One of the criticisms of the CARD act is that it doesn’t do enough to prevent banks from coming up with all new tricks and traps.    The long term solution is  the proposed financial product safety commission.   This would be to financial products what the consumer products safety commission is to physical products.    Until that is passed, we will be on the lookout for new tricks and traps.

Is This A New One?

With my radar set to maximum in an attempt to discover new and devious fine print that banks are creating to separate you from your money, I came across this article in The Consumerist.    The reader purports to have found a $2 charge on his Macy’s charge card for something called “Educational Interest”.     The story is a bit confusing, and I could find no further information on this charge on the Internets.    Furthermore, I have asked a Macy’s cardholder that I know to be on the lookout for this charge and to let me know if she sees such an item.

More Good Stuff From Starwood

Regular readers know that my favorite travel and rewards card is the Starwood American Express.    One of the fringe benefits of the card is a certificate they give you every year called an SPG50.    In theory the SPG50 is supposed to give you %50 off the rack rate of any Starwood hotel.    In reality, the rack rates are often, but not always, more double the best available price out there.

On the other hand, there is an entire thread over at FlyerTalk where they attempt to ferret out the hotels where this certificate brings you some value.    The best part about the Starwood forum at FlyerTalk, is that the people at Starwood actually read the comments there, post official responses, and offer to assist people.    If every hotel did this, it would be great.   If any airline actually did this, I think I would have a heart attack!

Anyways, it turns out that my SPG50 certificate will, in fact, result in a few hundred dollars in savings, by my parents, when they stay with us at the Starwood in St. John.    Furthermore, I have figured out the value I will be getting from the Starpoints that I will be using for my stay.   Sadly, it is only about 2 cents a point.    I came up with that figure when I realized that the other, non-Starwood accommodations we will be utilizing are costing us about $250 a night.     I have to use that number for the amount I would have paid if I had not had any Starpoints to redeem.     I also have to figure  in the $40 a night mandatory “resort fee” that we will reluctantly be paying to use our reward stays.   In the end, it works out to just over 2 cents a point when compared to our other hotel.

The other way of looking at it, is that the Starwood is nicer, and would have been much more expensive had we paid cash.    If you look at what we are saving based on the best available rate, we are looking at about 4 cents per point.    If you factor in the SPG50 rate, we go down to 3.5 cents per point.

Why Do I Stick With Starwood?

If I am really only getting 2 cents per dollar spent, what’s the point?   Why shouldn’t I just go with a 2% cash back card?    I am asking myself that, but in the end, I have concluded that he flexibility of the Starwood card makes up for it.   If I find myself short of a few miles here or there, I value the ability to transfer miles from Starwood to other programs.    It is that feature that has allowed me to take advantages of big promotions when they have come up in the past.

Finally, I value Starwoods exemplary customer service, a rarity in the travel industry these days.   For example, my SPG50 coupon happens to be expired, but I have found out that they will send you a new one on request.     That is customer service, and that is why they keep my business.

There is a lot of scary stuff out there regarding credit cards and credit scores.   And why not?   Credit scores are determined in about the most consumer unfriendly way.    There is a secret formula out there that determines your FICO score, and the Fair Isaac corporation that refuses to disclose how they come up with it.   It gets even more confusing when you realize that all of the other credit scores out there that you can pay to see are not FICO scores, but some other formulation.   Finally, FICO itself is a moving target, as the only thing that is disclosed about the secret formula is that it changes all the time.

Credit Score Urban Legends

Over at the Mint, there is a helpful article that seeks to debunk some of the misinformation that is out there.    They cover some really good subjects out there and it is worth a read.   Many people are surprised to know that a credit guru like myself is not checking my credit score all of the time.     I don’t check my credit score every day for the same reason I don’t check my blood pressure.    I always pay my bills on time and I know that my finances, like my body, are healthy.     Yes, I do check my credit report from time to time for errors, but I am not obsessed with it.    I think the Urban Legends article shows that too many people are worried about the details around the edges of their credit report.    I focus on the most important aspects of financial health; paying my bills on time, not using all of my available credit, and keeping a good credit history.    Do those things, and you shouldn’t stay up at night worrying if closing an unused account damaged your credit.

Fear Of A Chargeback

The chargeback is one of the most powerful tools that a credit card holder has.     It is this power, above others that separates credit cards from the far more impotent resources available to debit card users.  I have written about how merchants live in fear of a chargeback, as a successful chargeback can increase the transaction fees on all future sales.

What Are Chargebacks For?

Chargebacks are a privilege given to credit card users that allows them to dispute charges for goods and services not provided or delivered as promised.

To be sure, I am rarely forced to use a chargeback, for the same reason police officers rarely discharge their firearms.    In almost all instances, the threat of a chargeback is the fastest way to get a merchant to do the right thing.    Once the merchant realizes that you are not going to go away, but you area going to fight them with your most powerful weapon, the typically cave.     I have used this threat several times with airlines.  In one instance, United decided to charge me some random fee that they did not disclose.    They suggested that I accept a voucher for future travel, while I suggested they refund me the excess amount or I would issue a chargeback.    It would be like a thief taking money from your wallet, getting caught, and then giving you a coupon to make up for it.    I threatened a chargeback as I did not authorize the charge, and United sent me a check that week.

In another instance, AirTran sold me an upgraded seat that I never got to sit in due to my flight being canceled, and me being put on standby for another flight.    Again, the airline offered me coupons, and I threatened a chargeback and insisted on cash.   Airtran credited my card immediately.

Should The Card Holder Fear A Chargeback?

According to this article at Walletpop, merchants are starting to blackball people who do chargebacks.    I can understand the frustration a merchant feels when a person abuses chargebacks by fraudulently claiming merchandise was not received.    It would be very easy to get away with such fraud the first few times, but I would imagine a credit card company would catch on soon enough.

On the other hand, this article claims that just one chargeback is enough to get you on the black list of BadCustomer.com, and worse, they would charge you $99 to get off it.     I am highly skeptical of such claims.   First, I find it incredible that issuing a legitimate chargeback might lead one to be on such a black list.   Second, I would probably eat my computer before I paid someone $99 to take me off some list that I was erroneously put on.  In addition, I would gladly take my business elsewhere if a merchant accused me of potentially defrauding them.   Even, for the sake of argument, if an actual faudster was put on the list, this article seems to imply that paying $99 will get them off, so what’s the point?

Their may be a place for black lists that target repeated fraudsters, although I would prefer they simply be prosecuted.    That said, I would not take the author’s advice seriously when he says; “And for a legitimate customer thinking of doing a chargeback? Contact the company first for a refund. It’s a lot easier than paying $99 to get off a blacklist.”    Yes, you should contact the merchant first if you are not getting what you paid for, but don’t be afraid to threaten a chargeback when you know you are in the right.

For those frequent fliers at Delta’s hubs, Atlanta, Detroit, Cincinnati, Salt Lake City, Memphis, and Minneapolis, obtaining Delta Medallion status may be your perpetual mission in life.  Those who are sent overseas on business every couple weeks need not worry to hard about reaching the new Diamond Medallion level. The rest of you will be constantly trying to maintain your status every year.

Credit Cards Can Help

You probably already know about the Medallion Qualifying Miles (MQMs) available through Delta’s American Express credit card partners. While the Platinum Card offers 10,000 MQMs when you spend $25,000 and $50,000, the Reserve card is the big daddy, offering 15,000 MQMs at $30,000 and $60,000 annual spend.     It is therefore possible to receive 30,000 MQMs and make Silver Medallion without ever taking to the skies, although you will have to be a big spender to do so.

A New Offer For MQMs as a sign up bonus

Now, Delta is offering a initial sign up bonus of 5,000 and 10,000 MQMs for the Platinum Personal and Business cards respectively.     While savvy credit card holders might already have a personal card, I would think that the 10,000 MQMs as a sign up bonus for the business card would be irresistible to certain people I know.   You know who you are!

There is an annual fee of $150, which is really peanuts in the Medallion game.    If you can sign up for this card and make the next level, that fee will pay for itself in upgrades and bonus miles, if not for the actual miles themselves, which are worth something around $150 alone.

What If You Are Not A Delta Fan?

Let’s say you live in or travel to a certain southern city, but don’t really want to fly Delta enough to earn or take advantage of Medallion status?    Perhaps, like me, Airtran is more your style.      In that case, hang on to your American Express OPEN cards, as they are now offering 5% cash back on all Airtran purchases. I know that 5% isn’t going to make the difference between taking a great vacation and staying home, but it should make the difference in using your Amex open versus another card, as there really are few rewards as valuable as 5% cash back.

The Best Of Both Worlds?

Ironically, the Delta American Express cards are also part of the OPEN savings programs, and therefore accrue the 5% cash back when used to purchase tickets on their aforementioned rival Airtran.

Strategies For Maintaining Medallion

Now that Delta has implemented rollover miles, maintaining your status has gotten easier, if a bit more complicated.       When the end of the year approaches, it might even be desirable not to accrue enough mileage to make the next level, in order to have more rollover miles for the next year.     Ways to avoid accruing mileage include flying with frequent flier tickets, or just postponing travel until after the new year.

In theory, one could avoid earning MQMs by using the “pay with miles” option for a small portion of their ticket, yet on my last trip with Delta, I found that I had, in fact, earned MQMs!     I was happy to earn them, however I can only imagine the puzzled reaction I would get if I called Delta to complain about earning too many miles!

Traveling Together?

Another strategy is good for people who travel together.    So long as one of them has Medallion status, the benefits generally apply to both when traveling together.     In that case, only one person should sign up for such a credit card and get the MQM bonus.    Since these sign up bonuses can generally only be earned once every few years, let the other person wait until such a time when their status is in doubt before signing up for a card that includes a one time MQM bonus.

For this former Delta Medallion, I am happy to be out of the status circus, but for those who are still willing to jump through hoops to stay in Delta’s good graces, you now have a new ring to shoot for.

Back in December, I told you about the US Airways promotion, and how you could fly in First Class for very cheap.     If you took advantage of the promotion, today is the day the miles were to hit your accounts.

With nervous anticipation, I checked by account throughout the day, until I saw the above balance.   As you stare at that balance keep in mind two things:

1. I just opened my US Airways account in December.

2. I have never flown on US Airways.

How Did It Work Out?

Yes, I did spend $3,000 on the TrackItBack product to get those miles, but I donated the product to charity and will take a tax deduction.    Conservatively, you could say my net out of pocket expenses were $2,250, or about a half a cent per mile.

If you consult the US Airways Star Alliance Award Chart, you will see that it is the equivalent of ing a First Class Ticket to Europe for $600 dollars!

In fact, my friend Shawn and his mother, who I wrote about in the original story, have already found their two tickets to France in First Class to the Tour de France this year using their miles.    They put a hold on them over the weekend, and purchased them today.     The taxes and fees were close to two hundred dollars each, but think about it:  They will be flying to Europe on United Airlines International First Class and returning on Lufthansa’s outstanding First Class for about $2,000 total for the both of them.   That compares to about $3,500 for the two tickets in the peak summer season, when priced in coach.

For comparison, the round trip from Denver to Paris on Lufthansa in First prices out at over $17,000,  while the lesser United Airlines International First product is somewhat under $10,000.

How Did I Find The Award Seats In First?

You will recall that I had speculated that “there is that oh so tempting chance that they might do the trip in business class or even first, but it is hard to say considering they will only be able to book their July trip in March.”  Considering July is definitely the high season for reward travel to Europe, finding space for them was a challenge.   Luckily, I had studied the system and found that there are some tools out there to help you.

You cannot book US Airways international partner awards online, you must call their representatives.   While their representatives have a reputation for being friendly, they are not known as being familiar with all of the different possible routings in the Star Alliance, nor are they encouraged to spend much time looking on your behalf.

Fortunately, All Nippon airlines of Japan has a website that shows award availability within the Star Alliance, so I signed up for a membership in their frequent flier club and did the searching myself.   I completely lucked out when I found two award seats in First Class on a United flight from Denver to London, nonstop.   From London, they will take a discount carrier on to Bordeaux where they will see a couple stages of the tour.

Returning from Paris, I found plenty of space on Lufthansa to Frankfurt, in business class, but getting them back to the states was much more difficult.    I had to find an available flight transatlantic, and since there was no space on their Frankfurt-Denver flight, I would also have to find them space on United or Continental from their point of entry to Denver.    In the end, I found them seats in First on a 747 from Frankfurt to Houston, and continuing in First to Denver on United with good connection times.

Once I found the flights with space, they were able to call up and ask for a reservation on the specific flights they knew were available.   It was a win-win as the representative’s work in finding the flight was already done.

In Conclusion

A savvy traveler and credit card user can get to their destination in First Class for less than the cost of coach.    To do so, you have to wait until the right promotion comes along, and then go all in.    The key is having knowledge of the deal when it appears, and acting on it within the promotion guidelines.    In my experience, these promotions come up infrequently, but there will be others in the future.

Read this blog and others and you will be in the loop when the next big promo comes around.