No More Online Trading to Generate Miles, Website Tells Us Who Killed the Deal

The Forward Cabin flags that Loyal3 will stop accepting credit cards for stock purchases on November 18.

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).


About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Greedy abusers who have to scale everything to the max. I’ve long thought that they are why deals get shut down, not the publicity from bloggers, though they fiercely denounce any blogger who reveals their secrets. If people could just approach things like this in moderation, they would last much longer and provide more benefits in the long run.

  2. @DaveS- Though the blogs and forums alert more people to the deals who fit that greedy abusive profile, enabling them to scale even larger.

  3. So DaveS, its ok for you to game Loyal3 a little, its just the ones who go full-bore that have you butthurt?

  4. I have an account with Loyal 3 from day 1.
    You could never buy $2500 worth of stock in a single transcaction with a credit card.

    Why the lies?

  5. 1. I agree with DaveS
    2. @Dave: who says DaveS was gaming it at all? As soon as I learned about L3 (from travel blogs), I signed up. I buy about $300-440/month from them. I have not sold stock one (no “dumping” and re-purchasing, which is the abuse they had to stop).
    I am very sad to see this option go away, and blame the abusers for not using the site as it was intended. I hope they are proud of themselves.

  6. Fred, loyal3 used to allow purchases with a credit card in amounts of up to $2500. I bought stock at Loyal3 several times with a credit at that maximum, with a total spend of about $15k over a few weeks.

    I received a letter banning me from buying with a credit card after I sold about half of my holdings; I have no complaints.

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