No More free Miles using credit cards

[tombo]

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?

 

[Cathyb]

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

 

[DeniseM]

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?

 

[AwayWeGo]

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

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.​

 

["Roger"]

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.}

 

[tombo]

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

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.}

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.

 

[dougp26364]

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.

 

[IngridN]

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

 

[Steve]

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

 

[tombo]

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

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. "

 

[tombo]

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. "

 

[IngridN]

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. "

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

Ingrid

 

[DeniseM]

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!

 

[tombo]

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?

 

[IngridN]

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

Ingrid

 

[DebBrown]

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

 

[philemer]

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.

 

[AwayWeGo]

Goodbye, Old Friends.

-- hotlinked --​

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

 

[Nickfromct]

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.

 

[philemer]

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

 

[tombo]

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.

 

[philemer]

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.

 

[tombo]

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.

 

[philemer]

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.

 

[jamstew]

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.