Gene Hackman to Tom Cruise in The Firm:
The difference between tax avoidance and tax evasion is (a) whatever the IRS says, (b) a smart lawyer, (c) 10 years in prison, (d) all of the above.
There are a lot of grey areas in miles and points, and those grey areas are largely the making of the programs themselves. They are large and complicated and the people who manage them don’t always understand or remember the rules they’ve created.
What Rules Are We Obliged to Follow and When is it Ok to Push the Envelope?
When it comes time to write terms and conditions for a promotion, they don’t always do a full and complete job thinking through the implications. US Airways Dividend Miles used to be notorious for sloppily written terms.
And so millions of people reading through the offers, a few of them are bound to hit on something, a bigger opportunity than the program intended.
Here’s the interesting thing — in recent times there’s been a shift in narrative coming from the programs, where they seem to frown on activities of members benefiting from programs in ways the program didn’t intend as opposed to complaining only about members who actually broke rules.
Don’t get me wrong — with more than 100 million members of American AAdvantage alone (including US Airways Dividend Miles members, and after de-duping accounts), there are plenty of people who do break rules, such as:
- People who sell miles or award tickets
- People who take advantage of IT glitches
There are things an airline might decide is a rule but where it’s far less clear. In the case of the recent Danish pricing mistake I had no issue with using a foreign website to buy tickets and to work around website limitations to process transactions.
The United website will default to your billing address country, an odd quirk. There is nothing wrong in my view in issuing tickets in whatever country you wish. I do this all the time with Expedia’s country-specific websites (eg their New Zealand, German, Spanish, Brazilian websites).
I don’t think United should have been expected to honor the fare if cancelled and communicated promptly — but I saw nothing wrong with working around systems limitations to get their website to complete a Danish point of sale transaction.
Not All Rules are Enforced
Then there are of course rules that are only ‘kind of sort of’ rules, a decade ago it was common for the terms on a credit card offer to say that the signup bonus was for first time cardmembers only but in practice banks would give those bonuses to the same customer more than once.
If a rule is buried in the fine print, and not actually enforced, can it be said in a meaningful and not purely technically way that a member is actually violating something?
If a program says a promotion is supposed to work one way, but over time members come to learn it works a completely different way in practice, are members supposed to pay attention only to the written rules rather than the common law ones?
At a certain point we understand a program’s actual practice as the rules, regardless of what they say in print.
When How Things Work in Practice is Too Generous
I have little problem with the grey areas that are created by complexity, with benefiting more than a program may have intended. Hyatt’s “Faster Free Nights” were one of the most generous promotions from a hotel loyalty program, ever. Two stays (at any paid rate) earned a free night at any Hyatt in the world. Two cheap airport stays could be redeemed for a night at the Park Hyatt Tokyo.
- Back in the day you used to have to pay with MasterCard to be eligible
- A result of Hyatt’s IT systems limitations, Priceline stays counted
- And the free night itself even counted, as long as you had something charged to your room during the stay.
Two Priceline stays at many $35 each yielded a free night. And then afterwards every free night plus another paid stay yielded a free night, plenty of people made a single long distance call from their room and begged the hotel at checkout not to waive this charge as a courtesy!
It wasn’t how the program was ‘supposed to’ work but it is how the program did work and I was comfortable with that.
Not Everything You Can Do Is Ok
There are plenty of things that cross real lines for me. IHG Rewards Club (then Priority Club) offered points for installing their shopping toolbar. Only you didn’t need to actually install the toolbar, just click through the page as though you were going to. And they didn’t limit you to doing this once. People earned points over and over.
Some people even scripted this. They earned hundreds of thousands, even millions of points over a weekend with their computers running in overdrive.
I knew that come Monday morning Priority Club would be shutting down accounts. Some people doing this knew it too and used only ‘throwaway’ accounts.
- Some people booked hotel awards with the points, those were cancelled.
- Some were savvier and booked future air travel with their points, thinking once tickets were issued they’d be fine. Tickets were cancelled.
- Some cashed out for e-gift cards, delivered immediately such as to Amazon. And then ordered expensive merchandise that shipped immediately.
- Those people had their accounts closed, but they kept the merchandise (and perhaps then sold off the merchandise).
This felt like stealing to me.
Parsing My Own Lines of Right and Wrong
I don’t have great bright lines for what’s ok and what isn’t, I have my own sense.
I have absolutely no problem with throwaway and hidden city ticketing. Airlines take a somewhat anachronistic view that they are selling you transportation between say DC and Milwaukee when you get there via Chicago … not seats on given flights between DC and Chicago and Chicago and Milwaukee, so you’re cheating by buying transportation between DC and Chicago (and getting off in Chicago) at the price of DC to Milwaukee.
I have no problem booking ‘mistake fares’. I also think airlines ought to be able to make a reasonable and timely decision on whether or not to honor true mistakes. If an airline is going to let people travel in international business class for a hundred bucks or so, I would like to be one of those people. But I think that common law and historical rules about mutual mistake and obvious errors ought to allow a party to rescind a sale quickly… though not after a month when a customer might reasonably rely on the travel as-booked.
But even though I feel like currency earned belongs to a traveler, it’s a fairly clear rule that awards in most programs can be gifted but not sold.
Towards a Theory of Where to Draw the Line
I think it comes down in some measure to how clear a rule is, and whether the rule is reasonable and unambiguous in a world where you don’t get to participate in negotiating over the terms.
Rules that are not actually enforced aren’t really rules in a meaningful sense. If a program wants to assert them they should give clear and reasonable notice. Hyatt and Marriott both did this when they decided they actually wanted to expire points, even though their rules have for years claimed their points expire.
Rules have to be reasonably knowable. So when rules are consistent across programs, consistent with standard practice, they are more reasonable than unique rules that aren’t clearly spelled out and promoted. Novel interpretations of rules, even if arguably supportable by language in program terms, ought to at least be provided with fair warning to members in advance.
Vague concepts like ‘spirit’ and intent aren’t persuasive. If something is permitted by the rules, enforcing notions like the spirit or intent (easy for a program to discern in its own mind and after the fact but often unannounced and unknowable by a member in advance) is unreasonable.
Airlines have a greater responsibility than bank programs to treat customers fairly. Banks more than airline and hotel programs have been known to fire unprofitable customers. Often that is just managing risk (customers who charge more than their income, pay off cards mid cycle) and is an approach often dictated by regulators.
Airline programs are more or less entirely unregulated. In that world there is advance greater burden on a program, writing and interpreting its own rules with little recourse by members, to do so fairly and with ambiguity resolved in favor of the member.
Programs that treat us fairly deserve greater respect My views are somewhat situational — in an era where programs make changes without notice, as bold as to take away award charts off their website such that members may not even know when a program devalues, those are not programs I feel any special obligation to act solely in their interest.
There are lines. I worry there has been a shift to view many things that were commonplace as unacceptable merely because they do not benefit a program.
What are your lines?
The Priority Club toolbar exploit was bad faith but not theft by cultural norms (and not an exploit in the sense of information security). Western culture encourages legal bad faith toward faceless corporations. In the general populace, outside of frequent travelers, many would have envied and cheered those who cashed in for Amazon merchandise. The populace would have seen ingenuity, not theft.
Another great in-depth article!
My lines are similar, but I wouldn’t blame a program for denying benefits long after the fact when the member did not play by the rules (e.g. getting FFN credit for Priceline stays). A program should always be able to correct its errors, just as members should be able to get points credit after the fact.
Personally, I will not do anything, under ANY circumstances, that I know or believe to violate any bank/airline/hotel program rules. Nor will I do anything that strikes me as dishonest. And I will not do anything that is not in keeping with the intent of the programs. That means no hidden-city ticketing, no manipulating country specific websites to get better deals, no manufactured spending, and no CC churning.
The fact that airlines/hotels/banks stack things in their favor does not give me the right to break the rules in order to “even the score.” Two wrongs don’t make a right.
When people break these rules, and get caught & burned, like banks shutting down credit cards for MSing, or the UA Danish website thing, I just laugh.
A coworker and I discussed something like this when we both got RedCards to start MSing. She said she was a bit uneasy about doing it because it felt wrong. Signing up for cards and meeting the spending bonuses through regular spending seemed like it was more ethical. I agreed with her.
I think a lot of this is “what can I get away with?”. Will they honor that mistake fair? Will they close my card for loading my RedCard? Can I signup for a card multiple times? Exploiting lack of enforcement is usually okay with me. Maybe they never intended to let people load RedCards with credit cards but it works so I’ll do it. Getting 5 red cards under different people’s names and loading them all up with your credit card. That’s where it can get sketchy to me. Maybe because it’s even farther from the original intention of the product. Sure you probably shouldn’t load with credit cards but you also only suppose to have one card per person. Of course someone could say, “Why don’t the verify the names on the cards if they are worried about it?”. That’s true, it wouldn’t be hard to enforce something like that. Lets be realistic, we’re all gaming the system and know it. I can say this is more right to me than that, but I believe they’re both “wrong”. Along the lines of what Jason said, I don’t feel bad when I take advantage of a big for-profit corporation. The scale I’m doing it is insignificant to them but huge to me. Once the cost of gaming the system outweighs the cost it takes to fix it then you can be sure they’ll put a stop to it. At the very least learn from their mistake.
There was a member of Flyer Talk who signed off his posts with a phrase like the following:
“If Pavlov came back now, he wouldn’t need the dogs. He could just post deals on Flyer Talk and start taking notes”.
@Brian L
Very respectable your point, what I don’t get is why do you read this blog? is like complaining about republicans but watching Fox News.
Haha. Reading the latest series of FT posts, I can definitely see I’ve done this all backwards. Awesome! It’s all good.
Like always in this so called “hobby” there are different camps. Won’t get into yet another rant or description of the forces at work here.
Oh so NOW the rules are , no mistake fares, got it.
“PIPPIN: I didn’t think it would end this way.
GANDALF: End? No, the journey doesn’t end here. Death is just another path, one that we all must take. The grey rain-curtain of this world rolls back, and all turns to silver glass, and then you see it.
PIPPIN: What? Gandalf? See what?
GANDALF: White shores, and beyond, a far green country under a swift sunrise.
PIPPIN: Well, that isn’t so bad.
GANDALF: No. No, it isn’t.”
Oh btw, for the first time EVER I had a booking agent directly ask me for the “balance” of my mileage account while conducting a simple inquiry about an issue.
As if the booking agent were pulling the standard sales technique of figuring out how much this person has and then attempting to get as much as possible.
This may be commonplace, but to date, it’s the first time I’ve ever had an agent before being able to see my account ask me my balance.
That’s the war isn’t it?
It’s not really the Airlines vs the Flyers. It’s really now progressed to where it’s like a Senate race, the incumbents trying to hold their positions.
Put it this way, I’d much rather be a free agent in 2015 than to have ANY vested interest in this game. The New tech sides with the New guard.
Not only is there the principle of devaluation but I think some of completely skipped over the principle of deflation. Yes the airlines have devalued miles but some of the other stuff has also deflated it.
I often buy merchandise from Costco online with Visa or Mastercard. Then return the items back to the store. Since they only process AmEx, they issue refunds in cold cash. I have a dummy Costco membership in case they crack down.
Also I buy stuff from Nordstroms. Request for refund to be credit to my debit card.
Great ways to earn 500K UR points in year.
@Nick, I know you’re kind of tongue in cheek here, but VTFW and other blogs do have a lot of legitimate news and strategies that are unquestionably ethical and useful. I don’t pursue the tactics I disagree with, and if that seems to be the main thrust of a blog I stop paying attention to it. I also favor ethical bloggers with credit card link clicks.
Another thing I won’t do is book dummy legs on award tickets. There you’re not only depriving the company of the opportunity to market that seat to someone, but also depriving another flyer of the opportunity to get it. Not worth it, even if it saves some points sometimes.
I am an impulsive buyer. Often lose track of the last day a return can be accepted by a merchant. I file return protection or purchase protection claims. Often, the CC’s let you keep the merchandise.
I was surprised they didn’t want me to send them back my 75″ Ultra 4K TV ($3999). I claim the TV feel off the wall and shattered. I photoshopped the TV for evidence.
@DaveS
Precisely, ethics is an individual assessment of what is wrong or right, not by legal matters, but by our own beliefs. That is why it is such a grey area, I think travel hacking is a big part of these blogs. Gary is pretty much telling you were his lines are and it seems they are no where close to yours or Brian L.
@Jake. Lol on it’s surface, one might read your post and have a knee jerk reaction and say well wait a second… Isn’t that unethical fraud?
But then later down the line you realize, well Jake’s the reason I don’t have to pay the retailer full boat for that shiny new pair of shoes.
Hilarious. I thought some of the merchandise at Nordstrom’s showed signs of wear.
I think some people should get off their high horse.
Rex, however, I’m guessing is being a troll. That is very clearly fraud. Getting a good deal and committing fraud are two things entirely.
@Gary. I don’t see why airlines should have any greater or lesser responsibility to treat customers fairly. This makes no sense to me at all. EVERY business should treat its customers fairly.
In return, customers should act fairly towards the merchant with whom they’re doing business.
As for your position that you have no problem booking tickets on a company’s foreign website, I do not disagree, in so far as the transaction can be done honestly.
For the recent United fiasco, in order to actually purchase a ticket, one had to LIE and state that their home address was in Denmark. A big difference IMO, and one you conveniently glossed over.
I know you are having a bit of fun with satire, but let’s be honest, there are going to be some characters who read your blog and take lines like this one seriously: “In the case of the recent Danish pricing mistake I had no issue with using a foreign website to buy tickets and to work around website limitations to process transactions.”
“Website limitations.” A funny euphemism for a fake address. For the readers who think this stuff is o.k., do you lie about your address on your 1040 form to cheat on your taxes? Do you lie about your address on you insurance application to cheat you insurer?
Yet there are slimebuckets over on flyertalk who will spend paragraphs rationalizing how lying about the address on their credit card transactions is a o.k.
Don’t like the fact that taxes are higher in California than Nevada, move to Nevada. Don’t like the fact that plane tix are cheaper in Denmark than the US, move to Denmark.
Sorry to bring seriousness into a funny thread, but fraudsters need to stop whining to the DoT that fraud is magically ethical.
@joseph
Without getting into an argument, It’s quite different from your examples. The purpose of the payment page is to pay United for the ticket. Was that done? Yes, United had enough data to process my credit card. While I was living abroad, numerous times I had to “lie” on the address of different websites cause the system needed a zip code. Of course in this case was chasing the deal, but my point being that is not that uncommon to input or leave a default to get systems to work.
You said the following:
“Banks more than airline and hotel programs have been known to fire unprofitable customers. Often that is just managing risk (customers who charge more than their income, pay off cards mid cycle) and is an approach often dictated by regulators”.
By “pay off card mid cycle” do you mean paying a monthly bill before it is due? Why is this any worse than paying the monthly bills on time?
@Stan when you pay off mid cycle and run up your balance again, essentially exceeding your credit limit substantially — and exceeding your income — each month is considered a risk factor
@Gary, sorry I don’t see how paying mid cycle is exceeding your credit limit. Once I pay my bill and I owe $0 the amount of credit I’m using is back to the limits granted. I owe $0 and my limit is reset. As long as my balance owed doesn’t exceed my limits, why would they care?
I have cards with HUGE limits yet my newest card, an AA business platinum gave me a measly $1000 limit. Upon activating the card, the agent actually commented that I shouldn’t worry about meeting minimum spend for bonus requirements because I could pay the card off mid-cycle.