Loyal3, the brokerage that’s handling Virgin America elite frequent flyers’ purchase of IPO shares, is best known in the travel community as the online brokerage that let you buy stocks with a credit card.
As I noted back in March, I wasn’t big on the approach.
- Loyal3 doesn’t execute orders in real-time, so you aren’t buying at market at the time you initiate your order. They batch orders instead. I prefer to be the one doing the gaming, and that creates even more opportunity to be gamed.
- There’s price fluctuation risk, you couldn’t just buy and sell in real-time at the same price. So while you could buy and sell the asset, there’s risk, not how I like t earn my miles.
Still, since they let you fund up to $2,500 per stock by credit card, and they offered over 50 stocks, this was popular in certain circles… popular enough that Loyal3 dropped the maximum credit card purchsae amount down to $50 back in June.
Now they explain why they won’t take credit or debit cards anymore after November 18. It’s the miles and points.
Through the success, we’ve also learned a lot about how people use LOYAL3. Credit cards have become a common method for people “gaming” LOYAL3 to gain credit card points and not for the purpose of investing. This increases our costs and subtracts from our mission of making it easy, affordable and fee-free for people to invest in the brands they love.
In order to put an end to the “gaming” of LOYAL3, and to maintain fee-free investing, on Tuesday, 11/18/2014, we will be removing credit and debit cards from the LOYAL3 platform.
(Automatic monthly credit and debit card purchases continue through December 11.)
They’re ending credit card funding, because people were using it too much. Which makes them realize they never should have offered it in the first place. Credit card merchant fees are certainly greater than their margins on these trades, even with ‘batching’ (cough).
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