Delta can’t seem to keep quiet for a few days without making changes to something that will affect us reward travlers. Today, the word comes forth that the “Always Double Miles” program is no more. Delta had offered double miles on many types of purchases, including home improvement, gas stations, drug stores. Now, that promotion will end as of the start of next year.
In the past, you could justify the increased number of SkyMiles needed for a Delta reward, by considering the always double miles program on your Delta Skymiles American Express. That day has passed. Unfortunately, nobody told the good people over at the American Express website, who still have a page up advertising this offer.
The Traveler’s Check Loophole Is Now Closed
American Express had been offering travelers checks with little or no fee. These checks could be purchased on your American Express card as a purchase, not a cash advance, and the purchase would accumulate reward miles or points. One could then deposit any unused traveler’s checks in their bank account. Many reward card holders were doing this in order to accumulate extra miles. So many, in fact, that American Express has since ceased to offer this feature to it’s card members.
While some openly mourn this loss, others cite the reward card guru’s abuse of this service as denying legitimate users the opportunity to utilize traveler’s checks. My view is the following: The credit card companies make the rules, we just follow them: It is their world, and we just live in it.
Ebay plus PayPal For Rewards
I always believe that the best reward is gained when you spend less overall, rather than just spending with the right card. I have made it a habit to check the prices of things on Ebay before I order something online or run out to the store. Nine out of ten times, whatever you are looking for can be found cheaper on Ebay.
The preferred payment method on Ebay has always been PayPal. Unfortunately, PayPal will default your payment to an automatic withdrawal from your bank account. Thankfully, you can use your credit card as an alternate source of payment. Unfortunately, PayPal tries it’s best keep you from using your credit card.
Here is the trick: First, log in to PayPal and enter your credit card information as a funding source. Every time you make a purchase, be sure not to confirm payment without choosing an “alternate funding source.” This option is somewhat hidden, and it is easy to miss it. Then you can choose your credit card instead of your bank account, before confirming payment. Sometimes, PayPal will even present another page asking you if you “are sure” you want to pay with a credit card. They will conjure up all sorts of reasons that they think you would be better off if the money was withdrawn from your bank account immediately, rather than a charge placed on your card. Yet by agreeing to the bank withdrawal, you are loosing any reward points as well as the free “grace period” received when you pay your entire balance in full. Finally, you would also miss out on the opportunity to demand a chargeback in the event that the seller doesn’t ship the item, and PayPal won’t refund your money.
Starwood Amex vs. Amex Membership Rewards
I have recently spotted a key difference in the two similar programs. I have always been a big fan of the Starwood Preferred Guest American Express card, while I have family members who love the Membership Rewards program. It turns out that the Starwood program will only allow you to transfer miles from your account to a frequent flier account in your name only. With Membership Rewards, you can transfer an award to anyone who holds a card in your account. The idea is, that if you are a little short of miles, and you want to top off your account, as long as the person giving you the miles will entrust you with an additional card from their account, they can transfer those miles to you.
Transferring Miles and Awards
Of course, one of the aspects of all reward systems that few people understand, is that any award can be redeemed for a ticket in anyone’s name. It is stil your account, with your miles, that you redeem for your award. When the ticket is issued, the person redeeming the award, you, can always choose who the ticket holder will be. This works great when one person is redeeming multiple awards for a trip with friends or family, or for gifting awards. The only thing you should avoid, is buying or selling awards between strangers on Ebay or Craigslist. Not only is this practice ripe for fraud, but selling awards is technically against the program rules of most airlines. Rumor has it that an airline could ask you at check in to identify the account holder that issued the award. If you cannot, the ticket can be invalidated and the award holder’s account could be frozen and confiscated.
Prior to my bankruptcy I successfully negotiated with three different credit card companies. I had my interest rates reduced, and my late and over the limit charges removed. One of our readers, Surbhi had several questions about that process, and I wanted to take a little time to relate my experiences, as well as help Surbhi take the next step:
Hello,
I have been searching your website. Our debt at the moment amounts to about 66% of our salary. We are so far current with all our cards but are finding it increasingly difficult to pay minimums. Also all of the minimums are going towards interest only, so making those payments is of no use.
I was thinking of going to a credit reduction plan when I came to your site I have the following questions. I intend to call all my companies to see if they will reduce my interest. How low should I request the interest to go before I accept. Can I request them to take out late payments for the past year or is it limited to the month you are calling?
Also can they recalculate your interest for past months on a lower interest rate, Is it something that consumers can ask for? Or is it limited to that month only?
Also to expedite the payment can you fix a minimum for the months coming and the dates for it as well.
I really would like to solve this problem on my own. I find it rather unnerving that I have to go through a credit company and give them any sort of power of attorney.
Thanks
Surbhi
Hi Surbhi! Let me break down your question a piece at a time.
>>We are so far current with all our cards but are finding it increasingly difficult to pay minimums.
It’s excellent that you are current on your payments. It should give you a bit of bargaining power when you call your credit card company.
>>Also all of the minimums are going towards interest only, so making those payments is of no use.
Well, while those minimum payments are not helping you to get your debt paid off, they do serve a useful purpose - they protect your credit rating. Not having to take time to go back and fight bad information on your credit report, or pay more interest on your future loans is still useful. We just need to get you one step further so that you can reduce your debt - that’s the most important thing.
>>I was thinking of going to a credit reduction plan when I came to your site.
You can certainly do that if you need to. I’ve linked several articles at the end of this post that will help explain that process a bit, and help you select a service if you do choose to use one.
>> I intend to call all my companies to see if they will reduce my interest. How low should I request the interest to go before I accept.
It depends on what you are currently paying. Personally, I would try to at least get zero percent rate for a few months, even if the rate goes back up again. But if it is going to take you a while to pay down your debt, then it makes more sense to negotiate with them for a permanently reduced interest rate that will be higher than 0%. The answer here is, take what you can get! But don’t be afraid to keep negotiating until you are satisfied with the answer.
As a general rule of thumb, if this is a high interest card (19% to 24%) I would at least get them to knock the interest down to 9%-10%. If you have a clear and on-time payment history, you should be able to get them to do this. If the card already has a 5%-10% interest rate, you may not have as much luck getting the rates reduced.
>>Can I request them to take out late payments for the past year or is it limited to the month you are calling?
You should absolutely ask to have the last years worth of fees removed from the card. It doesn’t mean they will do it - each company’s policy on this is different. Capitol One, in particular does not like to remove fees. Some credit card companies will remove every fee on the card for the entire year, and sometimes they will remove all fees period. But one thing is sure: your credit card companies will never remove any fees for you unless you ask - and be persistent! Ask them if they can remove more than one fee for you, or waive the yearly membership fee, etc. You will need to talk to a manager.
>>Also can they recalculate your interest for past months on a lower interest rate, Is it something that consumers can ask for? Or is it limited to that month only?
You should definitely ask about this - again it will depend on the company’s policy. If they do it at all, they can likely adjust the entire balance, not just the last month.
>>Also to expedite the payment can you fix a minimum for the months coming and the dates for it as well.
You can definitely set up a payment plan with them, yes.
Ok Surbhi. There is one more piece of advice I can give you here - but you may not want to take it.
The things that you are talking about doing, a normal customer service representative might not be able to help you. They just aren’t trained to do it, and they may not have the authority to do it. So, if you call them, and they are unable to help you, you have two options.
1) Threaten to balance transfer your debt unless they work with you & speak with a manager - Do not threaten to close your account, balance transfers are the more effective weapon. Just keep reminding them what good customer you have been, and how happy you have been with them. But be firm and assure them that you will not allow the situation to continue like it is. A simple:
“The high interest and fees on this card are killing me! I am going to have to balance transfer my debt to a different company if you are unable to help me today.”
2) If the manager will not work with you, and you actually do not want to balance transfer your debt, then your best option is to go about 2-4 weeks past due on your bill. Just to the point where you get a phone call from a collections rep.
The collections reps at every credit card company are trained to do everything you need. They usually have the authority to negotiate and make changes to your account. If they do not, the collections manager certainly does. Just make sure that you can make a payment with them the day that you negotiate.
I put this as a last option because it will hurt your credit score. However, you can also negotiate with them to not report the payment as “late” on your credit reports as long as you make a payment that day.
Also know that if you go through a credit counseling agency, they will most likely hold your payments until you go past due anyway - because that’s when it’s easiest to negotiate. So - be warned of that! It’s a lot better in my opinion to manage things yourself so that you can control the amount of damage done to your credit rating.
If you do want to know more about credit counseling, you can check out the articles below. Thank you so much for your question - I hope this helped!
Delta fliers have been on a roller coaster ride for years now. They went in and out of bankruptcy in recent years, and they have just completed their acquisition of Northwest. They are now the largest airline in the world, and they are starting to do some confusing things.
The thing that Delta, and Northwest fliers have been wondering is whether the combined airline would impose the best or the worst policies of each carrier on the new combined entity. Based on all of their recent changes, it seems like there is no rhyme or reason to explain what’s happening.
Fees Go Up, Fees Go Down
Delta had been the lone hold out among the major airlines in not charging the dreaded “first bag fee.” This week, they have announce that they will no impose a $15 fee for your first bag, ostensibly because Northwest does. At the same time they are reducing their fee for the second checked bag from $50 to $25.
Fuel Surcharges Eliminated
This is about the most welcome piece of news. Fuel surcharges are a despicable practice, especially when they are imposed on frequent flier awards. Many travel bloggers have speculated that no airline will reduce these surcharges, even with the price of fuel at far lower levels than when the charges were imposed. It is comforting to see this actual happen at Delta.
Old Fees Gone, New Fees Are Here
Gone is the $3 curb side check in administrative fee. New, is the charge for a seat assignment in coach, arrgh! Now, when you redeem and award or purchase a ticket, your are blocked from choosing a many seats without paying $5-$25. That fee is per leg, not per flight, so you could end up paying this fee two, four, or even six times depending on your itinerary.
All of these changes take place on tickets purchased today, for flights on or after December 5th. See Delta’s site for more information.
What Does This Mean To Reward Card Fliers?
As you might guess, this is a mixed bag. You can’t help but like the dropping of the fuel surcharge on award tickets. For international awards, you would not have noticed a bag fee anyways. For domestic awards, the new first bag fees will add up on family ski trips, but you might even end up a little ahead if you had intended to check two bags.
Overall, the combined entity is doing some confusing things as it irons out the differences in the two airlines policies. A good way to stay up on all things Delta is The Ticket blog. I was reading this way back when I was a Delta Frequent Flier living in Atlanta. Although the blog is technically geared toward Atlanta based travelers, Delta and Atlanta are so synonymous, they are practically the same entity.
If you are a Delta, or Northwest customer, you are going to have to fly through Atlanta some day. As they say in the South, when you die, you have to change planes in Atlanta to go to heaven..
Some Other Delta Reward Travel Tricks
Delta is fairly unique in that you can use your miles for one way travel. This is an advantage when booking a round trip very far in the future. Say you will be taking a trip for a month. Since your best shot at getting an award seat is by booking it 331 days in advance, you can book the out bound exactly 331 days in advance, wait a period of time equal to the duration of your trip, and then book the return 331 days early as well.
Screwy Upgrades
The Delta website’s awards chart shows some fairly reasonably priced upgrade awards. They mention briefly that upgrades are available from “some fares”. What they don’t say, is what fares are upgradeable. It turns out those are only the higher fare classes. For example, I priced a flight overseas that came out to $1200 in coach. In order to purchase an upgradable seat, the same ticket was $2800. In reality, this is far worse than even United’s co-pay upgrade program! After I did the math, it made sense to just use the miles to get a business class award.
Northwest People Take Note
I know that this is a lot of info about airline rewards on a single airline, Delta. The reality is, that the Delta/Northwest merger has concluded. These two are now the largest airline in the world, and reward card holders who fly either airline need to fasten their seatbelts for turbulence ahead.
Here is a case study in recooping the highest value from your reward miles. It just so happens the example is from my globe trotting parents.
Start With A Flexible Program
As Delta frequent fliers, they do accumulate some serious SkyMiles. Fortunately, they have diversified their portfolio to include a generous helping of American Express Membership Rewards points. As you may well know Membership Reward points can be redeemed at a host of airlines for miles and/or flight awards. This means that when you need to redeem an award, you have far more options than a single, airline based mileage program can offer.
The Challenge
My parents have been planning a trip to Africa, to see the mountain gorillas, among other things. I had helped them book their trip using SkyMiles to and from Africa well in advance, in order to maximize their award availability. Now, as the details of their itinerary are taking shape, the realized they were missing one flight from Entebbe, Uganda down to Johannesburg, South Africa where they will catch their return flight to the United States. There is only one airline, South African Airways, that flies non-stop between those two cities.
Yesterday, my mother emails me to ask me my advice. She tells me that her Delta miles will no longer work for South African Airways, as they have left the SkyTeam alliance and are now part of the Star Alliance. She informs me that she does not have any points with a Star Alliance carrier, but thankfully she has some American Express Membership Reward points. Can I find her an award flight?
The Legwork
No one ever said that booking award travel was easy, in fact, it seems to be deliberately designed to be difficult. I suppose they figure that travelers with more money than time will just pay cash for their flights. Fortunately, I always have time for my parents. Step one was to find out which airlines offer partner awards on South African Airways. The easy answer would be any Star Alliance carrier, however, I know that they might have other partners as well. Rather than look at every airline frequent flyer program in the world, (I don’t have that much time!), I went straight to South African’s web site and found out what airlines they are partnered with.
I then looked up the airlines that American Express Membership Rewards points can be redeemed for. It turns out that there are six airlines listed that are partners with South African, as well as South African Airways itself. The airlines are Air Canada, Virgin Atlantic, Singapore Airlines, Swiss Airlines, El Al Israeli airlines, and All Nippon Airlines of Japan. Redeeming the miles directly for miles in South African’s program would have been obvious, almost too obvious. Closer observation reveals that the only award redemption opportunity from Membership Rewards on South African is an economy class companion award ticket for 50,000 points. While this is a fine award, it is only for travel to South Africa from the United States.
One Down, Six To Go
South African awards being a dead end, I went through the remaining six airlines. Swiss only offers a round trip flight award on Swiss itself, there is no points transfer option. Air Canada’s Aeroplan program wanted an astronomical 80,000 miles per person for a Star Alliance award within Africa. Virgin Atlantic offers the same award for a more reasonable 40,000 miles per person. I can’t even figure out the award mileage on El Al’s web site. It looks like someone tried to translate it from Hebrew to English in a hurry. Singapore Airline’s Kris Flyer program offered the award for only 25,000 per person.
All Nippon Airways (ANA) of Japan computes awards by mileage. I found out that the mileage between Entebbe and Johannesburg is 1,835 miles, about the distance from L.A. to Chicago. Unfortunately, ANA also requires all awards to be round trip. Even the round trip award for 3,670 miles is only 22,000 miles, the best deal so far. Even better is the fact that ANA is unique among Star Alliance carriers in that they show partner award availability online. Other carriers, like my nemisis, United Airlines, ask you to call them on the phone to make a partner reservation.
I was able to quickly sign up online for a free ANA account and use it to find out if they had any award availability on that flight, on their date of travel. They were in luck as there were at least two seats available on their travel date. I guess Uganda hasn’t quite caught on yet as an award travel destination, but I digress. It turns out that the ANA reward site is a popular tool that savvy award travelers use to determine Star Alliance award availability. Since the one way is not permitted, I recommended that they just pick a random return date that they will never use.
What They Will Need To Do
You would have to open an ANA acct online for free. Call and confirm the availability, and hold the tickets if possible. Then they will transfer the 44,000 Membership Rewards points to their new ANA account. Finally, they will call up ANA, confirm the transfer and issue the award ticket.
In the end, my mom was amazed that she could redeem her American Express Membership Rewards points, for miles in a Japanese airline, for a reward on South African Airways, to fly out of Uganda. It is a crazy world out there, but the best awards go to those with the patience and persistence to maximize their reward card points.
Superman has Lex Luthor, I have United Airlines. Yes, I took my last trip overseas with the miles I earned from their Mileage Plus program. And of course, I relied heavily on their reward cards and their sign up bonuses, but overall, almost every encounter I had with United was poor.
It Is Already Bad
I know that reward programs only get worse, but United has now completely lost me. Their award availability is terrible. Their partner flight awards are nearly impossible to find. They do note even offer a waiting list when the award you want is unavailable. Unlike other Star Alliance members, they have no partner upgrade awards.
If you do get an award flight on United, expect to be treated poorly. When things went wrong, as they invitably do on United, we were frequently reminded that we were second class citizens since we were on an award ticket. All summer long, they have been piling on the fees and the surcharges as fuel prices went up, and they have retained these fees as the price of fuel has fallen.
It Only Gets Worse
What is a recently bankrupt airline to do when its losses continue to pile up? Punish it’s most frequent fliers! Yes, United, the airline that never misses an opportunity to discourage you from being a loyal customer, has just announced it’s 2009 program changes.
Lowlights include:
Increased number of miles for a domestic upgrade.
A $50 co-pay for an upgrade “award” in the continental US
$250-$500 co-pays for upgrades to Hawaii and all other trans-oceanic destinations.
Huge increases in miles required for international and partner award redemption (domestic stays the same)
They Do Throw You A Bone
They are retroactively restoring the 500 mile minimum flight accrual for segments below 500 miles, but only for elite members. This might add up to a few hundred miles to a few people who flew United on many short flights this year. This was always a stupid policy as shorter flights are their most profitable ones, mile per mile, especially when fuel prices are high.
What Does This Mean For Your Reward Card
I think that this makes earning United’s Mileage Plus affiliated cards third rate reward cards. The best reward value is always on premium international flights and upgrades. In my book, having to pay for this “award” is a hassle at $50 and an outrage at $500. You must now look at miles accumulated through your Chase Mileage Plus card as being worth one cent per mile, at best. Simply put, I would just assume go with a cash back award rather than hit my head against the wall trying to earn an “award” on United that might include a $500 “co-pay”. Leave the co-pays to the health insurance plans, thank you.
Dining For Super Duper Delta Miles
As you know, there are miles and there are miles. In the wonderful world of Delta, it is all about accumulating Elite Qualifying Miles, or EQMs. Credit card miles and most other partners don’t work, as the only way to get EQMs is to actually pay for an airline ticket and fly somewhere. Only then do you get all of the elite perks that sometimes makes flying a little bit more tolerable.
I just found out that Delta is offering 1,000 regular bonus miles and 1,000 EQMs through a new promotion. You have to register for it, then here is what you do: Spend $200 on a registered card between now and December 15th. If you are traveling for business, this is pretty easy. Otherwise, just go out to lunch with all of your friends and/or co-workers, put the meal on your card, and let everyone else give you the cash. There are many people who schedule an additional “mileage run” flight at the end of the year just to get to the next elite level. If you take advantage of this promotion, you might not have to.
They are also offering VIP members an extra 5 miles per dollar spent when you fill out a rating survey online. That seems to be in addition to the 10 miles per dollar VIP members get, as well as any miles you earn from your reward card itself. At that rate, you will easily earn more miles eating out on a business trip than you would flying!
I am a big fan of these types of programs. Almost every airline has an affiliated dining program. When you are in a new town, and you don’t know where to go, narrowing your choices down to restaurants that participate in a mileage dining program is easy to do. When you are traveling by yourself on an expense account, it is easy to make a game out of using your credit card to accumulate miles. With these new offers, Delta makes it a very rewarding game.
Q. Why won’t Obama release his real birth certificate?
A. It got mixed in with his Rezko mortgage records and shredded.
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Like any experienced Chicago politician, Obama would go the cemetary to register voters. One night he came across a grave so old and worn that he couldn’t make out the name on the tombstone. The staffer holding the flashlight got impatient and suggested they just move on to the next plot. Obama angrily exclaimed, “This person has a much right to vote as anyone else here!”
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“People looking into Barack Obama’s campaign contributions say that Obama may have received $3.3 million from abroad. Yeah. It turns out that broad is Oprah Winfrey.” –Conan O’Brien
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Obama’s so pretty….
Obama is so pretty that Bill Clinton wants to intern for him.
Obama is so pretty that he won’t ride in Ted Kennedy’s car
Obama is so pretty that he would even look good in a Hillary pantsuit
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“After his big speech in North Carolina today, Senator Joe Biden said he was experiencing a sore throat and lost his voice. Boy, the good news doesn’t stop for Barack Obama. Just one lucky break after another.” –Jay Leno
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Working people frequently ask retired people what they do to make their days interesting. Well, for example, the other day I went downtown and into a shop. I was only there for about 5 minutes, and when I came out, there was a cop writing out a parking ticket. I said to him, ‘Come on, man, how about giving a retired person a break’?
He ignored me and continued writing the ticket. I called him a ‘Nazi.’ He glared at me and wrote another ticket for having worn tires. So I called him a ‘doughnut eating Gestapo.’ He finished the second ticket and put it on the windshield with the first. Then he wrote a third ticket.
This went on for about 20 minutes. The more I abused him the more tickets he wrote. Personally, I didn’t care. I came downtown on the bus, and the car that he was putting the tickets on had a bumper sticker that said, ‘Obama in ‘08 .’ I try to have a little fun each day now that I’m retired. It’s important to my health.
A woman at a John McCain rally said that Barack Obama is an Arab. And McCain quickly corrected her. It was really awkward, because McCain had to tell her, ‘Look, Governor Palin, you are wrong.’” –Jay Leno
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“Sarah Palin had to have her campaign bus make an unscheduled stop at a Wal-Mart in Ohio, so she could pick up a package of diapers. I guess she ran out of diapers, so they pulled over and she went in and everyone followed her. Which is kind of cute, but it turned out Senator McCain didn’t need them.” –Jimmy Kimmel
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“Political experts are saying that to succeed in the vice presidential debate, Sarah Palin needs to show that she has the same concerns as everyday Americans. For instance, Palin planned to start the debate by saying she’s really troubled by John McCain’s choice for vice president.” –Conan O’Brien
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“The Republican Convention is under way. The theme for tonight’s Republican Convention is, ‘Who is John McCain?’ Tomorrow night’s theme is, ‘Who forgot to check if the Vice President’s daughter is pregnant?’” –Conan O’Brien
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Jokes Credit: These are just a few of the jokes compiled by Daniel Kurtzman, About.com’s Political humor guide. Way to go Dan! You can click this link to check out the rest of the McCain funnies.
And to top it off, a wacky video making fun of both candidates:
Everyone has complaints about credit card companies. They seem to operate by rules that would be illegal in any other industry.
Enter The Proposed “Credit Card Bill Of Rights”
Last February a “Credit Card Bill of Rights” was introduced by House Financial Institutions and Consumer Credit Subcommittee Chairwoman Rep. Carolyn Maloney (D-NY) and Financial Services Committee Chairman Barney Frank (D-MA). The bill has several key provisions:
1. A restriction on arbitrary interest rate hikes. This is when people who pay their bills on time still see their APR go up for no apparent reason. This bill would require 45 days notification before a rate hike and allow consumers to pay off their balance at their old interest rate.
2. Prohibits “Double Cycle Billing”, a practice where you are billed on the interest of your balance over the last two payment cycles, including interest on principal that has already been paid.
3. A crack down on payment due date gimmicks. Banks would be required to mail statements out 25 days before they are due, instead of the current 14. They would also prevent credit card companies from charging a late fee when a card holder can provide proof of mailing seven days before the due date.
4. Allow card holders to set mandatory credit limits. Currently, banks approve transactions above your credit limit, and then charge you an “over the limit” fee.
5. A restriction on heavy fee subprime credit cards. This provision requires that some fees be paid up front before the card is issued.
6. Protects card holders from missleading terms such as “fixed rate” and “prime rate”
7. Requires credit card companies to fairly allocate payments. This would prevent them from applying payments to the lowest interest rate debts first.
8. Prevents card companies from charging the “over the limit” fee more than three times. This would prevent the fee from being tacked on over and over again on every purchase made after you reached your limit.
9. Better oversight of the credit card industry. Congress would collect statistics on credit card usage and fees.
Where Does This Bill Stand?
In March, congress held hearing in which it heard from consumers who felt taken advantage of by unfair and misleading credit card offers.
In September, the House of Representatives passed the bill by a 312 to 112 majority. The bill is now awaiting a vote in the Senate. The assumption is that the bill either does not have enough votes in the Senate and/or the support of President Bush, and will therefore not get a vote. I suppose it is possible that there might be some movement on this after the election, in the fear that the next Senate and/or President will enact even harsher legislation. I wouldn’t bet on it though.
What Does The Credit Card Industry Say?
During the hearings, congress heard from the credit card companies who warned of less restrictive credit and fewer reward card opportunites if this legislation passed.
Where Do The Current And Future Presidents Stand?
Bush has said he opposes this bill. Barack Obama not only supports this bill, but would go beyond it and have credit cards rateding system enacted to improve consumer information on credit card features. This is somewhat surprising since his running mate, Joe Biden, has long been an advocate for credit card companies, many of whom are based in Delaware, the state he represents. John McCain, who reportedly is a big credit card user, has not taken any position on this bill.
Where Do I Stand?
I think that most of this bill is excellent, and some of it is silly. Restrictions on arbitrary rate hikes and double cycle billing are both no brainers, as are allowing mandatory credit limits. I am also a big fan of the provision forcing banks to apply payments to the highest interest rate balance first. I also have no problem with the provisions clarifying language, although it will probably end up as small print somewhere that I will never look.
I love the part reducing the due date gimmicks. How is it that companies ask for “to allow 7-10 working days” for us to receive things by mail, and we should also expect our mailed in payments to take just as long, yet bills are sent out only 14 days in advance of their due date? On the other hand, I think the part about showing proof of mailing is a gimmick itself. How does one do that short of paying extra for priority or express mail and/or delivery confirmation? Paying electronically is both instant and verifiable. I would have much rather the bill outlawed due dates falling on weekends and holidays, one of the industry’s most bizarre practices.
As for the credit card industry’s arguments, in the wake of the current financial crisis, more restrictive credit terms for sub-prime borrowers seems like a good idea now more than ever.
Fairness Vs. Rewards
Finally, the idea of fewer reward card offerings does not concern me. I think that the restrictions are eminently reasonable, and almost certainly will have little effect on the vast majority of reward card holders or issuers, as these are people who pay their balance on time.
If however, I was to believe the doom and gloom scenarios painted by the banks, I would still be in favor of the credit card bill of rights. I do not want to travel for free because banks are profiting through unfair and deceptive credit card practices. If these shady practices are the only reason reward cards exist, frankly I would rather not vacation on the backs of my less fortunate neighbors who have been cheated by their banks.
A New Reward Card Benefit
Continental will be waiving it’s first bag fee for customers holding it’s Chase / OnePass rewards card. This currently will benefit travelers who are not OnePass Elite members, but who do hold this card. Holders of the “Presidential Plus” card get both their first and second bags checked for free, just like the old days (or today at Southwest!) If I were planning a big family trip this year, like a ski trip, and I had booked it on Continental, this card would potentially save hundreds me of dollars in baggage fees. With oil prices plumetting, we are likely to see more offers like this than an actual reduction in baggage fees.
Over at The Consumerist, they have been having a discussion about reward cards and credit scores. Yesterday, someone asked, “Is It OK To Use Credit Cards For Everything, If You Pay Them Off Every Month?” The premise of the question, of course, is that credit cards are evil in general, but that they might be acceptable if you pay them off every month.
The Counter Intuitive Nature Of Credit Scores
What they actually hit on is the odd fact that having more credit cards actually improves your credit score. Let me explain. In the old days, before the concept of credit scores were invented, having a good credit was simple. Back then, people were concerned with your “credit history”. Your credit report was examined, and if you had been paying your bills on time for years, you had “good credit”.
The Rise Of The Credit Score
Apparently, the concept of “good credit” was not a quantifiable value. Different people had different ideas of what “good credit” or “bad credit” was. That is why Fair Isaac Corporation, or FICO, came out with the concept of a credit score, or “FICO Score.” This is a third party that evaluates your entire credit history and spits out a number. Credit card companies and other lenders no longer have to examine your unique credit report, they merely have to decide which loans to offer anyone with a particular credit score.
How Does Having A Lot Of Credit Cards Help Your Credit Score?
The odd thing about credit scores is that they are computed using a secret formula. While this formula hasn’t been disclosed, experts in the field have gotten the gist of it. One of the key components in your score is the amount of available credit you are currently using. Once you understand that, it is obvious why having many credit cards with high credit limits will reduce your percentage of credit used relative to your credit limit.
How Does This Affect Reward Card Users
One of the biggest temptations of a reward card value seeker is to apply for every card that has any bonus. Obviously, it won’t help your credit to apply for dozens of cards. Another factor in your FICO score your number of recent applications for new credit. The credit agencies track applications whether or not you are granted credit. The idea is that someone who applies for many credit cards in a short period of time is someone in financial trouble. Do this, and you will undoubtedly lower your score. The formula used obviously does not take into account that you might just be capitalizing on several reward card bonuses.
Paying Your Credit Card Off Every MonthAnd Your Credit Balance
The Consumerist later followed up on this topic by pointing out an interesting fact; just because you pay off your balance in full every month, doesn’t mean you have a zero balance. I remember one time when I refinanced my house, my mortgage broker showed me a copy of my credit report. It listed several unpaid balances on my credit cards. Initially, I was shocked and insulted. I pointed out that I paid every credit card bill on time and in full, so that must be a mistake. To his credit, my mortgage broker pointed out that my “outstanding balance” is merely my total amount of charges since my last payment, not any reflection of a monthly balance not paid in full.
Conclusions
There are many great reward cards out there, and it is good for your credit score to have more than one. I personally have about five, and I think that getting one or two more will probably help my credit score. Credit cards are not evil. Like fire, they can be a necessary and valuable tool if used wisely, but they can also burn you if you are careless.
The first post the Consumerist wrote on this topic pointed out another fact that I have touched on in the past. Credit card companies want you to have more reward cards because they feel that they encourage more spending. As readers of this blog know by now, reward cards are only for people who are able to pay off their balance on time, in full, every month. Hopefully, those with that kind of spending discipline are not the kind of people who will make unnecessary purchases in pursuit of a 1-5% return.
With Halloween around the corner, it is a good time to be alert for scary stories. This year, there is a lot of frightening news in the business section of the newspaper.
Financial Crisis Hits Credit Cards
We all knew it would be coming. Anecdotal evidence from postings over at FlyerTalk indicate more people are being hit with a “financial review” from their credit card company these days. Today, the New York Times has a lengthy article discussing how credit card companies may follow the mortgage industry as the next victim of the credit crunch. The article points to the credit card companies restricting credit on several fronts.
Raising interest rates
This is an obvious consequence of tightening credit markets. As a reward credit card aficionado, this does not directly affect me personally. On the other hand, I know that people like myself, who have been able to successfully avoid paying interest on my credit cards, are probably in the minority.
Reduced Credit Limit
Card companies are reducing credit limits on card holders. Again, perhaps I am in the minority, but I almost never approach the limit on a single card, and if I do, I have several other backups. The last time this happened was when we bought our house. We budgeted, and spent, tens of thousands of dollars on renovations. At one point I even paid off part of my balance before the due date in order to stay below my credit limit and rack up more reward points. Those of you who are forced to finance your daily lives on credit cards have yet another good reason to curtail that tenuous arrangement.
Fewer Promotional Offers
Thankfully, I have not seen any decline in reward card sign up bonuses, but it does seem like there are fewer 0% APR promotion offers. I have never been bold enough or organized enough to attempt an introductory rate arbitrage play. That is when you borrow money at 0%, and then deposit it in an interest bearing account. The account is then used to pay of the card, and the interest earned is yours to keep. Proponents of this scheme are likely to be disappointed in the near future.
Stingier Rewards
The article states that: “Some reward programs have also gotten stingier as lenders cut corners to save money. Card companies, for example, have taken to substituting cheaper brands for a Sony big-screen television as a way of lowering the cost of their redemption prizes.”
To me, it is hard to distinguish the natural devaluation of reward programs from any changes that are being made directly as a result of the current financial crisis.
Good News?
The article does mention that fees are unlikely to go up substantially this year, as they have in the past. This is due to the fact that fees are already pretty high, and there is a lot of legislative scrutiny going on in light of the proposed credit card bill of rights.
Another piece of good news is that you are likely to receive fewer credit card offers by mail. I hate these, and have always asked the credit bureaus to opt me out of pre-screened offers. Unfortunately, I have always received plenty of these offers in the mail. For example, we used to receive an offer from the Chase/United airlines card once a week that continued long after we actually received the card!
OK, Maybe That Wasn’t So Scary
If you really want to have nightmares, just read Jenna’s story on First Premier!
I was never a huge fan of the X-Files, as it seemed to be a never ending string of revelations followed by the disclosure “that’s just what they want you to believe!”
I had a similar feeling last week, when I discussed the changes to the Marriott rewards program. At that time, I wrote: “they are eliminating blackout dates, although it is unclear if they are offering true last room availability like Starwood. ”
How Is It Unclear
In their press release, Marriott announces a nice sounding change; no blackout dates. Another clue seemed to be the web site address for promotion:
Last Room Available! Wow, just like Starwood’s program. Sounds great!
Then I failed to notice any reference to “Last Room Available” in the page itself, only the term “No Blackout Dates” Where have I heard this before? It was years ago when I had some Delta miles I was trying to redeem for an award trip to Florida several months in the future. Despite claiming that there were “no blackout dates,” for their awards, Delta had no award availability for flights from Denver to West Palm Beach, Ft. Lauderdale, or Miami, changing planes in Atlanta, Cincinnati, or their old hub in Dallas for a two month period!
I then realized that “no blackout dates” only means that they only guarantee one award seat to be available on a single flight, on every day of the year. Realizing my miles were worthless, I switched programs.
The Devil Is In The Details
Over at Flyertalk, a Marriott spokesperson was proud to announce their new policy, however they offered a little more information about the changes than they did in the press release.
Specifically, they said: “While this does not mean you will never again have difficulty booking a redemption stay, it does mean these difficulties will be rare. Hotels will only be able to limit the number of rooms available for redemption on a very limited number of nights.”
Call me a pessimist on the subject of travel rewards, but in my experience, “a very limited number of nights” is usually limited to the nights I have off for vacation.
Tim Winship over at SmarterTravel.com goes a step further, “The answer is to be found on the Marriott website: “Hotels may limit the number of standard rooms available for redemption on a limited number of days.” In other words, capacity controls remain in place. And some Marriott, JW Marriott, and Marriott Conference Centers properties are exempt from the new policy altogether.” Hat Tip to Mark Ashley at UpgradeTravelBetter.
It Gets Worse
After my post, a reader, Dan, wrote :
“You need to do your homework before you get in bed with a vendor. This Marriott Rewards program “enhancement” is nothing of the kind. Most redemptions under the new program are going up, and not just a little. a 7 night stay in a Category 7 hotel used to cost 150,000 points, but now will cost 210,000 points, an increase of 40%! And that includes the fifth night free! Further, it instantly devalues ALL of the points that have been previously earned by its members (as of 1/15/09). The Marriott program members are livid over these changes in the program. Just go to Marriott’s own message board for this topic and read all the posts”
Yes, Dan, I can see how this would be very upsetting to see your hard earned points devalued. No, Dan, I am not “in bed with the vendor”. Don’t I wish! If they would like to offer me some free nights and convince me how great their program is, I’m all ears Unfortunately, I don’t know anyone at Marriott, and that hasn’t happened yet.
I am a bit cynical, and thus I realize that all programs are devalued over time, just like inflation does to our currency. The reward game has always been a use it or loose it proposition, and at least they are giving you a few months to redeem your rewards at the old rate. When the deal no longer makes sense to you, go to Starwood or Hilton, both of which offer “no blackout dates” and “no capacity controls”
Finally, by increasing Platinum Elite Bonuses from 30% to 50%, and offering the fifth night free, they have mitigated the loss amongst their most loyal supporters and those who redeem awards for long stays.
Yes it is a mixed bag, but many programs are heading down hill fast. The worst I can say for Marriott’s program is that it may be a bumpy road ahead.
In the interest of fun and democracy, I thought we’d post some current jokes about both of the presidential candidates. Hope you enjoy!