Loyalty Programs Are Complicated. A Good Consumer Advocate Helps Educate You on How to Win!

Christopher Elliott argues in the Washington Post that rewards credit cards aren’t worth it because of the ‘headache’.

He doesn’t just think you should avoid loyalty programs and credit card benefits (his usual tact). He thinks the government ought to step in (“it’s time for the Consumer Financial Protection Bureau to say, “Enough is enough.”).

But what are his complaints?

  • You have to buy your United ticket from United if you want checked bag fees waived. “In order to qualify for the [United Explorer Card’s] free bag check and priority boarding, the ticket must be purchased directly from United, via its Web page” except this is false. (The Washington Post should really fact check Elliott before publishing him.)

    You do have to buy your United Airlines ticket from United, and not from an agency like Expedia or Orbitz. But you do not need to buy it from United.com. Other United booking channels (like telephone reservations) work as well.

    “United should be required to disclose it more prominently” except that it’s disclosed both on the Chase website for the credit card and on United’s website. It isn’t a secret. In fact, United doesn’t want to keep it secret, they want consumers to know precisely so that this can serve as an incentive for passengers to book direct which means lower costs for the airline.

    Meanwhile, it’s cherry picking an example. Neither the co-brand credit cards of Delta and American have a similar rule.

  • American Express will no longer give signup bonuses for the same personal credit cards twice.

    When Joan DePalma, a retired social worker from New York, applied for a Delta-branded American Express card recently…“When I received the card, I was refused the credit and the bonus mileage,” she says. The reason? She already had another Delta American Express card, and the offer was limited to first-time applicants.

    This trips up even the savviest of credit card consumers who want signup bonuses, but is Elliott really suggesting that the Consumer Financial Products Bureau require banks pay out signup bonuses to consumers multiple times?

  • Companion tickets require high priced fares or have other restrictions. (Except when – contra Elliott – they don’t.)

    Other “free” companion tickets are restricted by destinations. For example, a Lufthansa offer is limited to tickets departing from the United States to Europe, the Middle East, Africa and the Far East. It also must be on a Lufthansa flight — no code-sharing.

    Except that scammy free companion tickets usually come from outfits other than airlines and credit card companies. There are restrictions to be sure — but is it really a legitimate complaint that you can only use a Lufthansa companion ticket on a Lufthansa flight (and not to Southeast or Central Asia)?

    Still, he has to look to the US co-brand credit card for German airline Lufthansa to make his point.

    Elliott thinks consumers are “duped” and sees himself as a consumer advocate, but doesn’t use his perch to educate consumers how to get the most from the benefits that companies offer. He doesn’t point out the outstanding value provided by the companion tickets that come with the Alaska Airlines Visa (the only restriction is that it’s for a coach ticket) and after meeting spending requirements with the Barclays American AAdvantage Aviator Silver card (which has a reasonable minimum ticket price).

  • Fuel surcharges. Fuel surcharges are a scam. But he complains about the high costs imposed by the British Airways frequent flyer program. That’s not really a gotcha of rewards credit cards as much as most non-US loyalty programs. A good consumer advocate might tell readers how to avoid those fuel surcharges, or which programs charge them when (Delta on a few partners like China Southern and China Eastern and award trips originating in Europe, American for awards on BA).

Ultimately we can find credit cards that provide less value than their marketing copy is designed to suggest. That’s true of almost any kind of consumer product, because advertising.

It’s true of dishwashers and cars, but doesn’t mean you shouldn’t drive or that you should only wash dishes by hand.

There are great rewards credit cards, too, and even simple ones. You aren’t better off getting a credit card without rewards which Elliott seems to imply by not providing examples of cards that do deliver simple high value. By only finding examples of benefits with fine print, and not suggesting valuable alternatives, he does his readers a real disservice.

The most ironic part, to me, is his penultimate paragraph:

Loyalty-program expert Bill Hanifin, chief executive of Hanifinloyalty.com, coined the term “loyalty asterisk” to define these complex and confusing cards. He says that although these two-for-one and “free” ticket offers are not illegal, they can be difficult to decipher. “Unfortunately, the complexity of the financial models behind these programs is enough to mandate the asterisks in the copy,” he says.

The “asterisks in the copy” are largely a function of regulatory requirements and fear of fines by the Consumer Financial Protection Bureau. His solution is more regulation by the Consumer Financial Protection Bureau. That won’t eliminate asterisks in marketing material, it will only increase them.

Many loyalty programs are complicated. It’s the complication that creates arbitrage opportunities, the possibility of receiving outsized value for awards. A consumer advocate might tell readers how to come out on top.

Many consumers shouldn’t play the game of spending on a credit card linked to an airline loyalty program, or even points that transfer to airline frequent flyer programs… not because those programs are complicated, but because most people look to redeem their points for domestic coach travel and would be better off with the simplicity of a 2% cash back credit card. Oddly, Elliott doesn’t offer that advice.

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. What do you keep engaging with this clown?

    And it is a useful rule of life to immediately stop listening to someone who begins a sentence with “The government ought to …”

  2. What I want to know is, who the heck invited Elliott to be on Boardingarea anyway? His blog absolutely does not belong here. I don’t read it, just like I don’t read the Delta whatever blog…..

  3. I really wish there was a way for people to respond to Chris Elliott’s advice. The stuff he spews is so ridiculously wrong sometimes. Anytime I want a good laugh, I read his column…the guy is impressively bad.

  4. @Gene I haven’t seen Elliott’s blog on BoardingArea recently, though I haven’t asked about it. The only person who invites someone to BoardingArea is Randy Petersen. I did speak with Chris on the phone about his decision before he signed on.

    He continues to take oblique swipes at me on his blog, though they’re never substantive. I think my recent criticisms of his work have been entirely based on substance (though it’s perfectly fair with readers to disagree with my take).

  5. It is a shame how much worthless travel information is conveyed in the mainstream media. I think it’s largely a function of the editors not knowing much about the subject, either. Elliott is the poster boy for bad advice regarding travel loyalty programs, but have you read their “regular” travel articles lately? Heck, the NY Times just published a piece about travel to Bali from a guy who spent his first 4 days on the island! I’m sorry, but spending 4 days someplace does not qualify you as an “expert” worthy of giving advice in a prestigious media outlet.

    Or maybe it does. 🙂

  6. Elliott is probably correct that most people don’t have the inclination to become well enough informed to be successful in using reward credit cards successfully. I imagine almost all of us can attest to that from our own conversations with people who marvel at all the travel we do, but when we explain how, they tend to lose interest.

    Elliott writes for a general audience. The thing that grates is his assumption that because a lot of his readers shouldn’t get involved, the whole process is a scam. He doesn’t give his readers enough credit. Instead of helping them learn to use credit cards well, he simply assumes they’re too dumb for that.

    I agree he does some sloppy journalism. I got free baggage on a United ticket that was booked for me and paid by someone else with the group sales department. I just needed to give my MileagePlus number and bingo, I was good to go.

  7. @ Gary — Agreed that you criticisms of Elliott have been fair. I hadn’t noticed Elliott’s absence from BoardingArea, but now that you mention it, hmmmm…….

  8. His thesis is that the vast majority of people who sign up for credit cards a)end up running a balance and b)do not take advantage of the proclaimed benefits of the card. He is 100% correct on both counts. Therefore, he believes travel related credit cards do much more harm than good to our society and shouldn’t be freely promoted. Of course, many of the people who read Gary’s blog are experts and able to turn the table on the issuing banks – but you’re in the minority and Chris has a reasonable point, although he often stretches to make those points as Gary has shown here.

  9. Gary, you have the critics, but I just don’t understand the rationale for Randy inviting Nitwit.otg on this board or for keeping him here.

    He is not a consumer advocate — and they are needed sometimes, but Elliott’s crusades are for the most ridiculous causes, and his advocating on a series of malcontents is quite amusing.

    I actually encourage those reading your blog to read about the so called troubles that the aggrieved that he claims to represent truly experience and see how his clients can do not wrong, while he — and they and his sycophants are always in the right.

    They bring a new meaning to DYKWIA!

  10. @Randall Elliott makes incorrect claims in his article and has to stretch to criticize the Lufthansa card and to BA loyalty program to indict US credit cards while ignoring counterexamples that his readers would benefit by knowing about.

    He is wrong on credit card debt. Households aren’t more indebted than in the past, credit cards have taken the place of more costly forms of debt.

  11. @Kevin I don’t claim to know his mind. I used to think he was just sensationalizing but after much correspondence with him I do think he believes what he writes.

  12. Gary – I’ll take your word on total household debt not increasing, but when 80-90% of credit card holders with a credit score 700 or below can’t pay off their credit card balance each month, I think most reasonable people can agree we – as a society – shouldn’t be pushing more credit cards on them.

  13. I used to want to contradict misinformation too, but then I realized that the more people think there is no value in miles, the more my miles are worth.

  14. Gary – I’m not anti-credit cards like Elliott…however, the average indebted household has $15k+ of suffocating credit card debt and that usually has nothing to do with needing access to credit, it’s mostly financial recklessness (of course there are exceptions here like medical bills). That debt can have a terrible impact on a family. I just happen to agree with Elliott that we shouldn’t be pushing this potential disaster on people – you obviously disagree but I don’t think you’re objective on this. Payday loan availability or the fact debt as a % of income is down because of walking away, near-record bankruptcies and extremely low interest rates shouldn’t preclude us from trying to educate families on how to be smarter with their money and credit.

  15. Honestly, I only read Chris Elliott’s articles when you link to them.

    And I agree that he’s no where near as knowledgeable about frequent flier loyalty programs than you, so some of the examples he cites are not the best.

    But I think substantially, he’s right- many banks are making offers that they do not deliver. Lets look at the specific case you both cited of the AMEX offer of one bonus per card type per lifetime. I ran afoul of that rule, because I thought I had had an AMEX business gold card before.

    Now I have a spreadsheet of each card applied for and cancelled, and you probably do the same, but why do we have to resort to that? Why can AMEX take your details, run your credit and impact your credit rating, without checking first to see if you are eligible for this bonus?

    I would have no issue with a little judicious regulation, to require that credit card companies screen to make sure you are eligible for an offer before taking your application, and also some clear reminder language upon issuance of the card of the conditions you need to fulfill to get the sign up bonus. For example, the AMEX rep convinced me to keep my new Gold card by telling me I could use it to offset $100 of airlines fees, but she neglected to tell me that I needed to register for the specific airlines I wanted credited before incurring the fee…

  16. Some people can’t even have a coffee without some ‘issue’ . I bet that’s Elliott , just can’t get along , just can’t understand… World is against him .

  17. My wife is a stay-at-home mom with access to 1%-level income deposited in jointly owned accounts and her own FICO score >800. Despite this, she was recently denied a Mitsuwa card by JCB (saves 10% on groceries bought at Mitsuwa) because she doesn’t have her own income and does not reside in a community property state. I assumed that JCB was just transferring its Japanese gender-bias to our more freedom-loving, gender-neutral country until I carefully read the relevant CFPB guidelines and realized that America’s very own nanny state was the source of JCB’s policy. It’s very comforting to know that our government is there to protect her from her poor decisions. After all, she might have been applying for a credit card with out her husband’s permission – I think I saw that once in an I Love Lucy episode.

    Ironically, she was targeted for a 100,000 point AMEX Platinum offer and was immediately approved when she applied this evening. That’s very nice because she prefers ANA above other carriers. We had a good laugh at this. She started out wanting a card for grocery shopping and ended up with our family’s most expensive card. Now let’s hope that she uses it responsibly. Big Brother may be looking over her shoulder.

  18. @George Why do we have to keep track of our credit cards? Why can’t AMEX do it for us? Well, of course they CAN, but why should they? Why can’t you be responsible for remembering your own credit cards? I remember mine.

    You remind me of the people who check into the hotel and expect the front desk lady to remember them. Uh, you only have to remember one front desk agent, but that agent talks to hundreds of people a DAY, she can’t remember everyone’s name. The same is true for cards: why should AMEX be forced to remember millions of former cardholders, instead of the cardholders being responsible, and remembering themselves?

    I don’t consider myself some sort of libertarian zealot, but this makes me think I may be. The kind of regulation Chris Elliot asks for is the exact red tape BS that has stifled new products. Do we need better truth in advertising? Of course, because free markets need informed consumers, but Elliot doesn’t want to simply regulate the ads, he also wants a bureau to regulate the product, and that is anathema to a free market.

  19. @Randall even if consumer debt is financial recklessness rather than smoothing income, needing to fix a car, medical bills, etc that recklessness doesn’t go away without credit cards, consumers just have higher-cost options.

  20. @iahphx My opinion: “The New York Times” and “prestigious media outlet” don’t belong in the same sentence! They’ve destroyed the brand with “four day experts,” and placing promoting a political agenda above simply reporting the news. NY Times readers (I pass on buying it: the price paid for what you get is excessive) could probably illustrate it’s decline in more concrete terms, but in travel it seems that they’ve not yet found a replacement for the late (and wonderful) R. W. Apple, Jr.

  21. @Joseph,

    Why should AMEX keep track of if I am eligible for the offer? Because they are making the offer!
    If you publish headlines stating “sign up for this card and get 50,000 points”, then you should ensure that people who apply are eligible.

    I don’t understand your logic about the front desk clerk- this is not a DYKWIA issue. It’s absolutely trivial for a credit card company to screen your details during the application process to confirm that you are eligible for the offer they made. Why don’t they? It’s not because of the difficulty of “remembering millions of former card holders”- they use computers, by the way. It’s because they want to sell you the credit card, without giving you the advertised offer.

    I actually am the CEO of a B2C internet startup, so fall squarely into the “pro-innovation” category. But I also think that judicious regulation, where people get what they expected to get, is reasonable and fair.

  22. Gary – Again I’m not against credit cards, they are a wonderful advancement to our society and I’m a very happy Visa owner. However, there is nearly $1 trillion in combined credit card debt in the U.S. – that’s an astonishing amount. That’s just off-base to say if credit cards didn’t exist that $1 trillion would morph into another form of debt such as payday loans. Would some people still find a way to get themselves into financial trouble? Of course. But the thing with credit cards is it’s just so easy to pull it out of your pocket and buy a bunch of crap that you don’t need – a lot of that wouldn’t happen with payday loan type of credit. As such, I’m simply saying that my moral code tells me it isn’t right to push credit cards on people when I know half of them are going to misuse them and get their families in a jam. Yes, it would likely happen anyway much of the time, but it wouldn’t sit right with me. What I mean here is have you ever thought about all the credit cards people applied for thru your blog and the amount of debt that was built up on those cards? I’m sure it’s in the millions with how successful you are. Just doesn’t seem like the right thing to do if you have other ways to earn that income. Just my 2 cents…

  23. I’ve been reading Elliott’s website for years now, some interesting ideas and advocating for folks who run afoul of silly airline rules is a real service. But he is just plain crazy when it comes to FF programs. My perfectly polite exchange (advocating for a bit of nuance) got my account suspended for 30 days although it is not clear if it was him or his moderators who suspended me.

    When I emailed him about it he responded, “I’m looking at our system, and it appears as if your account is on a 30-day suspension. I’m so sorry. Must have been that little dust-up on that card post. Hey, strictly between you and me, my friend, I would avoid commenting on posts about mileage programs. Just a little free advice. 😉 I hope you have a splendid week, and thanks for participating in my site.”

    Fair enough, it is his site to do with what he will. Just remember the friendly advice about disagreeing with him. 🙂

    I do wonder how much of this is just an act to drive traffic but he does seem to go well beyond sometimes. For example, one of his posts during this exchange was “The day I allow a thoughtful discussion about travel clubs, pyramid schemes and the benefits of heroin addiction is the day I’ll allow a thoughtful discussion about loyalty programs on this site. So take note: When I begin talking up China White, you can feel free to discuss the “benefits” of your preferred loyalty program.”

    So perhaps he is a true believer? And I guess I must be a heroin addict. 🙂

    Cheers….

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