# No More free Miles using credit cards



## tombo (Jun 11, 2009)

Thanks to our wonderful representatives in Washington changing the rules for credit card companies, the credit card companies will in the very near future  charge interest and fees on all charges beginning day one. All the free rooms and miles so many of us accumulate using credit cards  to pay bills (which we pay off early so we don't get charged any interest or fees)  will soon cost us real money. The free points, rooms, miles, etc will no longer be free. I wonder how many TUGGERS will change travel plans when we can't get free air fare from our credit cards anymore. Without credit card miles it will take me years to get a round trip coach ticket. My free flights are about to be a fond memory. I just wiped out my last rewards points and Delta miles for 2 first class R/T tickets to St Maarten. I have one free American Airlines  domestic flight left using accumulated miles.

Besides me are there any others here who will have to change travel plans in the future due to the credit card rule changes?


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## Cathyb (Jun 11, 2009)

Yes, back to paying by check and cash.  Oh well, it was good while it lasted!


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## DeniseM (Jun 11, 2009)

So that's been passed by congress?  What if you pay off your card the same day you charge or keep a credit balance?  Are those ways around it?


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## AwayWeGo (Jun 11, 2009)

*Credit Card Changes, For Sure.  Travel Plan Changes, Not So Much.*




tombo said:


> Besides me are there any others here who will have to change travel plans in the future due to the credit card rule changes?


We never snagged any free flights via any credit card bonuses.  About the best we could do was get a little cash back from Discover Card & Platinum Cash Rewards American Express Card.  We just (a) don't spend that much money & (b) pay cash for too much of the money we do spend.  So, no, clamping down on charge card bonus airline miles won't have any practical effect around here. 

Charging interest from Day One on all credit card purchases, however, is something else again.  We don't _pay_ any credit card interest.  We don't _make_ any periodic card payments.  We use Master Charge, etc., strictly as a convenience -- you know, buy stuff on plastic (gasoline, RedBox Dot Com movie rentals, purchases via Internet, etc.), then pay the card balance in full when the monthly bill comes in. 

If that's no longer possible without interest charges, it will trigger some changes around here in the form of (a) shredding all the credit cards & (b) starting up Visa or Master Charge check-card accounts down at the credit union for convenience in buying gasoline, doing RedBox Dot Com movie rentals, making miscellaneous purchases via Internet, etc. 

It's always something, eh ? 

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​


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## "Roger" (Jun 11, 2009)

> So that's [the discontinuation of frequent flyer miles] been passed by congress?



No it hasn't.  

Congress did pass legislation prohibiting certain practices such as changing a person's interest rate retroactively so it applies to all outstanding balances (and not just balances incurred after the rate change).  It is true that credit card companies are considering withdrawing benefits such as frequent flyer miles in order to make up for loss of revenue, but Congress did not dictate that they do this so the wording in the original message is misleading.

Any further discussion of the matter would lead me to violate TUG rules.

[In the interest of full disclosure, I never have had an outstanding balance left on my credit card bill.}


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## tombo (Jun 11, 2009)

"Roger" said:


> [DeniseM]So that's [the discontinuation of frequent flyer miles] been passed by congress?  ...QUOTE]
> 
> No it hasn't.
> 
> ...



The nightly news I watched didn't say that the CC companies had to charge interest beginiing day one, it said they would now be allowed to charge interest beginning day one and most if not all credit card companies were expected to do so.


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## dougp26364 (Jun 11, 2009)

If enough people were to stop using their CC's, then the CC companies would make changes to attract business. Of course, we all know this isn't going to happen. To many people attempt to borrow their way to wealth.


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## IngridN (Jun 11, 2009)

tombo said:


> The nightly news I watched didn't say that the CC companies had to charge interest beginiing day one, it said they would now be allowed to charge interest beginning day one and most if not all credit card companies were expected to do so.



I don't believe the CC cards are prevented from charging interest from day one.  Those who do wouldn't have much business IMHO.  If they did, they would certainly lose mine.  I charge everything and anything to my CCs for the cashback, hotel and airline points and pay it off each month.  If they charge interest from day one, it's back to the checks.  I don't remember the stats, but a good percentage of people do not carry a balance and I would guess their reaction would be the same as mine.

Ingrid


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## Steve (Jun 11, 2009)

tombo said:


> The nightly news I watched didn't say that the CC companies had to charge interest beginiing day one, it said they would now be allowed to charge interest beginning day one and most if not all credit card companies were expected to do so.



This still isn't quite right.  The credit card companies have always been allowed to charge interest from the moment of purchase.  This is NOT new.  

Many people, including some industry analysts and those in the media, are speculating that credit card companies will now decide to exercise this right which they have always had and charge customers from the moment of purchase.  Their reasoning is that companies will do this to try and make up for some of the income that they are going to lose as a result of the new regulations which were passed by Congress.

Will this happen?  Time will tell.  

Steve


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## tombo (Jun 11, 2009)

Steve said:


> This still isn't quite right.  The credit card companies have always been allowed to charge interest from the moment of purchase.  This is NOT new.
> 
> Many people, including some industry analysts and those in the media, are speculating that credit card companies will now decide to exercise this right which they have always had and charge customers from the moment of purchase.  Their reasoning is that companies will do this to try and make up for some of the income that they are going to lose as a result of the new regulations which were passed by Congress.
> 
> ...



http://www.msnbc.msn.com/id/30829066/

"Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups. "


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## tombo (Jun 11, 2009)

IngridN said:


> I don't believe the CC cards are prevented from charging interest from day one.  Those who do wouldn't have much business IMHO.  If they did, they would certainly lose mine.  I charge everything and anything to my CCs for the cashback, hotel and airline points and pay it off each month.  If they charge interest from day one, it's back to the checks.  I don't remember the stats, but a good percentage of people do not carry a balance and I would guess their reaction would be the same as mine.
> 
> Ingrid




Exactly my point. The article I listed above and several other articles I have read say that about 30% of the CC customers pay off the balance in full, and the CC companies are not going to continue to let those customers have a "free ride" anymore. Due to less future revenue under the new rules they are going to curtail free programs, implement annual fees, and start charging interest from day one because they don't make any money from customers who pay no interest while accumulating miles etc. They don't care if people who pay their balances in full for free miles cancel their cards since we were costing them money to have us as customers.

From the above article:

“Despite all the terrible things that have been said, you’re making out like a bandit,” he said. “That’s a third of credit card customers, 50 million people who have gotten a great deal.” 

"Robert Hammer, an industry consultant, said the legislation might have the broad effect of encouraging card issuers to become ever more reliant on fees from marginal customers as well as creditworthy cardholders — “deadbeats” in industry parlance, because they generate scant fee revenue. "


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## IngridN (Jun 11, 2009)

tombo said:


> Exactly my point. The article I listed above and several other articles I have read say that about 30% of the CC customers pay off the balance in full, and the CC companies are not going to continue to let those customers have a "free ride" anymore. Due to less future revenue under the new rules they are going to curtail free programs, implement annual fees, and start charging interest from day one because they don't make any money from customers who pay no interest while accumulating miles etc. They don't care if people who pay their balances in full for free miles cancel their cards since we were costing them money to have us as customers.
> 
> From the above article:
> 
> ...



Right...they conveniently forget how much they charge the merchant!  And lets not forget the foreign conversion.  I really feel for their loss   

Ingrid


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## DeniseM (Jun 11, 2009)

What if I prepay my credit card every month so the money is already IN the Acct. when charges hit?  Would that work?

It will kill me to lost my Starpoints!


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## tombo (Jun 11, 2009)

DeniseM said:


> What if I prepay my credit card every month so the money is already IN the Acct. when charges hit?  Would that work?
> 
> It will kill me to lost my Starpoints!



No one knows for sure which company will do what. As Steve said time will tell. The supposed "experts" are saying that most if not all companies are going to reduce or eliminate free credit card perks.

I was just wondering when I started this thread if the CC Companies do make you pay interest immediatelly to earn miles if many Tuggers would be able to earn enough FF miles to take trips (I don't fly enough to earn the miles I currently use to vacation) without using CC's anymore. I figure a lot of us take a trip or two a year we feel is free. Will we still take those trips if we have to buy all of our plane tickets. I will have to buy my airplane tickets and it will impact the number of vacations I will take that require flying. Are most others here in the same boat or do most of you fly enough to accumulate enough miles to get free tickets without the CC perks?


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## IngridN (Jun 11, 2009)

DH, unfortunately, travels lots for business, so we'll continue to fly free, only paying for tickets where it makes sense.

Ingrid


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## DebBrown (Jun 11, 2009)

We're in that group that charges everything and anything to get the frequent flyer miles.  If we had to pay higher fees are interest, we'd certainly change our habits.  And, NO, we wouldn't earn enough miles for tickets without the credit card charges.

It will be the end of the gravy train for us. 

Deb


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## philemer (Jun 11, 2009)

I'll believe the decrease in free miles when I see it. CITI recently started offering 30K free AA miles, with first year fee waived, to many people!! Here's the website if you want to apply: 30K free AA. US Air, Continental, Alaska, United, Delta, etc, are still offering 20K to 30K miles for credit card use through their sites. Will it dry up? Don't know for sure but I doubt it. A business needs to attract new customers & this is one way to do it. Time will tell.


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## AwayWeGo (Jun 11, 2009)

*Goodbye, Old Friends.*





-- hotlinked --​
-- Alan Cole, McLean (Fairfax County), Virginia, USA.​


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## Nickfromct (Jun 11, 2009)

I find it hard to believe that the credit card companies would institute such a policy charging interest from the date of purchase. If you run a balance, you are already paying interest from the date of purchase. So that means they would be disenfranching only the folks that pay on time.  Not too smart. The CC companies also get a fee from the merchants ranging between 2-4% I believe. So if you charge $1000/month and pay on time, you bring them between $20-$40 per month. On the other hand, if the cc companies were so smart, they wouldn't be in they shape they are in now.


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## philemer (Jun 11, 2009)

Alan,
Your "old friends" aren't going anywhere. However, they may morph a bit.


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## tombo (Jun 11, 2009)

Nickfromct said:


> I find it hard to believe that the credit card companies would institute such a policy charging interest from the date of purchase. If you run a balance, you are already paying interest from the date of purchase. So that means they would be disenfranching only the folks that pay on time.  Not too smart. The CC companies also get a fee from the merchants ranging between 2-4% I believe. So if you charge $1000/month and pay on time, you bring them between $20-$40 per month. On the other hand, if the cc companies were so smart, they wouldn't be in they shape they are in now.



But 1000 (or 2000 in some cases) FF miles per $1000 charged costs the CC company about $28 to $56 (just a guess). For $1000 in charges they get $30 to $40 in fees. They have paperwork, processing expenses, and employees to pay. They do not make a profit in that example or in any situations where the customer pays no interest and receives one (or even 2) FF miles per dollar spent. Those who pay their balances in full have been subsidized by those who carried big balances and pay the CC companies a lot of interest. If things do change that might not happen anymore.


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## philemer (Jun 11, 2009)

tombo said:


> But 1000 FF miles costs the CC company about $28. For $1000 in charges they get $30 to $40 in fees. They have paperwork, processing expenses, and employees to pay. They do not make a profit in that example.



tombo,
Can you tell us where you got the "about $28" figure for 1000 miles? I'm thinking that only a company insider would know this info. My "guess" is the figure is much lower.


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## tombo (Jun 11, 2009)

philemer said:


> tombo,
> Can you tell us where you got the "about $28" figure for 1000 miles? I'm thinking that only a company insider would know this info. My "guess" is the figure is much lower.



Not an insider. I was using figures that Delta charges us. I added a disclaimer stating that the fees were a guess on my previous post.

This is from the Delta web site:

"Purchased miles are applicable toward all SkyMiles awards. 
The cost is $0.028 USD per mile plus a 7.5% Federal Excise Tax."

1000 miles cost $27.50 plus taxes from American Airlines.

I am sure the CC companies get a discount, but even if you use a figure of $20 per $1000 I don't think that they could make a profit on 3% to 4% in merchant fees when they are paying 2% or more to the airlines to buy miles. That only leaves the CC companies 1% to 2% to cover expenses and make a profit.


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## philemer (Jun 11, 2009)

What the airlines charge us is irrelevant, IMO. The airlines also receive advertising value so they can charge the banks a lot less. I wouldn't be surprised if the banks pay < .01 per mile. Pure speculation, of course.


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## jamstew (Jun 12, 2009)

DebBrown said:


> We're in that group that charges everything and anything to get the frequent flyer miles.  If we had to pay higher fees are interest, we'd certainly change our habits.  And, NO, we wouldn't earn enough miles for tickets without the credit card charges.
> 
> It will be the end of the gravy train for us.
> 
> Deb



Same here. The *only* reason I use a credit card at all (other than the convenience) is for the miles. That said, I only take two flying trips a year and can fly pretty cheaply on Southwest, so it won't change my travel habits.


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## Cathyb (Jun 12, 2009)

tombo, et al:  Are they required to notify/warn us in a certain timeframe before this is implemented????


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## x3 skier (Jun 12, 2009)

Having accumulated a Gazzilion miles in my career and still having over a million left after retiring, I only use credit cards to keep active the FF accounts. Interest on a charge of <$100 or so a month is not going to upset me but if they add a large annual fee, that might change and I might resort to other things to keep the FF accounts active.

Cheers


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## JeffW (Jun 12, 2009)

What credit companies CAN do, and what they WILL do, are two different things.  For example Advanta recently deactivated a lot of their credit cards, because of industry woes.  This doesn't mean that every credit card company will do this.

In fact I'd predict that for every company that makes a change (raises annual fee, reduces perks, charges interest from day 1), there will be another company that advertises that _they don't_.  There's just too much competition out there.

Similar story in other areas.  The headlines are saying the GM & Chrysler have filed for bankruptcy, and area getting rid of dealers.  But that doesn't mean Toyota or Ford are doing that.  In fact their sales might eventually grow, as even the 'new' GM or 'new' Chrysler are likely going to have struggle for sales, trying to convince people they can make a long-term purchase from them.

Jeff


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## falmouth3 (Jun 12, 2009)

Although the offers for credit cards are no longer filling my mailbox, I still get them.  My credit rating is great and the offers that come are specifically directed to the individuals who get them.  I'm sure the computer models know that I carry no balance, and still I see offers for free cards with mileage or hotel point bonuses attached.  We'll see what happens, but in the short term, I'll keep charging almost everything.

Sue


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## Werner (Jun 12, 2009)

There has already been a discussion about this here, starting at post #11.  People who keep zero balance on the cc's are not considered good customers in the credit card industry, we are known as freeloaders because we get to use other peoples money for 30 days at no cost.  The fees cc companies charged retailers result in higher prices that everyone pays so all cc users even get subsidized by cash payers.  Its a wonderful life.... or was.  

To make up the lost revenue they may

charge new/higher annual fees.  This hits the low $ user hardest
reduce benefits/freebies
charge interest from date of sale.
charge a minimum monthly fee
It is still a competitive business (I think!) so they do have to be careful about how and when they mess with the fees.

One thing that might mitigate interest charges from day of sale is to delay discretionary purchases to the end of the billing month.  Prepaying may not work.  We tried to prepay a Citi card with a overestimated amount because we were traveling on the pay date and we still had to pay a late fee.  Apparently the payment had to be tied to and come after the bill was received.  It seemed a bit hokey to us but each cc has its own rules.


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## Carolinian (Jun 12, 2009)

It is still a competitive business and there will be some credit card companies who make these feared ''enhancements'' while others won't.  A good example is the ''foreign usage'' junk fee.  Visa/Mastercard charge the banks 1% for currency conversions, so many banks added another 2% for themselves, although they do nothing in the process, for a total of 3%.  Even where a charge abroad is in dollars and Mastercard/Visa charge them nothing, they still pop customers for 3%. But NOT every bank.  Capital One does not charge junk fees, not even the 1% that Visa/Mastercard charges them.  Some others pass on the 1% but do not pile on themselves.  

Airlines want to sell miles to cc companies and if their present cc partner adopts policies that mean fewer miles sold, they will probably go looking for a new partner.


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## post-it (Jun 12, 2009)

tombo said:


> Not an insider. I was using figures that Delta charges us. I added a disclaimer stating that the fees were a guess on my previous post.
> 
> This is from the Delta web site:
> 
> ...



The following is from an article regarding whether to use FF miles or if purchasing a ticket is the best value.  The writer gives a formula to use when making this decision:

"In my regular conversations with other frequent flyers, there are two dominant schools of thought, neither of which I believe to be wholly sensible.
First, there are those who cling to the old maxim that you should redeem miles for tickets with a cash value such that you're getting a minimum value of $0.02 per mile. Applying that rule in your case, you would save those miles for an award ticket with a value of $1,100 (55,000 miles x $0.02) or more, and charge that $800 ticket to your airline-affiliated credit card.
At the opposite end of the spectrum are those who advocate using miles for whatever trip happens to coincide with their having enough miles in their account to get it, no matter how cheaply they could purchase a comparable ticket.
Applying the "live for today" advice, you have carte blanche to use 55,000 miles for a ticket that could be purchased for $800 (or, for that matter, for a $200 ticket).
I'm going to come down squarely on the side of a balanced approach, which recognizes that miles have more or less value depending on how they are used, but which also takes into consideration non-financial variables.
From a value standpoint, $0.0145 per mile is indeed somewhat less than the $0.02 rule-of-thumb value often used as a benchmark. But it's not so much less that I would dismiss it out of hand.
On the other hand, a relative of mine recently used 25,000 miles for a ticket she could have bought for $160?a transaction that netted her a per-mile value of $0.0064 (I have since disowned her). While there may be no per-mile value below which redemption should be rejected categorically, that certainly tests the limits of acceptability.
The non-quantitative considerations are more personal but no less important. Ask yourself the following questions:
On the earning side, how long will it take you to replenish those miles? If 55,000 miles represents a five-year investment in mileage accumulation, I'd be inclined to want to squeeze more value out of them. But if that's just a small portion of your annual mileage earning, then "easy come, easy go" might apply. 
Will you have another opportunity in the foreseeable future to use those miles for a more expensive ticket? If so, by all means wait. But if there's nothing better on the horizon, take advantage of what's at hand. 
In the current environment, there is yet another consideration: Will the airline with which you've earned those miles still be in business to reward your loyalty if you wait to redeem an award six, 12, or 18 months from now? And even if the airline survives, will it still operate flights on the routes you want to fly? Since no one knows the answers to those questions, travelers are left to make their best guesses, and factor in their tolerance for risk-related anxiety.
Not knowing your personal situation, I can't answer those questions for you. What I can say is that, when it comes to managing my own frequent flyer account, I'm increasingly inclined to use miles now, rather than trust in a future that looks positively iffy.
Have a safe and happy trip, whatever you decide."


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## PigsDad (Jun 12, 2009)

post-it said:


> The following is from an article regarding whether to use FF miles or if purchasing a ticket is the best value.


The _value _of the miles to an individual has _absolutely nothing_ to do with the cost of those miles to the credit card company that gives them to you -- that is what this conversation was about.  I am with philemer -- the price the CC companies pay for the miles is probably way less that $0.01/mile.

If CC companies can't make money off off of the 2-5% they charge for transaction fees, they will simply lose me as a customer.  Let's see: an average monthly bill of $2500 will generate between $50 and $125 in fees.  The cost for the perks that they give me for that $2500 in charges would probably be less than $20.

I think there will be plenty of companies that can still make money on a customer like me.  As usual, the press is adding to the hype just to sell stories, IMO.

Kurt


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## kathyj0205 (Jun 12, 2009)

Don't forget that that the CC companies are making money on the other end of the transaction.  I have a small retail store, and on those airline reward cards I pay 3.5 - 4% on every transaction.  So they aren't just relying on consumers, but on the merchants as well.  Even tho most of us pay off our CCs each month, the CC companies are still making almost 4% on the total purchases.


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## esk444 (Jun 12, 2009)

tombo said:


> Thanks to our wonderful representatives in Washington changing the rules for credit card companies, the credit card companies will in the very near future  charge interest and fees on all charges beginning day one.



Seems like you swallowed the kool aid of the bank and credit card industry lobbyists.  

Congress wants to eliminate a whole bunch of unsavory practices that banking industry is doing to its customers.  These unsavory practices didn't even exist ten years ago.  So now the whole system of reward cards and grace periods are supported by them?


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## esk444 (Jun 12, 2009)

KathyJed said:


> Don't forget that that the CC companies are making money on the other end of the transaction.  I have a small retail store, and on those airline reward cards I pay 3.5 - 4% on every transaction.  So they aren't just relying on consumers, but on the merchants as well.  Even tho most of us pay off our CCs each month, the CC companies are still making almost 4% on the total purchases.



The CC companies like Mastercard and Visa are the ones that charge merchants the 4% fee.  It's banks that actually issue the credit cards, makes the loans, and charges the bogus fees.  

I briefly worked for GE Capital, a major credit card issuer and bank.  They are OK with customers not carrying balances and pay their bills in full by the grace period.  The reason is that these customers are extremely low risk, have good credit scores, and provide a base to cross sell them services will high profit margins (credit report monitoring, life insurance, travel insurance, referral fees from vendors, etc.).

The people they make a ton of money from is basically people who consistently carry balances, but eventually pays the bill off at a high rate.  But it's a dicey game to figure out who will pay and who won't.  Those that have their underwriting game down well make tons of money in good times and do OK in bad.  Those who screw up, do Ok in good times, but fail in bad times. 

When credit is tight the companies stop underwriting those with bad credit and also the customers who never use the cards or buy cross services.  They want to keep the sweet spot in the middle who are the most profitable.


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## Skinsfan1311 (Jun 12, 2009)

As long as they're not charging an annual fee it's probably not a great idea to close your credit cards, especially the older ones.  

Doing so can lower your credit score.   Depending on you situation, that may not be a  good thing,  given the current economy.

Just my 2 cents.....


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## K2Quick (Jun 12, 2009)

It's way too early to speculate on what changes are going to happen as a result of the recent legislation.  I work for one of the world's largest issuers and our company is still sorting it out.  The only thing we know with any certainty is that credit is not going to be granted anywhere near as loosely going forward and interest rates will likely be higher.  I do happen to work for the one major issuer that historically has made its bread and butter catering to those who pay off their bills each month more so than to those who carry balances.  In fact, I looked at our most recent 10Q and we basically made no money at all on our lending portfolio (Interest Income less Interest Expense less Bad Debt Write-Offs).  I haven't heard any plans from our company to charge interest from day one to those who don't carry balances - that would be counter to our core product's appeal.


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## Negociant (Jun 12, 2009)

Personally, and just my opinion, but I do not believe that all cc companies will start to charge interest from date of purchase.  The free market will still allow some room for competition and the cc companies will use their various ways of obtaining customers.  Between my business and personal accounts, we charge over $100k per year on cc's and always pay off the balance.  Remember that merchants are charged a fee by the cc company for each transaction, so they make money from me even if I don't pay interest.  If they changed their policy, people would change behavior, and they would lose revenue.  So I am from Missouri on this one and will worry about it if and when it happens.


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## tombo (Jun 12, 2009)

esk444 said:


> Seems like you swallowed the kool aid of the bank and credit card industry lobbyists.
> 
> Congress wants to eliminate a whole bunch of unsavory practices that banking industry is doing to its customers.  These unsavory practices didn't even exist ten years ago.  So now the whole system of reward cards and grace periods are supported by them?



We don't discuss politics here but once again congress dropped the ball. They didn't implement any limit on the interest rates CC's can charge and they gave them 9 months to ease the rates up. Last time congress acted on the credit cards they stopped people wjo file bankruptcy from writing off their credit card debt. They can still write of everything else but back taxes and CC's.

Not a fan of government. When they fix something they end up screwing 10 other things up IMO.


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## "Roger" (Jun 12, 2009)

tombo said:


> We don't discuss politics here but ...
> Not a fan of government. When they fix something they end up screwing 10 other things up IMO.


Now you have done that twice (made political pronouncments).  That put those of us who want to respond to your message but respect TUG rules at a disadvantage.

Trying the best I can ...  

On the one hand, you complain about how credit card companies will have to restrict goodies like frequent flyer miles because of new rules put in place to curb credit card abuses, but then turn around and complain that they did not curb abuses which would ... require credit card companies to seek income elsewhere doing such things as ... restrict frequent flyer miles.

If you do respond, please keep your comments about politics and politicians to yourself.  Thank you.


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## Aussiedog (Jun 12, 2009)

*Death spiral on the horizon?  And what about AMEX?*

So what about AMEX?  They are always sending me upgrade offers that would change the agreement to allow me to carry a balance, but I never take them up on it.  I have always paid at the end of the month and I charge EVERYTHING in order to accumulate Rewards points.  If they started to charge interest that changes their basic business model.  

I would not use any card if I had to pay interest - back to cash and checks.
So if 30% of the cardholders out there carry no balance like me, and that same 30% of credit card holders would be ticked off if the card companies tried to charge interest from day one of purchase, what might happen?  How about a death spiral for their industry and a hit to consumer spending in general?


As a nation we are finally spending less and saving more - well, there is research that shows that without credit cards we spend even less.  Might not merchants object to this potential change in interest strategy?
And then these same card companies, who may lose a chunk of their members because we won't pay the interest - won't they be shooting themselves in the foot because with fewer members they have reduced negotiating power with merchants?  And there goes both merchant and member market share?

I hope the card companies give this some thought before doing anything stupid.:annoyed: 

Ann


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## taffy19 (Jun 12, 2009)

Aussiedog said:


> So what about AMEX? They are always sending me upgrade offers that would change the agreement to allow me to carry a balance, but I never take them up on it. I have always paid at the end of the month and I charge EVERYTHING in order to accumulate Rewards points. If they started to charge interest that changes their basic business model.
> 
> I would not use any card if I had to pay interest - back to cash and checks.
> So if 30% of the cardholders out there carry no balance like me, and that same 30% of credit card holders would be ticked off if the card companies tried to charge interest from day one of purchase, what might happen? How about a death spiral for their industry and a hit to consumer spending in general?
> ...


I agree and I have a feeling that they will charge higher fees for other things. I know they do already for charges outside the country. There is a list of these charges but I don't know offhand what they are but a bounced check for instance. I also would drop all credit cards immediately and use a debit card instead or a check. Back to paper again.


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## tombo (Jun 12, 2009)

"Roger" said:


> Now you have done that twice (made political pronouncments).  That put those of us who want to respond to your message but respect TUG rules at a disadvantage.
> 
> Trying the best I can ...
> 
> ...



CC companies are not being restricted by the new legislation from giving out goodies, they are curtailing perks of their own volition. Yes I think having legislation limiting CC interest rates to 18% or less would allow the CC companies plenty of profit margin if they simply were more selective about the type of customers they gave credit to. They could still keep the perks programs if they had more good paying customers and less bad debt to write off.

TUG posting rules states: "Avoid posting about politics, religion, or contentious social issues Unless directly related to timesharing". I did not mention a politician, a political party, or anything other than rules our government passed which will likely affect our future travel plans. I think you are a little too sensitive about the word government being mentioned in a context relating to travel perks which is what this thread was designed to talk about. If government is not mentioned then the whole reason for the CC changes can't even be discussed. ESK also said the word CONGRESS in his post and yet no warning from you to him.

While you are trying to follow TUG posting rules you are ignoring rule number 8: "Avoid replying to messages to point out bbs rule infractions
Leave this to BBS Administrators and Moderators."
I was scolded by you for doing nothing wrong. Please feel free to contact a moderator about my posts or volunteer to become a moderator before admonishing me in the future. If my posts bother you do not feel free to tell me what I can and can not post. It is against TUG rules, and as you have said more than once, you are trying hard to follow the rules. 

If you do respond, please keep your comments about whether you feel that my posts break TUG rules to yourself. 
Thank you.


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## Rose Pink (Jun 12, 2009)

iconnections;738482... I also would drop all credit cards immediately and [B said:
			
		

> use a debit card instead[/b] or a check. Back to paper again.


 
I'm glad you brought this up as I have a question about debit cards. Since most of them say Visa or Mastercard, I assume they are somehow connected to those companies even though the money comes straight out of checking and not a credit account. Doesn't the merchant still pay a fee when when we use the debit cards? In other words, does using a debit card still generate income for the credit companies without them having to offer cash back or other rewards? If so, I'm sure they'd love it if we all switched to debit cards.


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## K2Quick (Jun 12, 2009)

Rose Pink said:


> I'm glad you brought this up as I have a question about debit cards. Since most of them say Visa or Mastercard, I assume they are somehow connected to those companies even though the money comes straight out of checking and not a credit account. Doesn't the merchant still pay a fee when when we use the debit cards? In other words, does using a debit card still generate income for the credit companies without them having to offer cash back or other rewards? If so, I'm sure they'd love it if we all switched to debit cards.



The merchants still pay an interchange fee, but it's a small fraction of what the discount plus interchange rate is for credit cards.  Merchants would love it if everyone used debit instead of credit because it obviously costs them less.  In my opinion, however, consumers are silly to even carry debit cards - they're a lot riskier because a criminal can clean out your bank account by having the card run as a credit card without a PIN.  You are protected, but you're out the money in your account while fraud is being investigated.  With a credit card, you never have the exposure.


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## Aussiedog (Jun 13, 2009)

K2Quick said:


> In my opinion, however, consumers are silly to even carry debit cards - they're a lot riskier because a criminal can clean out your bank account by having the card run as a credit card without a PIN.  You are protected, but you're out the money in your account while fraud is being investigated.




Amen to that!

I have heard this for years and wondered if it was still the case.  As luck would have it, I have a new client who just sold his internet security firm to one of the big names in the business and we just had this conversation yesterday.  He would never carry a debit card because of the lack of consumer protection, and went on to say that his view is *not *in the minority in his profession.

Ann


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## cindi (Jun 13, 2009)

I have never used a debit card.  Like many, I try to accumulate miles on my CC.  

Bu do I undestand correctly? If you use a debit card you don't have a PIN number for security???


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## K2Quick (Jun 13, 2009)

cindi said:


> I have never used a debit card.  Like many, I try to accumulate miles on my CC.
> 
> Bu do I undestand correctly? If you use a debit card you don't have a PIN number for security???



That is correct.  Any debit card with a Visa / MC logo can be run as a credit card.  The merchant still has to obtain an authorization, but the merchant is not required to capture a PIN number.  The merchant's incentive is to capture that PIN number because the merchant will pay around 0.7% instead of about 2.3% in transaction cost.  But that has to be weighed against the cost of replacing existing terminals with customer interfacing terminals.  Visa and MC obviously want you to run the cards as credit transactions because they get the higher interchange rates.

On the long-time advice of Clark Howard, I don't even carry what he calls a "piece-of-trash-fake-Visa-or-Mastercard" (debit card).  I had my bank issue me a generic non-Visa branded ATM card.


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## rickandcindy23 (Jun 13, 2009)

Carolinian said:


> It is still a competitive business and there will be some credit card companies who make these feared ''enhancements'' while others won't.  A good example is the ''foreign usage'' junk fee.  Visa/Mastercard charge the banks 1% for currency conversions, so many banks added another 2% for themselves, although they do nothing in the process, for a total of 3%.  Even where a charge abroad is in dollars and Mastercard/Visa charge them nothing, they still pop customers for 3%. But NOT every bank.  Capital One does not charge junk fees, not even the 1% that Visa/Mastercard charges them.  Some others pass on the 1% but do not pile on themselves.
> 
> Airlines want to sell miles to cc companies and if their present cc partner adopts policies that mean fewer miles sold, they will probably go looking for a new partner.



How does one avoid those fees?  Is there are card that doesn't charge them?  Also, why can't you write a U.S. check to pay your maintenance fees in Australia?  Is there a charge for that?  I have always used my CC's to pay my maintenance fees, but I resent that charge and would like to find an alternative.


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## rickandcindy23 (Jun 13, 2009)

Merchants do pay a lot to offer credit cards, and because this is where the real money comes in, so I am doubting CC companies will start charging interest from day 1.  They could charge $500 in annual fees for that FF card and get by with it, since I don't think that's regulated.   

And I like Denise's idea of overpaying on the card for future purchases, or going online and paying for the purchase the day it's made.  I can do that with Barclay's card.


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## Rose Pink (Jun 13, 2009)

K2Quick said:


> The merchants still pay an interchange fee, but it's a small fraction of what the discount plus interchange rate is for credit cards. Merchants would love it if everyone used debit instead of credit because it obviously costs them less. ....


 
Thank you for the clarification on fees.  I wasn't sure about it.  I don't carry a debit card for the reasons you and others have given but merchants usually ask me if my card is debit or credit.


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## Dollie (Jun 13, 2009)

K2Quick said:


> In my opinion, however, consumers are silly to even carry debit cards - they're a lot riskier because a criminal can clean out your bank account by having the card run as a credit card without a PIN.  You are protected, but you're out the money in your account while fraud is being investigated.  With a credit card, you never have the exposure.



I use a 2 account approach even though I do not presently have a debit card (but this would work if I did).  I have a checking account and a saving account.  These are separate and not linked together.  The checking account is used for paying bills either by written check or via e-banking.  It contains enough funds to cover the bills plus a small amount extra.  It is accessible on-line and has an ATM card capability (would have a debit card if I wanted one).  The savings account holds the working capital I need (the rest of the funds are invested).  I can fiscally (in person at the bank) transfer funds between the accounts (majority of the time from the savings to the checking).  A criminal if they get access to my ATM card, checks, (or debit card) would only have access to the checking account, not the savings account where the majority of the money is.  This approach requires a little more managing of funds and planning, but the security/peace of mind is worth the effort for me.  It also has the side affect that you have more of a tendency to think twice about spending money since you are conscience of the amount of money that will have to be transferred to cover the purchase.


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## falmouth3 (Jun 13, 2009)

rickandcindy23 said:


> How does one avoid those fees?  Is there are card that doesn't charge them?  Also, why can't you write a U.S. check to pay your maintenance fees in Australia?  Is there a charge for that?  I have always used my CC's to pay my maintenance fees, but I resent that charge and would like to find an alternative.



My credit union card will only charge me the 1% fee imposed by VISA.  The credit union does not add on the other "junk" fees.  That's the card I use in Europe.

Sue


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## M. Henley (Jun 13, 2009)

*Free Miles*

Betweeen Rita and I we have received 5 free RT flights in the past 12 months, not all due to CC purchases as some are due to hotel stays.

 If the CC companies decide to cease giving perks and/or charge interest from day one of the purchase, I would seldom utilize a CC, and would revert to my old ways of paying cash.  A CC would be then be used only for on-line purchases, for guaranteeing hotel rooms, which would then be paid for by cash when checking out, and for reserving rental cars, which again would be paid for by cash when the car is returned.


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## pointsjunkie (Jun 14, 2009)

from one who charges everything and pays it off each month, this new fee would really be awful. 

i do take advantage of the FF system, i get many free flights per year. i would really have to sit down and calculate(when the terms finally come to the public) if it would still be worth it.

i just used 45000 miles for a first class ticket that would cost $1598.01 if i paid cash.

i would be so upset if the credit card companies started charging interest. i do like the prepay idea denise had. how would that effect our credit scores if they started to charge interest and it showed up on a credit report?

i still have 500000 FF miles and 2 jetblue, and 1 southwest and 200000 starpoints all for future flights. 

but if i had to pay for my flights, i usually fly somewhere every month it would stop me dead in my tracks. this has me so upset.


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## gorevs9 (Jun 15, 2009)

pointsjunkie said:


> i do like the prepay idea denise had.


I'm guessing you would have to prepay by check.  Neither of my CC accounts will allow an online payment of more than the current balance.


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## Luanne (Jun 15, 2009)

So does anyone really know for sure what any of the credit card companies are going to do?  Or is all of this speculation on what might happen?


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## K2Quick (Jun 15, 2009)

pointsjunkie said:


> from one who charges everything and pays it off each month, this new fee would really be awful.
> 
> but if i had to pay for my flights, i usually fly somewhere every month it would stop me dead in my tracks. this has me so upset.



It's way too early to say that whatever card you carry is going to have its terms significantly altered.  A responsible card user such as you will be extremely attractive to many lenders.


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## Rose Pink (Jun 15, 2009)

Luanne said:


> So does anyone really know for sure what any of the credit card companies are going to do? Or is all of this speculation on what might happen?


 
At this point, I think it is all speculation but is a rememder to keep your eyes open.  CC companies have changed credit limits and interest rates without prior notification to the card holder.  I hope they will have to provide plenty of lead time before they start charging point-of-sale interest (*if* they ever do).


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## JeffW (Jun 15, 2009)

To some degree, I can't help but think that there's a lot of "the sky is falling" fear going on here.  Will _some _credit card companies change, absolutely.  But will the majority, I don't think so.  There's just too much competition out there for "all credit card perks to go away", or "all cards now will accrue interest from time of purchase."

But as previously pointed out, you really need to keep track of your cards.  The extreme changes (card being cancelled, credit limit severely cut back) will probably be pretty easy to spot.  It's the others: rebate rates (cash back / FF miles earned) going down, change in when interest accrual starts - that are likely to be not as visible.

Jeff


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## Icarus (Jun 16, 2009)

philemer said:


> Alan,
> Your "old friends" aren't going anywhere. However, they may morph a bit.



hahaha. No way in hell he has a Diners Club card because they aren't free.

tombo:

I'm not buying into any of your scenarios or political messages in this thread. The banks are whining. They have the best lobbyists and are very good at getting their POV heard. That's all it is.

I remember the days when they really did actual underwriting when you applied for a credit card and the credit lines they gave out were reasonable. The amount of credit they give out now is ridiculous even for people that are in good financial condition. There's really no way to justify those multiple $20,000++ credit lines that they give out to normal people. If their entire business model is based on those punitive interest rates and late and over the limit punitive fees they charge people on the edge, then it's time that somebody reigned them in, IMO.

Denise:

Don't worry. Amex and Starwood will still be in business together. So will Chase and United, etc, etc.

Is anybody loosing sleep over this? Go and apply for the United Chase Visa that gives you 30k - 40k miles after something like $250 in charges. Go and apply for the Starwood Amex which gives you up to 25k SPG points. They aren't going anywhere anytime soon.

-David


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## AwayWeGo (Jun 16, 2009)

*Zero Dollars & Zero Cents.*




Icarus said:


> No way in hell he has a Diners Club card because they aren't free.


When I (briefly) had Diner's Club, it was free. 

Go figure. 

-- Alan Cole, McLean (Fairfax Coiunty), Virginia, USA.​


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## Icarus (Jun 16, 2009)

AwayWeGo said:


> When I (briefly) had Diner's Club, it was free.
> 
> Go figure.
> 
> -- Alan Cole, McLean (Fairfax Coiunty), Virginia, USA.​



Yes, I figured. 

The US Diners Club franchise is owned by Citibank. I have one. In the US they issue them as Master Cards with the DC logo on them. They are pricey too, but have excellent rental car coverage and you can use their points to pay the $95 annual fee. Their points program used to be a good way to move miles around without loosing like 90% of their value, but that also disappeared over the years.

-David


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## Carolinian (Jun 16, 2009)

rickandcindy23 said:


> How does one avoid those fees?  Is there are card that doesn't charge them?  Also, why can't you write a U.S. check to pay your maintenance fees in Australia?  Is there a charge for that?  I have always used my CC's to pay my maintenance fees, but I resent that charge and would like to find an alternative.



Most Credit Unions only charge 1% foreign usage imposed by Visa/Mastercard and a lower (or free) ATM out of network fee.  CapOne (the best) does not even charge that.


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## kamumma1 (Jun 16, 2009)

If CC companies start charging from the gecko - that will stink!  I refuse to pay interest on a purchase from Day 1 (will lose the cards), which yes, will  impact our travel.  We put all of our personal and small business expenses on a Marriott rewards card.  Each year we trade 1 of our weeks for points and stay at one of their Cat 6 hotels and get free airfare for 4.  If we can't get the CC miles, we will have to start using our two times shares and pay for both trips' airfares  .  That was one of the selling points we bought the second unit for.  We will still travel, but won't get travel packages anymore.  I would seriously miss the Marriott hotels  .


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## jehb2 (Jun 17, 2009)

In addition to the FF benefits I have my monthly bills automatically charged to my cc because it just makes life easier.  At one time I use to lock myself in my daughter's playpen so she couldn't get at the bills when I paid them--and that still was an effort.

But if they start charging me interest even though I pay my balances in full then I'll have to operate on a cash only basis.  We pretty much do that now in our daily spending.

I just hope they don't mess with my debit card.


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## HuskyJim (Jun 17, 2009)

The changes in the Credit Card rules, based on what was passed in May (and previously in November), has a companion effort going on in Canada.

Canada has similar rules to the US, but many differences.  

But Canada will be implementing a new rule (next year) to forbid the practice stated here - charging interst on ALL purchases, even if you always pay in full. 

Canada law will force the CC companies to honor a 21-day grace period on all new purchases when you pay in full.  This will even apply for those that had carried a balance.

"... interest on new purchases is not charged if the cardholder pays off the balance in full at the end of the billing cycle irrespective of whether the cardholder carries a balance."

I think that this will force a similar rule in the US, eventually.


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## HatTrick (Jun 17, 2009)

kamumma1 said:


> If CC companies start charging from the gecko - that will stink!



What does GEICO have to do with this? (I think you mean "from the get-go".)


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## tombo (Jun 17, 2009)

Icarus said:


> hahaha. N
> 
> tombo:
> 
> ...



This is not my scenario.  I am just asking the what if question. I did not invent the idea that the CC companies are going to do these things but I do keep reading about the potential future changes and seeing stories about it on the news. It might never happen, but there is too much speculation on too many sites to poo poo the whole notion. 

Here are 2 more articles:


http://www.koco.com/news/19540811/detail.html

http://www.nytimes.com/2009/05/19/b...l=1&adxnnlx=1245276233-nr4GWDAolMiwoU8xIWZLHw

Of course everyone on the internet knows more than newspapers and television news departments. I don't believe everything I read, but usually where there is smoke there is fire. I have not read a single article that says that none of this will happen, but I have read several that say the changes might occur, or even worse that the changes will happen.

Time will tell.


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