Crikey is sick of getting ripped off by credit card companies and happily publishes these tales from others who have noticed some big clamp downs on their frequent flyer points.

Of course, they then became a staple for all where the only loyalty is to the points [ie the Card issuer], not so much the business you are purchasing from. And these days most businesses offer all cards.

Loyalty costs, as Coles Myer found out, but it pressed on with abandoning its shareholder discount scheme.

We’ve seen the NABs woeful attempt to change the value of points, and to backdate it to those already earnt. Talk about a PR disaster. The shortage of actual frequent flyer flights is another – Qantas has no FFFs avails for about three months to the USA and reportably can’t even put on enough seats for paying customers. No wonder they are reporting surging profits.

The recent inquiry by the RBA into Interchange fees and cards was interesting in that Amex and Diners were exempt as they were not affiliated with the banks as they are companies not banks.

Diners are dead in retail land in Australia and are pricing themselves out of what is left in food and accommodation. Amex seem hell bent on alienating its high wealth customers – and it is succeeding.

It is the cost of points that is driving them nuts, especially for “volume and gold card Users”. Many small business people have the ability to charge loads through their card – electricity, rates, insurance, telephones, freight, advertising, goods for resale etc. Many small businesses can easily ramp up 10, 20, 40k per month, simply paying the card in one large lick.

This is why Telstra recently dropped its bonus points partners arrangements with Visa/Qantas – they were determined to reduce costs and points were right up there. Stories abound of multinationals charging their million dollar phone bills to the CEO’s card. Even One-Tel dropped a $400k bill on Amex, via one J. Rich, power user extraordinaire. Many executives have had this perk, as a non-taxable, non-FBT item for years. It is rife.

Crikey has been told a very interesting story. Mid last year Amex advised a member of 20 years standing [who they confirmed in writing had a first class credit rating with Amex] that they were not prepared to accept “commercial charges” to his card. The member was taken aback, as that is why he had an Amex card – for business!

When pushed, they advised commercial charges meant “goods for resale”, which he had been doing increasingly as Amex went on an expansion drive and opened accounts everywhere, including with more of his suppliers, around the time of the 2000 Olympics. Amex then pointed to a change in terms [fine print of course] sent out a year earlier, well after this big push.

Amex later tried to include radio advertising and freight etc in this definition. They said that suitable business charges meant petrol, accommodation and air travel. Of course, the member had not bought a ticket for some years, travelling regularly to the USA on points in business class from Amex and Visa. He had been charging radio advertising and other general expenses like insurance for some years.

This user is also a retailer, who has offered Amex to his customers for years and he was perplexed as Amex had been courting him to increase his business to business sales [ie which included certain wholesale customers ie goods for resale]. He had agreed to do this and joint promotions had been undertaken with a lowering of his Amex fees to 2.5%. He pays 1.1% on Visa/Mastercard [+ gst]. Understand that a lot of the profits come from smaller retailers who could be paying up to 4.5% on Amex and up to 3.5% on Visa/Mastercard. (Try 4.2 per cent for Crikey with Visa/Mastercard – we are getting ripped off outrageously.)

Not agreeing with this new “trading terms”, he continued to charge as he had done for the last few years substantial amounts to his card for “goods for resale”. These were purchased, as they had been all this time, from wholesalers who have no retail business – ie the card facility was “goods for resale” only. These wholesalers included large American companies. A few letters were exchanged with Amex continuing to duck the “why do wholesalers have Amex accounts if you don’t allow goods for resale” question.

Amex then suspended his card whilst he was overseas [it was current as always], citing breach of terms etc. Fortunately, he would not leave home without his Visa card.

Needless to say, they have now parted company – Amex has dropped some $500,000 turnover per year on the member’s card and he is wondering why he still offers Amex to his wholesale customers, knowing that this rule is being enforced to stop power users – ie those that actually redeem points!

Of course, he went to Visa, and was readily given a $50k limit, and continues on charging and redeeming.

You see, the game was, when points were introduced, that the majority of users clocked up insignificant amounts of points that were never used.

Now, even Government employees who had cards were paying their departments bills quite legitimately on government cards in their names and scooping up the points. One ATO executive had taken his family to Singapore on holidays for the last two years courtesy of all the travel he had racked up during the GST introduction period.

In Amex’s case, they simply just can’t afford it – their demographic is management or high wealth individuals and this was generating “power users”. Now Amex is chasing Mums and Dads and young urban users, who will never charge significant amounts to the cards, and co-branding with AMP etc.

Crikey hears of another points user who is a small business, who buys a lot of stationery basics for manufacturing and resale. His large multi-national supplier has no retail outlets and no retail business – they only sell materials to the printing trade. Same good history, large user, lots of redemptions of Airline flights and you guessed it – clamped. He got around it by prepaying the card just prior to charging the purchase, but has since given up fighting the Amex threats and gone to Visa, who happily gave him a $40k limit.

Crikey would be interested to hear from anyone else who has similar tales to tell and here is one that we sent around to subscribers last week:

20. FREQUENT FLYER RIP-OFFS

A subscriber writes:

The frequent flyer “rewards” program is not very rewarding. Ansett reward holders were ignored as creditors in the carve up. No one put a tax on the flying public to give them a return on the value owed to them.

Reward points are a form of currency and according the Economist May 4th 2002 it is a currency that has all the symptoms of hyper inflation. My recent experience bears it out. Two years ago a trip from Canberra to Melbourne return “cost” 9000 points. Today the same trip costs 20,000. How much is that really worth? It is not the cost of a standard return fare but it the cost of how much the trip would cost without frequent flyers.

I have just made a booking from Canberra to Melbourne for myself and my wife. To use frequent flyer points I had to book well in advance (three weeks to find anything remotely suitable). Even then I had to start the trip a day earlier than wanted and end a day before. It took me about one hour to find suitable times. Having booked one ticket with frequent flyers I booked another ticket on the same flights. The cost of that ticket was $140 minus taxes. (With frequent flyer tickets you have to pay the taxes and the taxes without GST was $33). This means that the value of a frequent flyer point to me was 0.7 of a cent, minus interest costs for the time it has taken to accumulate them, minus the inconvenience factor required when trying to use the points.

With the restrictions on frequent flyer seats my guess is that the cost to Qantas is essentially zero because you can bet if there was the remotest chance of them filling the seat then it would not be available. In effect frequent flyer points are a hidden payment to the airlines – not something they give you.

I wonder how much it cost the organisations that “gave me” the points to acquire the points? I have been unable to find out but perhaps some reader has an idea. I am using up all my points as soon as I can before they have even less value and I will not be persuaded to change my spending habits because of the promise of rewards.

Name Withheld

Keep sending them in folks.

Ripped off by Qantas and Ansett

I have just read the article about frequent flyer points. My husband and I lost 240,000 with the demise of Ansett. I had actually phoned them to make a booking and they told me to defer this to the end of the month to allow that extra time as I didn’t want the trip for one year. You guessed it, they folded during the month. I recently tried to book a flight with Quantas to Brisbane from Melbourne and the earliest I could get that didn’t leave Melbourne in the very early hours of the morning, or return at midnight was November. I was trying to go on an earlier flight using either Business or Economy but to no avail. Nevertheless, it is still a lure. A bit like fishing.

Name withheld

Peter Fray

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