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The end of the "Free Ride" for credit card holders with good credit?

The end of the "Free Ride" for credit card holders with good credit?

Old May 27, 09, 3:43 am
  #76  
 
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Originally Posted by pinniped View Post
I don't disagree that the Schwab card is a good one - perhaps the best Visa/MC product out there - but the comparison to SPG Amex is a bit unfair. Converting Starpoints to air miles is a very poor use of Starpoints except in extreme cases. 1 Starpoint is conservatively worth 3-4 cents (typically more like 5-7 cents).

Plus, the beauty of Starpoints is that they are very usable. The lifespan of any given point in my account is rarely longer than a year. (That is, I earn them and burn them at approximately the same pace.)

Once I've fully cycled out of the Thank You Network I'll probably add the Schwab card as my Visa/MC backup to the two hotel Amexes.
I see what you are saying, but cost in this context is just doing the math. If I turn down 2 cents cash to get 1.25 airline miles, my cost of those miles is 1.6 cents each. If you turn down 2 cents cash to get a Starwood point, then your cost is 2 cents for each Starwood point.

Value is another matter and another thread, and as you note, and depends on usage. If your use amounts to 5-7 cents per point, that's great. I continuously check myself on mile values to avoid the errors often posted on FT in this regard, like thinking a C class free ticket to Europe is worth the $6,000 rack rate instead of the $3,100 op-up fare available most of the time.

Congrats too on using miles within a year. My stockpile goes back a lot longer, and that's another discount I apply to my valuation, especially compared to getting cash right now.
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Old May 28, 09, 8:02 am
  #77  
 
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Violation

Originally Posted by clacko View Post
my wife's hairdresser reported last week that her cc charge was raised from 4 to 6%....
A surcharge for using a credit card is clearly a violation of the merchant contract. I have reported merchants before & had the surcharge reinstated to my account. They can give a cash discount, but not a cc surcharge.
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Old May 28, 09, 9:20 am
  #78  
 
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Originally Posted by MiamiPrep View Post
A surcharge for using a credit card is clearly a violation of the merchant contract. I have reported merchants before & had the surcharge reinstated to my account. They can give a cash discount, but not a cc surcharge.
I think she meant the charge from the CC-company to the merchant.
There are some cases the charges are very high indeed.
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Old May 28, 09, 2:59 pm
  #79  
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Originally Posted by Mountain Trader View Post
I see what you are saying, but cost in this context is just doing the math. If I turn down 2 cents cash to get 1.25 airline miles, my cost of those miles is 1.6 cents each. If you turn down 2 cents cash to get a Starwood point, then your cost is 2 cents for each Starwood point.
Completely agree on the cost side...I'm just saying that killing Starpoints like that sort of distorts the equation.

Value is another matter and another thread, and as you note, and depends on usage. If your use amounts to 5-7 cents per point, that's great.
Admittedly, very high Starpoint valuations are harder to get in 2009. The US dollar is a bit stronger and overall hotel demand is down. That means that in most cities around the world, getting a decent bed is quite a bit cheaper now than it was a year ago. I don't always do a straight-up comparison with only the published rate at that Starwood: I look at where I'd really stay in that city if I didn't have points. In most cases, it's not a U.S.-based chain. Therefore, I'll probably hold Starpoints more this year, paying for rooms instead, and redeem more in 2010 and/or 2011 or whenever I run into another high-demand scenario. (So I'll probably blow my usual fast turnover of Starpoints by a bit...)

I continuously check myself on mile values to avoid the errors often posted on FT in this regard, like thinking a C class free ticket to Europe is worth the $6,000 rack rate instead of the $3,100 op-up fare available most of the time.
I don't ordinarily book either of those types of fares. In a world without miles, I'd book cheap coach and never fly C. I tend to base my FF mile valuations on the occasions when I actually redeem for a straight coach award. From MCI, I tend to do that on my Canadian and Central American trips - routes with traditionally high fares, reasonable mileage requirements, and narrowbody service where cabin isn't a big deal. Tends to be around 1.8 to 2 cents per mile. Of course, I still use most of my miles for TATL premium cabin, but any valuation I put on those trips would be completely arbitrary since I don't otherwise buy those tickets.
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Old May 29, 09, 10:44 am
  #80  
 
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Originally Posted by pinniped View Post
Completely agree on the cost side...
We view these things very much the same.

Back to the original thread topic, the Schwab card means that every point or mile earned by a dollar of CC charging costs me 2 cents. If I worked as hard on the cash-back side as I do on the FF side (Costco and other fat cash-back deals), my guess is that 2 cents would go up to 2.5 cents or more. And I doubt FIA and Schwab were counting on a lot of bad credits, meaning their deal is likely to stay even with the new law.

So if the FF-tied cards want to add new fees, bring 'em on because I'll go elsewhere.. As I said on another post, the airlines need the fees from folks like me using credit cards a lot more than I need more FF miles.
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Old May 29, 09, 12:25 pm
  #81  
 
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Originally Posted by friedablass View Post
I don't think it's the 'poor' who are subsidizing well-to-do in this scenario. It's the 'don't-have-the-money-but-spend-anyway' people who subsidize it. If people would spend within their means they would be able to pay in cash for all their purchases, but would choose to use their cards in order to earn rewards, miles, etc... However, many people do not spend within their means and end up carrying balances and sinking further and further into debt because they are unable to finance their lifestyle.

In any case, I don't believe banks are going to charge APRs from the minute of the purchase - they would lose TONS of business as all those who never carry balances and don't want to pay a premium for using a card cease to use cards.
I agree with you that this is unlikely ever to happen.

And I agree that the "poor" are not subsidizing the "rich" (e.g., those who pay the balance off monthly). The "rich" in this scenario don't need to be subsidized -they provide a very steady low risk/low reward income for CC issuers (income in the form of annual fees and merchant fees). From the perspective of the CC issuers, I would draw an analogy to an investor's view of something like T-bills -- they aren't sexy, high yield investments, but they are attractive in that they provide a measure of stability and reliable growth to a portfolio.

So who is subsidizing whom? I would say that the interest charges paid by the "moderate" folks -- those who maintain a balance on their card but eventually pay their bills -- are subsidizing the default risk posed by the "poor" (e.g., those who irresponsibly run up charges, and then don't pay).

If CC issuers charged interest immediately, they would lose the modest but stable income provided by the "rich," but would likely retain most of the "moderate" and "poor." As such, the "moderates" would still have to subsidize the default risk of the "poor," but the issuers wouldn't have the safe, steady income from the "rich" to stabilize their portfolios. And with interest charges accruing earlier, they'd probably be increasing the likelihood of default by the "poor," creating an even greater need for income from the "moderate." They'd eventually create a vicious cycle in which they'd need to keep raising rates to the point that nobody would want a card, except perhaps those least likely to pay off their bills.

As others have said, it isn't going to happen.
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Old May 30, 09, 3:07 am
  #82  
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IMHO, we are moving (probably quite slowly) toward an Australian-type regulation of (rather low compared to the present system) interchange charges and fees.

This may well result in much less revenue to card companies and thus much less money to support incentive programs such as FF miles to card holders.

And, it will end the cross-subsidies now enjoyed by heavy bonus "earners" at the expense of those who do not get bonuses--generally the less well off.

Interchange on a miles card (even if $20-50K a year or more goes through the account) cannot cover free first class tickets to Asia after the costs of running the system are taken into account.

Someone is subsidizing me when AA or UAL get me a free (okay, I pay a few bucks in taxes) F or C ticket to Paris. And, I don't think it's the nice guys at the airlines.
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Old May 30, 09, 11:57 am
  #83  
 
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Originally Posted by pinniped View Post
I don't disagree that the Schwab card is a good one - perhaps the best Visa/MC product out there - but the comparison to SPG Amex is a bit unfair. Converting Starpoints to air miles is a very poor use of Starpoints except in extreme cases. 1 Starpoint is conservatively worth 3-4 cents (typically more like 5-7 cents).

Plus, the beauty of Starpoints is that they are very usable. The lifespan of any given point in my account is rarely longer than a year. (That is, I earn them and burn them at approximately the same pace.)

Once I've fully cycled out of the Thank You Network I'll probably add the Schwab card as my Visa/MC backup to the two hotel Amexes.
I see this a lot but don't really understand why. 60k spend on SPG = 75k mile on AA or similar = $3,000 business class ticket from NYC to OGG (or similar). What's poor about that? Don't really see that as any worse than 6 nights at a cat 5 (low season) for the same 60k Starpoints...unless you can show me cat 5 hotels going for a lot more than $500/night.
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Old May 30, 09, 12:37 pm
  #84  
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Originally Posted by broadwayblue View Post
I see this a lot but don't really understand why. 60k spend on SPG = 75k mile on AA or similar = $3,000 business class ticket from NYC to OGG (or similar). What's poor about that? Don't really see that as any worse than 6 nights at a cat 5 (low season) for the same 60k Starpoints...unless you can show me cat 5 hotels going for a lot more than $500/night.
Two reasons (for me)

(1) I would never actually buy the $3,000 J seat to OGG with my own money. That seat is maybe worth a grand to me. I'm spending $1200 R/T per seat to get confirmed J to MUC this summer...I would have maybe gone up to $1500 for them, but not higher. That's just me and my own valuation on the seats...

(2) AA miles are too easy to get from so many places, whereas Starpoints are scarce. Even if I had a lot of disposable cash and routinely bought J/F tickets for my leisure trips, I'd try to get the AA miles from somewhere else and hang on to the Starpoints. There are many ways to convert into AA if you need it. Whenever I need a quick 120k AA, a Marriott Travel Package converts in about 1 business day. ^ Unlike a SPG conversion, you're actually gaining value out of the MR Travel Package conversion.

As to the 2nd part of your question, here are some of my recent redemptions. All of them were in situations where Priceline or other "cheap" options were either not yielding anything good or nonexistent.

- Westin Berlin on the night before the Berlin Marathon. Cat 3, not even bookable with cash unless you were willing to go 3 nights at around US$500/nt. Gold desk in the U.S. called the hotel directly and got my jr. suite booked for 1 night for 8500 pts.

- Sheraton in Munich during the middle of Oktoberfest. Cat 3, also jr. suite, 8500 points for 2 nights, easily accommodating 4 people. Those rooms were about US$500/nt. with all taxes as well. Crappy twin/double rooms at nearby 2* and 3* hotels were going for 300 Euros/nt.

- Westin PVR during Spring Break before it bumped up to a Cat 4. 28k points + $40/nt. cash for confirmed Royal Beach Club rooms (free booze and half board) for 5 nights. The Westin was charging $350/nt. for rooms, although there were some cheaper options in the area. (This is a very good property with a great RBC - well worth paying a bit extra vs. the nearby Marriott.)

- W Union Square for the NYC Marathon weekend. Cat 5 at the time...I understand this one is a 6 now. Great hotel...would've been over $600/nt. with taxes. In 2009 I see better Manhattan rates in general: I'd probably look to use an SPG50 or one of the Marriott promotions before using Starpoints there.
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Old May 30, 09, 3:52 pm
  #85  
 
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Originally Posted by MiamiPrep View Post
A surcharge for using a credit card is clearly a violation of the merchant contract. I have reported merchants before & had the surcharge reinstated to my account. They can give a cash discount, but not a cc surcharge.
Actually it's pretty common in some parts of Europe, such as The Netherlands.
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Old May 30, 09, 7:33 pm
  #86  
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Originally Posted by StewieD View Post
Actually it's pretty common in some parts of Europe, such as The Netherlands.
Common doesn't mean allowed.

Australia, as well as third parties collecting on behalf of government entities,
are the only exceptions I can think of.
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Old Jun 3, 09, 12:57 pm
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Originally Posted by josephstern View Post
I'm in California. Illegal here for me and the more than 10% of Americans who share my state.
I'm in Southern California, where two Shell stations within three miles advertise CASH PRICE.

Then there's Arco, which if you think about it always gives a cash discount.
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Old Jun 6, 09, 2:24 pm
  #88  
 
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Originally Posted by Centurion View Post
AGREE!!!! ALL OF YOU ARE SUCKERS INCLUDING THE NEWS PAPER WHO REPORTED. The banks are trying to scare the people who vote into putting presure on congress. DO NOT FALL FOR ANOTHER SCAM by the credit card comapnies.
I'm glad you shouted this so the people way in the back row could hear you.
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