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A couple of weeks ago, at Frequent Traveler University, I showed multiple ways of earning 5 points per dollar for all credit card spend. Soon, I’ll post an outline of these techniques, but first I find it necessary to warn you of some dangers and headaches these techniques offer…
American Express Financial Review
I don’t have first hand experience with this, but I know a couple of people who have recently had their American Express credit card accounts frozen. They had been selected by American Express for Financial Reviews. In each case, these individuals had spent large amounts of money at drug stores in order to buy reload cards. They had paid with their American Express Hilton cards which earn 6 points per dollar at drug stores. As part of the Financial Review, American Express asks customers to fill out IRS form 4506-T so that Amex can examine the individual’s federal taxes. Presumably American Express does this in order to determine whether the individual can really afford as much as they have been spending. Often, people get through the Financial Review unscathed and with their accounts restored. Sometimes it doesn’t work out as well and the individual’s American Express credit card accounts are closed altogether. American Express prepaid accounts are unaffected.
I don’t know what level of spend is likely to trigger a Financial Review. It probably depends somewhat on your historical spend patterns with American Express. It may also have something to do with your overall credit line: if you regularly spend right up to your limit, that could look suspicious. Or, if you pay off your account multiple times per month, that can look suspicious as well.
Chase Account Closure
There have been incidents in the past in which Chase has abruptly, and without warning, closed accounts where they suspected customers of “perk abuse”. This is where people use credit card benefits in a way that Chase determines is “not as intended.” One example is where a guy bought thousands of 1 cent e-gift cards in order to earn 10 points per transaction thanks to his Chase Freedom card / Chase checking account combination. Chase wisely shut him down. For more details, please see my post “Why Chase cancels accounts (and how to protect yourself).”
So far, I haven’t heard of any confirmed cases in which Chase has shut down Ink cardholders for abusing the 5X perk, but it could happen at any time. No one knows what levels of 5X spending are safe.
Prepaid Account Closure
Many of the 5X Everywhere techniques rely on prepaid products of one type or another. If you regularly load and unload large amounts of money to and from these accounts, you run the risk of having your account abruptly closed. This has happened to many people with the NetSpend card (see “We’re sorry, there is a problem with your account“). I haven’t yet heard of American Express doing this to anyone, but its always a possibility. The worst part of having your account shut down is that the issuing bank may not be quick to send you your balance. I know people who have waited about two months for their NetSpend checks, for example. On the other hand, when this happens, there is no impact on your credit report so unless you have a lot of money tied up, it’s really not a big deal.
Prepaid Headaches
There are lots of little potential “gotchas” with prepaid products. Here are a few:
- Reload cards not working. Many people have reported having trouble loading a Vanilla Reload card onto their new Amex prepaid card. Sometimes these problems are resolved by simply waiting 24 hours and trying again. Other times people have had to get everyone involved from Incomm (the company behind Vanilla Reload cards), to American Express, to the merchant they bought the cards from. This has never happened to me, but it sure sounds like a huge hassle!
- Fraudulent charges. A reader told me about a situation in which he reported to American Express a large fraudulent charge that had appeared on his Bluebird account. American Express put the amount on an 8 day hold while they investigated. That meant that this individual could not get to these funds (his funds!) for 8 days.
- Fees. I love the American Express prepaid products since they are almost fee-free, but most other prepaid cards charge fees for just about everything. The MyVanilla Visa card, for example, charges 50 cents for each credit or debit transaction, and $1.95 for each ATM withdrawal. The first time I tried to use my MyVanilla card at an ATM, the request was declined and I was charged a 75 cent ATM Withdrawal Decline fee. When I called to ask why, I was told that there is a $400 limit per day for ATM withdrawals and since I had tried to withdraw $400, the ATM fee put me over $400. Therefore, the request was declined and I was charged a decline fee. Nice.
- Limits. Each prepaid product has different limits regarding how much can be loaded, spent, or withdrawn each day or month. These limits aren’t the end of the world, but they can make prepaid products a pain to use day to day.
- Tracking expenses. If you like to track credit card expenses through services like Mint.com, you might find yourself out of luck. With most prepaid products its necessary to log into their own proprietary web site in order to view and track expenses.
Is it worth it?
The rewards in earning 5X Everywhere can be huge, but each person needs to decide for themselves whether the rewards are worth the dangers and headaches. I do practice these techniques, but in moderation. Due to recent news about Amex Financial Reviews, I plan to be even more cautious with my Amex credit cards. How about you? Has this post changed the way you think about “5X Everywhere”?
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Jacob: I’ve bought as much as $4500 at a time, but it really depends on each person’s situation as to how much is too much. Note that Office Depot no longer sells $500 Visa or Amex gift cards, so now the best available ones are $200 with a $6.95 fee. It’s not nearly as good of a deal as before.
Hey there!
How much in gift cards have you bought at one time at an office supply store?
I’m having eye surgery on Monday and they said they would accept multiple gift cards as payment as long as they work like credit or debit cards (score!), but I also don’t want to push the envelope with chase. I met the spend awhile ago and use the card for other things. The most I’ve bought in gift cards at one time was 2 $500 vanilla visas. Will 4 or 5 cards bring Chase knocking?
Thanks!
Nick you are 100% right!
Paul: That’s a great question, but unfortunately, no one here knows the answer to that.
I’ve seen on previous posts that you should limit how much you spend at Office Depot on an Ink Bold card (like never more than 4K a month). Any idea if that would be per card or person? So if I had Ink Bold and Ink Bold Plus should spending 3K a month on both be OK?
MM: “Gaming the system” = “getting more miles/cashback/points/etc than the bank/hotel/airline/etc wants you to, often through very clever methods”. Who determines this? Whichever blogger happens to be spouting off at any given moment.
“too much” = “enough to trigger an FR”.
🙂
I need someone to define “gaming the system” for me. WTF does that REALLY mean? Explain in detail, please, what it means to be a person who ‘games the system’ and who determines this and exactly how they do so?!
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And on that note, what is “Too Much?” How is that defined, and by whom? Unless there’s a shortage like in a war where we all need to be rationed, or a company sets a pre noted limit, I am paying X for Y so the only TOO MUCH should be what I can afford or not.
Why banks don’t stop you from getting 5% on everything! Also: how to avoid baggage fees!…
BASICALLY, THEY DON’T WANT TO: The big thing among the gaming-the-system crowd the past several months has been reloadable prepaid gift cards–Vanilla reloads, Paypower, Netspend, etc. It seems that everybody has been writing about this topi…
lol nah, I would mistakenly out deals or piss off more people than I probably do already.
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On another note… FYI I was not FRd yet. Some people close to me have been though and it stinks–especially the waiting and not knowing if the income thing will work out as related to reasons I have given above.
Clearly, Marathon Man needs to start his own blog, lol.
I can’t be bothered with these reload cards. Too many problems. I’m spending my time buying GC and merchandise with the Amex sync and other offers. I’ve made hundreds of dollars of that stuff, and it’s less complicated and there are no feds running after me and I don’t have to worry about my cards being locked.
I have bought the occasional VR and that’s fine, but to focus on these seems to be too much work for me. Whatever floats your boat, i suppose.
Another thing I have heard Amex is telling its soon to be former customers is: Well we feel your income does not match and so you should never have gotten our card to begin with! Then again what I find faulty in this are these things:
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1) what if your income changes up or down. Are we supposed to always somehow notify Amex of these things? If I got a card say in 2004 and made $50k a year, should I call them to tell them I make $80k now? Or if I lose my job, should I tell them I make less now? What I get a new one next week that makes $80k now but with a different company than the one I had listed on my appp or in a different job title? Should I tell them this too? When and how? And why?
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2) What is INCOME? On the FR we now know it is based on say the 2011 tax return. But where in the application do they state this as being the only way to determine income? What if your dead father left you a million dollars and you just put it under the mattress? Is this not a form of money used to live on? I think the FRists should tell the app-ists to detail more on what they need when you apply. Either that, or they should ALLOW this info when you get FRd. Why do they LET you apply saying you pull in $x a year but when you get FRd they only accept some part of this as valid data for their inquiry? Truly Cardinal-like, if you ax me.
And lastly, there’s the matter of what some companies call ‘intent’… Yeah, Amex, like most companies will even tell some FRd people that the reason they dont like GC buying is because we are not using the card as intended, or using the GC as intended (again they have no proof but they can guess and that guess is good enough for THEM). They will claim that due to our abuse of intended use, they feel they should shut us down. So what truly really honestly sickens me the most is that I bet someone could probably go out and buy say 20 assault rifles with their Amex and have no problem with the purchases of them–you know, to get the points and all–but that person cant get Vanilla GCs without triggering the FR and some abuse of intent. Oh I know this is a sore subject (I have little kids myself so I can’t even get it all out of my head and it’s got me all depressed) and while the tragedy of CT and the loss of one’s CC use are by no means related, I am sure some here can see my point: Amex has targeted what we buy and it’s currently worse to buy GCs than anything else on the market and that just makes no sense to me and I am frustrated by it to the point of being mad.
More:
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It doesn’t matter if you pay off your cards in full, quickly, or over time. In fact paying them quickly makes it look even worse, it seems. One would think the reverse, but if you pay them too quickly they can almost surely assume it came from churned and cashed out GC money, not from your own savings, even if it WAS from your own savings! And they tend to know what you bought and want to know why. I know I have bought many Visa and MC GCs because I need to pay bills that do not take Amex. My basement costs a ton of money to work on and some contractors will not accept the high fee Amex so I can actually give them $500 Visa GCs all day long. I can still earn points by buying these on my Amex cards though, but oh this is a no-no these days. My dentist doesn’t take Amex either but does anyone here know that a crown costs $1200 if you have no insurance for it? What if you find you need 8 crowns but just happen to have the money saved up to get them done? Why not buy GCs and use those? Well Amex may think you are up to something even if that’s the whole point. Again, it comes down to them deciding they just don’t want to give you points. In the wake of all this witch hunting lately, I personally have already moved my MR points on the latest 30% BA transfer deal. Lately, I don’t trust Amex at all to bank ’em for me in the least!
I have been studying the FR thing for some time now and have seriously toned down all sorts of activity because of my fears of it. I cant really get new Citi HH Ccs because I maxed out my inquiries on that so buying with my HH Amex has been a mainstay for some time now. But the FR and other stuff like it has me up in arms…
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Somehow somewhere any one of the entities involved in any scheme we do wants to not just stop us but also fk us for even daring to play these games. What they should do is to have better designed their service so it can’t be what they would consider “gamed” anyway, but since they don’t know how to or don’t think they need to spend resources to do this, instead they are bent on doing us in AFTER we commit a perceived crime in their minds. All they can do is to nail us if they perceive us as being the bad guy later. They think we are bad for doing exactly what their own cards allow us to do.
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In the case of Amex they may let some HH super users survive the FR if their income was high enough but others become the example. I know many people here may be sick of being that example and some have had stuff like this happen too many times this year alone (Chase closures, points not posting, etc). It seems lately, either a promo fails, the store screws you, the cc screws you or you gotta sue somebody to try and get results but wait a long time for them to come or not. In the end that ‘free ticket’ cost can be a really huge headache and a lot of loss. It seems this time around, it’s not OD who is stopping the vanillas (or in this case CVS) and it’s not incomm who makes them, rather it is Amex.
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I would bet that in Amex’s defense, if their way of determining ‘girth’ is by getting someone to reveal their 2011 income, then they need to feel a person has the propensity to pay a bill back when due. If they feel he cannot pay it back based on their terms, they can invent reason to close the person off. They can claim that someone like that could buy tons of gcs, cash ‘em or sell ‘em, take the money and file chapter 11. Amex would seriously lose out in that case, and the person would win huge. This is their out. In this model, I’m sure that they’ve gotten sick of people buying gift cards and just redeeming them and are starting to crack down. As well, they clearly have people on FT watching what’s going on—and reading these blogs as well! They go by patterns and risk, and any one of us could intentionally or unintentionally tip the scales in favor of justifying that notion.
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In the case of Chase, they tended to NOT care as much—or at least until someone tried to give their points to someone else, god forbid. But for Amex, it is different. To me it is as if Amex must have had a more pressing financial crisis-related reason to crack down more and maybe it goes something like this:
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(1) government had to bail out some big banks.
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(2) Government also tossed in the security patriot terrorism laundering drug thing.
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(3) we were among those affected.
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(4) we need to trim the tree a bit.
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(5) it is easier to fight a million little customers and appear to cut the fat that way than it would be to go up against the government or spend big bucks on big lawyers. A million people cannot effectively ban together to stop Amex, really. Not for this type of thing.
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(6) we will go after our customers.
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(7) after all the govt or something is after us.
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(8) so we figure out who these may be by looking at this gig with big GC spends and FR a gazillion people.
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(9) if they fit ok with our requirements (last years tax, or not too much big spend unless their taxes show they made a lot of money) we let them live.
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(10) if not, they die, we look good for ousting who could be the problem and all is well. If someone happens to have a decent income and they did a lot of GC buying, then that may be ok, but we will get swaths of people we need to out anyway, just to fulfill some quota and look good to those watching over us!
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(11) NEXT!
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They are just playing a similar game to the one we are playing. A chur of sorts, but on a more massive scale.
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The sad thing about the FR is this: Up until someone was FRd, their income was never a question, just like yours has yet to be –until it happens to you.
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Of course many here will argue that something like 2011 income shouldn’t even BE the determining factor. After all a person who made, say $50k last year COULD lose his or her job tomorrow and then they have NO income and no way to pay back CC bills anyway. But a person who put $200k into the bank to survive the next four years doesn’t get by in Amex’s current standards, because this FR thing is based on income not assets or supposed savings. Not so fair. And maybe Amex thinks that $200k is churned money anyway, coming from their own CCs and use of credit limits to buy and cash out GCs. They will tell you they have no way to verify that the $200k you claim to have in your bank is even all yours. Was it obtained by other launderings? Etc etc. All bull.
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With all this said, my summation of this is that they just plain don’t wanna give the HHilton points. That’s the true reason all this is taking place in the wake of many people having found a great way to get them on the cheap, and their ‘out’ is to invoke the FR to everybody lately. What a great way for Amex to save their company money, eh?