At it’s core, the credit industry seems to be a cat and mouse game between banks and customers, creditors and debtors.    Here are two stories that illustrate both sides.

Banks Evade Reform

The credit card bill of rights (CARD Act) is a great piece of legislation.   It closes many loopholes and bans many unfair and deceptive practices.   It is also no surprise that the banks would alter their practices to get around these new regulations.

Businessweek has an article going into some detail about how the banks are starting this process of evading the regulations.     One of the regulations that has already taken effect concerns the changing of interest rates that were marketed to cardholders as “fixed”.    The bank’s response is simply to change your card from “fixed” to “variable”, and then jack up the rates.     At least calling the card “variable” is honest, whereas varying the rate of a “fixed” rate card is not.     The big problem is that “Companies have already rethought rates. Under the new law, issuers can’t raise them without 45 days’ notice. But there’s a loophole: The rules don’t apply to variable-rate cards, with rates that float up and down.”      So the 45 day rule goes out the window.    While you can still pay off  and cancel your card before the change goes into effect, most people who are paying interest, almost by definition, are unable pay off their card.

Another fee they cite is a bank that is starting a $19 inactivity fee for people who haven’t used their card in a year.   I really doubt they will collect much from this fee.   If you haven’t used your card in a year, you will likely cancel it and not have to pay the fee.       While this new fee is really not going anywhere, don’t be surprised to see other creative fees being proposed.      These companies are in business to make money, and they will do it any way they can.   They may adhere to the word of the new rules but not to their spirit.

Even though I predicted this outcome, I still supported the legislation.     This morning, I heard a local radio commentator lament that this is just another piece of legislation that was gutted by the industry.   I disagree.    I still feel  that this legislation has teeth and is fair, I just think that there will always be more than one way to skin a cat, and it is very unfortunate if you happen to be the cat.    Just because banks can think up new fees, it doesn’t mean that attempts to reign them in were necessarily too weak.

Consumers Wiggle Out Of Debt

The Washington Post has an article on how consumers are increasingly able to convince their credit card issuers to negotiate on interest rates and even  write off some of their debts.    One card holder got his interest rate lowered, but only in return for closing his account.    Another got a zero percent rate for 12 months, but he too had to agree to close his accounts.     The article warns that closed accounts may hurt your credit score and forgiven debt has negative tax consequences.

In reality, closed accounts really only have a temporary minor impact on your credit score, and the I am sure the tax liability of a forgiven debt is a fraction of the debt itself.    The overwhelming concern for consumers should be paying their bills on time and maintaining their credit score.

The article just shows how consumers are also using every means at their disposal to conserve their money.    One could even make the argument that their behavior is more egregious.    As consumers, they purchased items, and agreed to pay interest on them.    Now they are asking their creditors to modify this agreement or risk default.   Is that better or worse than complying with the letter of the law, but not the spirit.

In the end, this is not a moral or ethical dilemma, it is simply about business.  Each party will maximize their profits while minimizing their losses.   So long as it is done honestly, that is pretty much how it should be.

Yesterday, I wrote about how I generally see a lot of value in hotel loyalty programs and by extension, their affiliated credit cards.    Generally,  I find hotel programs to be more customer friendly, and hotel options to be more flexible.    As a traveler, I may have few choices in airlines that will get me to my destination with a minimum of hassle, yet once I arrive, I usually have plenty of good hotel choices.    As a reward traveler, I find that my hotel spending can meet or even exceed my airline costs, especially when traveling domestically.

Starwood Preferred Guest vs. Membership Rewards

Readers of this blog know that the Starwood Amex is my favorite reward card due to their easy rewards and their very helpful customer service.    Whenever I have had the occasion to contact their customer service, they have always come to a resolution that met or exceeded my expectations.    On the other hand, I have not had the occasion to use the Membership Rewards program offered by Amex.   Both programs are highly regarded by reward card fans for their high degree of flexibility.    While Starwood offers it’s industry leading awards with no blackouts and no capacity restrictions, it also offers transfers of points to miles on dozens of airlines.

Membership rewards offers transfers to airline miles as well as award seats on several airlines, if not as many as are affiliate with Starwood.    That is what makes this latest offer interesting.    Until September 22d, there is a 50% bonus on transfers from Membership Rewards to Starwood.     The normal transfer rate from Membership Rewards to SPG is 3 to 1.     This rate is not terribly favorable.     The new 2 to 1 rate makes a little more sense to people who have a lot of Membership Rewards points who may need to top off a Starwood account.

Membership Rewards Hotels

It is tough to grasp how many different hotel options there are with your Membership Rewards Points.  It is not that there are an infinite number of options, it is that they are laid out by property, and there are dozens of different properties.     The awards vary in both points and value, and it takes some time to go through them all.    At first glance, it does seem like most hotel stays start at 20,000 points.   For that value, you could transfer to Starwood and stay at plenty of Westins that are 10,000 points a night, and get your fifth night free.

More Hotel Discounts

This is a tough year for hotels, and September and October are some of the toughest months of the year for the travel industry.     That is probably why hotels are trying to unload rooms for discounted reward rates.     Airlines can park their planes when fuel costs rise and traffic falls, but hotels have a far higher percentage of their costs already sunk into their property.    Marriott is now discounting their awards 105 for general members, and 15% for those with status.   Registration is required here and it is only valid for stays through January 15, 2010.    The points look like a lot.   For example, the web site says Denver to Dallas for 40,000 points plus $76.     That seems pricey in a time where a round trip flight to Dallas is around $200 when paying with cash.     Keep in mind that 10 points are earned for a dollar spent at a Priority Club hotel.

If you travel on business and spend many nights in hotels, keep your eyes open for deals and promos offered by hotel chains.   The best deals in travel are often on the ground.

To paraphrase the late, great, Rodney Dangerfield, hotels loyalty program don’t get much respect.   When most people think of reward travel, the first thing that often comes to mind are airline frequent flier programs.     The fact is that airline programs have been hugely devalued, and they remain riddled with bizarre rules and elusive availability.

Hotel programs, on the other hand, can be much more attractive.   My favorite reward credit card remains to this day my Starwood American Express.   Their program seems to operate in a manner that suggests a competitive marketplace.     On the other hand, most airlines seem to act like monopolies.

When you think about it, there are good reasons for that fact.   If you  travel frequently for business, you are probably the best customer for both airlines and hotels.     These travelers are not only frequent, but they often don’t care too much about what their hotel or flight costs, so long as it is within their company’s guidelines.    If you live in most major cities, there is likely one dominant carrier that offers most of the non-stop flights out of your home airport.   Unless you want to double your travel time and vastly increase your risk of delays and lost luggage, you will pay whatever it takes to fly non-stop to your destination on your city’s major carrier.   Continental doesn’t have to compete with Delta for travelers in Cleveland, because they know that only Continental will fly them non-stop to most cities.   In Cincinnati, the situation is reversed.

Hotels Are Different

Once travelers reach their  destination, they can choose from one of several hotel chains that will likely have properties near any major business center.    There, the traveler has lots of options that may be equally convenient.    That is why hotel programs are often superior in value and service to airline programs.     That, and the airline industry in this country remains second only to the automobile industry as one of the worst managed industries in the world, but that is the topic of another article.

Most reward travel aficionados agree that the best program out there is the Starwood Preferred Guest program.      Case in point:   Starwood had a policy where no-shows for reward bookings were charged the rack rate if they canceled late or failed to show up.      According to this article, Starwood realized that customers were not happy with this policy, and they changed it.      When was the last time you heard of an airline changing a policy in favor of their customers?   Sometimes it happens when you are talking about startup discount carriers, but it never seems to happen for the legacy carriers.    At one point, I even wrote an article about the contrast between them.

Hotel programs, like Starwood’s generally have far fewer strange rules and fees compared to airlines.    That is not to say that they are all the same.      Take the Intercontinental Hotel Group’s Priority Club system for example.    They represent such brands as Holiday Inn, Candlewood Suites, and of course, Intercontinental Hotels.    While this might be a great system for business travelers who are not overly concerned with price, I have found this program completely useless for leisure travelers.   Every time I book a room with them, I do not receive points because it is a discount rate.     The only way to accumulate points in their system is to pay a higher rate, or get their credit card.

Credit Cards Are Crucial For Hotels And Airlines

I have noted in the past, that sometimes the hardest way to get points or miles is to purchase goods or services from the company offering them.    That is another way of saying that the easiest path to an award is often through the credit card.    I purchase rooms at Starwood, yet I have tens of thousands of Starwood Points.    It is possible to get most of the way to elite status on many airlines with credit card spend alone.     This article shows how the airlines can be very dependent on their credit card partners for financial support.

Consider Your Cards

Most airlines and hotels offer a credit card that ties into their loyalty programs.   Many of the airline miles can be redeemed for hotels, while many hotel points can be redeemed for some kind of airline award.     In short, there is a lot of overlap between these two industries.      When I have my choice, I tend to go with the hotels.     At least that industry that seems to have it’s act together in terms of customer service.

Here in Colorado, we spend a lot of time on the ski slopes.   When traveling up the chair lift, there is not much in the way of reading material, except for what is printed on the lift towers.   To paraphrase one of the common signs, “Dangerous skiing can result in death and/or loss of your lift ticket”.

Of course, if you die skiing, you probably aren’t that concerned about your lift ticket.   On the other hand, if you or someone you love dies, you may be concerned about there frequent flier miles or other loyalty points.    It is entirely possible that people may hold hundreds of thousands of points, potentially worth thousands of dollars.

What Happens To Your Points/Miles When You Die?

This is where things get complicated.   Just about every loyalty program claims that points accumulated are the property of the company issuing them, giving them complete discretion as to how they are handled in the case that someone dies.   Airlines have the most popular programs, and their rules vary greatly from company to company.

For example, Inside Flyer posted this article five years ago regarding this subject.   At that time, they found the following regarding these airlines that do allow the transfer of miles from the deceased account to an heir:

American AAdvantage: Mileage does not need to be specified in the will but American does require a copy of the pages, which identify the decedent’s name, the executor’s or personal representative’s name, and a page showing the date of execution and signature of the maker. If the AAdvantage account is specifically mentioned, a copy of that page must be included as well. If the AAdvantage account has less than 10,000 miles, only proof of death is required; if more than 10,000 miles — a transfer fee of $50 will be charged.

Continental OnePass: Transfer to a surviving spouse or a named beneficiary may be done provided the inheritor is also a OnePass program member at the time of the account member’s death. The account does not need to be mentioned in the will, but Continental does require a copy of the death certificate and a testimentary letter appointing the executor who authorizes the transfer of miles to the inheriting member. Continental charges no fee for the transfer.

Delta SkyMiles: Mileage does not need to be specified in the will but Delta does require a copy of the will if the beneficiary is not the spouse. If there is more than one heir, and the account is not specifically assigned to any one heir, a letter from all the heirs is needed to assign the account to any one of them. Delta charges no fee for the transfer.

Keep in mind that these rule may have changed since the article was published in 2004.

On the other hand, Northwest currently does not allow miles to be transferred after death.    Considering that you can transfer unlimited miles from Northwest to Delta at this time, there is really no reason that anyone should keep miles in a Northwest account, unless you are just about to redeem them for some award not available at Delta.

Other airlines that void miles at death include: Air France, Cathay Pacific, Hawaiian, KLM, Air New Zealand, and Qantas, and the dreaded United, although there are reports of them transferring miles for a fee of $75.   More information can be found at this discussion on Flyertalk.

Ways Around Transferring Miles

In most cases, it is not the miles that you are looking for but the award ticket.   Fortunately, those are transferable in every program I know of.    It is not uncommon for me to have an award ticket issued in the name of a friend or a family member, who will presumably return the favor some day.      That said, I don’t imagine there is someone at the airline cross checking the obituaries with their frequent flier membership lists.    When someone passes away, I don’t see any reason why you could not have an award ticket issued in a survivor’s name.   As far as I can tell, the miles are essentially a part of the deceased’s estate, and their executor or heir could essentially act on their behalf in obtaining an award, just as they might dispose of assets or credits.    Just to be safe, I would conduct the transaction online rather than over the telephone.   The only downside is that you would be unable to combine mileage from the deceased’s program with that of an heir.      It is not much of a downside, as any mileage too small for an award, really isn’t worth that much anyways.    I would be most concerned with reclaiming the mileage of someone who has hundreds of thousands of miles.

Non-Airline Programs

It is beyond the scope of this article to determine the policy of every credit card and hotel’s program’s points.   The best way to find out is to read carefully the terms and conditions of the program.   If  the answer is not there, you may wish to communicate directly with them in writing.

Update Your Will

Either way, it is a good idea to include all points, miles, and loyalty programs in your will to a designated heir.     This will assist you when the time comes to claim benefits.

We are all going to die at some point.   It would be nice if our survivors could enjoy some of the rewards that we accumulated in this world.

Credit cards are the safest way to pay for anything.   Cash can be stolen, debit cards don’t have charge back protection, but credit cards holders are protect from fraudulent transactions under most circumstances.

Identity Theft Can Happen To Anyone

If you don’t believe it, take a look at this article in the New York Times.   You figure that if you are Ben Bernake, the Chairman of the Federal Reserve bank and the most powerful person in the financial world, no one would be stupid enough to try to steal your identity.     Of course, the joke is that whoever stole his identity is now several trillion dollars in debt.

Credit Card Protections Are Only Valid If Reported Within 60 Days

Here is an article about a man in Denver who was paying his credit card off at a fixed amount every month.   I know it’s crazy, but people do this.    Apparently, he also racked up some $11,000 of fraudulent charges.   Normally, this would not be a problem, except that he actually failed to notice this within the 60 day period.   Afterwards, he was unable to get the credit card companies to reverse the charges.

While it is unlikely that someone would not notice such a large charge, it is far more likely that a smaller charge will sneak on your bill.    You should really spend a few minutes looking over each statement for errors.    Since I pay my bills quickly online, I actually end up spending more time scrutinizing my bill than I do paying it.     I don’t actually keep receipts to match up every transaction, although I know some people who do.    Instead, I rely mostly on my memory.    Perhaps when I get older, it won’t be the best system, but it seems to work for me now.

Follow The Rules

When you notice a problem with your statement, you should first try to contact the merchant directly.   It could be  an innocent mistake, and it is the right thing to do give the merchant a chance to resolve it for you without incurring the expense of a charge back.     If you didn’t know, chargebacks are very costly to merchants as they can raise their fees for all transactions.     If the merchant can’t or won’t help you, or the charge is clearly fraudulent, the next step is to contact your credit card company.

Here are the rules for chargebacks that the Federal Trade Commission puts out.     The repeatedly say that the chargeback must be submitted in writing.     While true, I have never had to do this with a credit card company, they have always taken my information over the phone, and then asked me to submit further documentation in writing.    If you are dealing with a less reputable creditor, you should certainly put your dispute in writing as advised.

Documentation Is The Key

These matters will ultimately come down to a “he said, she said” situation if the merchant disputes your claim.   The winner will be the party who has the most clear documentation of their case.    If you have receipts, emails, tracking numbers or other information, submit it along with your dispute.    Always keep any explanations brief, polite, and to the point.    I can only imagine what it must be like to be the person who has to read through a hundred of these a day.   I would go crazy reading a dispute that sounds like a story from  Grandpa Simpson, and I would probably deny the claim without reading the whole thing.    Just be glad I don’t have that job!

One Last Word

Finally, I will never be able to think of the term “Identity Theft” without recalling this clip that I posted a couple weeks ago.   It is a classic.