NPR: How Frequent Fliers Exploit A Government Program To Get Free Trips

[China]

How Frequent Fliers Exploit A Government Program To Get Free Trips

We recently reported on the the government's failed effort to persuade Americans to use dollar coins.

But the coins have found at least one group of fans: Travel enthusiasts who buy thousands of dollar coins with credit cards that award frequent-flier miles for purchases.

Once in possession of the coins — shipped to them by the government for free — they can deposit them into their bank accounts and pay off the credit card bills. The result: a free ticket to anywhere.

"We've used them to go on trips around the world," says Jane Liaw, a 35-year-old public health researcher and science writer in San Francisco. Liaw says she and her husband, who use a variety of tricks for earning miles, are planning trips to Greece and Turkey, "all on miles and points."

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[TheDoyler23]

Sounds like a good idea to me. It screws over credit card companies and could irritate banks a bit.

I know people who are religious about paying off their cards and use them for everything in order to get the miles. Seems like a more legit way of doing the same thing.

[Southtown]

You'll find a huge thread about this on the fatwallet.com message boards. I guess its not as easy as it used to be. Some credit card companies are now charging the cash advance apr for purchasing coins instead of the purchase apr. The cash advance apr is usually in the high 20% range and you don't get the grace period...so it cuts down the margins for the consumer trying to churn points or miles.

Here is the thread that was started 3.5 years ago.

http://www.fatwallet.com/forums/finance/837472/

[techboy]

It screws over credit card companies and could irritate banks a bit.

It doesn't screw over credit card companies at all. They still make money on every transaction. The only reason some of them fuss about it is they fear someone buying up to the max, taking the money, and defaulting. The people pulling this stunt, though, aren't going to do that.

The only ones this really annoys are the banks, because they have to pay for an armored car to ship these out.

The government should care too, but they're mandated by law to sell these things, and the Mint makes money on seignorage, so they don't really care either, despite their attempts to avoid bad PR by saying they do.

The numbers in that story are a bit off, though. There's a guy named Mr. Pickles on flyertalk who bought millions, especially before the restrictions came down after the last time this hit the press and made the government look stupid.

I guess its not as easy as it used to be.

It's not as easy as it used to be, but people are pretty clever about this. The latest strategy, as I understand it, is to buy debit cards using cash back sites (doing it right, you can make a small profit on that alone, though nothing worth bothering with ordinarily), then turn around and use those to buy the coins. This has a number of interesting advantages, not the least of which is that it avoids cash advance fees (not that many banks actually charge them).

The real masters of these exploits are at flyertalk (though I read fatwallet finance too, they're better and more focused at schemes to make money, not miles), and this is the master thread there, though it appears it just got locked yesterday, probably because there's some fallout over certain members of the community as a whole talking to NPR, which is a no no (I read several blogs related to this).

I actually thought about doing this, but moving the boxes to the bank, and finding a bank that could and would take them, just seemed like too much work for me.

[Thiebear]

so the government sells you dollar coins, and ships them you?

And sends you on flights around the world for free?

how are we not in a debt crisis all the time.. Why not add a clause that says if you scam the program you owe the gov't for the flights...

[Mickalino]

so the government sells you dollar coins, and ships them you?

And sends you on flights around the world for free?

how are we not in a debt crisis all the time.. Why not add a clause that says if you scam the program you owe the gov't for the flights...

The government is not actually funding for the flights, so they are not the one getting screwed here - the airlines are - and other passengers who are trying to use up those restricted and allotted seats the fair way, by earning them.

[chipwhich]

The government is not providing the flights, so they are not the one getting screwed here - the airlines are - and other passengers who are trying to use up those restricted and allotted seats the fair way, by earning them.

The govt pays to ship the coins.

Shipping isn't free.

The airlines don't get screwed, they get reimbursed by the CC card companies for these flights.

The only one losing money is the US govt.

[Bang]

Well, when airlines stop hiking rates to capitalize on things like people fleeing apocalypitic earthquakes and nuclear meltdowns, then maybe people would stop figuring ways to **** them back.

~Bang

[Mickalino]

The govt pays to ship the coins.

Shipping isn't free.

The airlines don't get screwed, they get reimbursed by the CC card companies for these flights.

The only one losing money is the US govt.

And passengers who are loyal to their airlines so they can get frequent flier awards, and actually pay higher fares in some cases, so they can accrue most or all of their miles on the same airline.

Ever tried to book a restricted FF award on an airline, only to find out that they don't have any allotted award seats until about 5 months away - and then a "Return" seat is not available until a month after the Outbound date. Thanks in part, to people like this, gobbling up all the award seats unethically.

[techboy]

The government is not actually funding for the flights, so they are not the one getting screwed here - the airlines are - and other passengers who are trying to use up those restricted and allotted seats the fair way, by earning them.

No, the airlines make a fair amount of money selling the frequent flyer miles to the credit card companies in the first place, and there's a reason availability is often limited... they try not to award seats that would have been sold, so they really make out pretty well.

Air Canada's program was so profitable they spun it off from the airline and it runs as a seperate company.

The only one losing money is the US govt.

The government doesn't really lose money on this either, per se. They actually make money on something called "seignorage". It's not really much different than just printing more money, with all the benefits and drawbacks such an action has.

Again, the only ones that appear to lose directly on this are the banks, given that they have to spend manpower and money counting, storing, and shipping the things, and they are heavy.

It's funny... remember the article a little while ago, about these coins that nobody wants? Well, this is probably the only group that actually wants them, and some of them actually spend them in the community as intended instead of just taking them back to the banks.

If the government would ever get smart and take the 1 dollar bill out of circulation, frequent flyers might become the Mint's best friend, getting these out quickly and efficiently.

The stupidity is that the government mandates that these coins must be sold, then won't do what it takes to ensure that they don't end up right back in the Fed collecting dust.