwood Amex to pay for a new Mazda Van. I started by contacting the dealer, informing them we were in the market and advising them we would only purchase if we could use the card.

Last year, I paid for my new Lexus in full on my Aadvantage Visa card. Prior to presenting the card, I had obtained a letter from Visa International stating that refusal to accept a Visa card by a merchant is a contravention of their agreement. Although most attempt to, a merchant cannot limit acceptance of the card. You either accept it or you dont. When in doubt they should read their agreement with Visa/Mastercard.

I wonder if I could do this with my red Sox season tickets. Just $4000, but that's $4000 miles. They take visa/MC/Amex for regular tickets, but not for season tickets. Think I could press them on this?

Not being a businessman, I missed some pretty obvious ones . . . Thank you to everyone who took the time to answer my question. http://www.flyertalk.com/forum/smile.gif

-levi aka eastwest

tom & cordelli, thanks for your help with the LoJack. Whatever will you americans come up with next!

In Australia, a Visa card linked to Ansett Global Rewards program recently introduced this clause in their contract:

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The Card must be used wholly or predominately for personal domestic or household expenditure.

It may also be used for reasonable expenditure of a personal business nature.

We reservce the right to determine, in any instance, whether the use or proposed use of your Card has been or will be in accordance with this requirement.
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Ferrari, when did Amex have a link with AC's Aeroplan points program? It has always been CP's CanadianPlus that was the primary FF program in Canada. Now we are left with DL and CO as places to put these points, or Starwood but at a very poor exchange rate. [And of course, Amex's own somewhat inferior to its US program credit towards purchase of tickets.]

But Ken Hamer is on to something too, since we get 1.5 points (Amex Plat Canada) per Cdn$ and this converts at a 1:1 ratio to points in both US programs. That's almost twice the points per dollar than is given by Amex in the US, or by Visa and Mastercards associated with airline programs. As ozstamps points out, maybe there is one good thing in having a weak currency.

I recently put $10,000 on the DL Skymiles Amex as part of my purchase of a new Blazer. I signed up for the Skymiles card mainly just to make this one purchase. The mileage award was 10K bonus for the signup, 10K for the money spent (dollar for dollar), and a one-time 50K bonus for spending $10,000 in the first six months. In other words, a $10,000 purchase = 70,000 Skymiles! Due to Delta Double Miles on certain other purchases, I've continued using it, but will probably get rid of it when I'm due to re-up the fee in a year.

Only downside to the deal: the annual fee to get this card was $85, and I don't take delivery on the 50,000 mile bonus until Aug. or Sept. 2001.

Still, it was nice to sort of feel like I will get a couple of free plane tickets along with my new car.

BTW: You cannot use the GM Mastercard to purchase a new GM car and redeem the earnings on that purchase.

On this tangent, here is something I always do and others here might benefit from.

MANY places charge 3-6% "penalty" to use Amex. This actually is a clear breach of Merchant rules. Visa and Mastercard here frankly do not care, but AMEX sure does.

If I am in some carpet Bazaar in Turkey or a travel agent in the Falkland Islands as I just was, (for many $1000s) and they demand the extra fee, I always agree as long as they itemise it, i.e. Travel $3000 + 5% card fee = $3150, I sign for it. When account from Amex comes in I post the receipt and ask the $150 be "rebated to me and take whatever action deemed appropriate against the merchant"

Then it is Amex's call. I doubt with a rug shop in Instanbul that they bother .. not my problem tho. http://www.flyertalk.com/forum/smile.gif



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~ Glen ~

Shareholder.

My mistake, it was CP not AC.

I hope AC takes this up with Amex.

Excellent point about itemizing the card use fee. I've run into this from time to time and will most certainly follow your lead in the future.

Merchants are allowed to advertise their general prices as "cash prices," in which they buyer can pay with cash or check. They are allowed to add a 3% or so charge to process the credit card. However, they are not allowed to impose an upper or lower charge limit.

This is not correct as to Visa, MC, and probably the other major card brands. Merchants are not allowed to "surcharge." Some of the credit card systems allow merchants to offer a cash "discount" but require the posted price to be the one for credit card users. They can advertise a "cash price" but must post a credit price (possibly more prominently--I'm not sure).

Two car-related stories:

About 8 years ago, my sister and I went to pick up her new Saturn, $17,000. As we went in, I noticed the VISA sign, and suggested we try that; they accepted - $6,000 on her card (near Christmas, so she wanted to keep some open credit) and $11,000 on mine. This was back when a free ticket was still 20,000 miles, so we were way ahead. Plus she was 1½ months ahead on interest, since she had taken a (tax deductible) line of credit on the house that she had planned to pay with, and our card payments weren't due for 1½ months.

A few months later, I got a notice from my card company that they were upping my limit "to make sure it keeps pace with my needs".

And a few years later, I went with her to have the car serviced and noticed a discreet sign that "charge cards accepted for parts and service only." Yes, I'm sure they lost money on us.

The other story is that when I had a "small" accident in '94 (to the tune of $5,000 damage, my car only), my insurance company sent me a check made out to me AND the body shop. Makes sense - a lot of people wouldn't be able to cash a $5,000 check. But I asked (nicely) and they re-issued the check to me alone; if my rates are going to go up that much (and they did for a few years), I at least wanted to get the miles by charging the repairs!

[This message has been edited by johna (edited 01-18-2001).]

Tute, I can't speak for the USA, but I have been a merchant for Amex, Diners, Visa and Mastercard for 25 years. The official party line is NO, NO, NO, NO, NO.

Sure in Hong King etc, they do this everysecond of every day. Even on 49th Street in NYC on electronic goods they'll often try it on, in practice. But as a MERCHANT, they'd painfully castrate me here if I tried to do it. They simply cancel your merchant account - no contest. And as posted above as a CARDHOLDER I get Amex to rebate ME the 3-6% "surcharge" when they levy it.

"You don't ask, you don't get". Applies to Amex as much as to Airlines. http://www.flyertalk.com/forum/wink.gif

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~ Glen ~

ozstamps, are minimum and maximums allowed then?

Frequently Australia shops display a minimum $X required for a credit card purchase. Is this okay?

Also, Australia has an added element in using the business related chargings Fringe Benefits Tax (hence the Global Rewards Visa ruling). I don't believe this has been affected by tax changes. Basically, frequent flyer points become a taxable fringe benefit in this situation and are taxed as though you earnt the dollar value of the benefit on top of other earnings.

I recently got the Delta Skymiles Platinum and got 15000 miles with the opportunity to earn another 15000 miles if I spend $15,000 in 6 months. I am looking to buy a new car that costs around $20,000. The problem is that AMEX would only give me a limit of $5400. (I guess because I have all these other FF affinity cards with high limits) In any case I don't think I can spend 15,000 in 6 months without charging at least 10,000 or 12,0000 as part of the purchase of the new car. Any advice on how to go about doing this to charge that much at the dealership? I already got them to up my credit limit and that's as high as AMEX would go.

Even if a dealer is willing to let you charge the entire purchase price of a car, I'd be somewhat leery of doing so, particularly if they agreed to take the credit card before you began negotiating.

My guess is that although you wouldn't see it, you'd still end up paying the credit card service fee, it would simply be hidden in the final price you pay for the car. You probably could have negotiated them down further - however they held firm if they knew they were on the hook for $xxxx in credit card service fees.

(This of course is not an issue for flat-rate pricing establishments such as Saturn, where there is no negotiating involved.)

[This message has been edited by bokich (edited 01-19-2001).]