Cap On United Miles May Signal Souring Of ‘Affinity Card’ Deals
CHICAGO (AP) _ A move by United Airlines and First Chicago Corp. to clip the wings of credit card holders who allegedly abuse a frequent-flier program may ruffle a few feathers.
The Chicago-based carrier and the banking company are tightening up a loophole in United’s frequent-flier program by putting a cap on the number of points a person can earn through the Mileage Plus First Card.
The Visa card - marketed by FCC National Bank, a First Chicago subsidiary - rewards users with one United mileage point for each dollar spent. Other banks offer such ″affinity cards″ linked to most major airlines and some hotel chains.
Banks offering affinity cards face a growing problem as some people run up huge balances each month to get the frequent-flier points. The cardholders then pay in full when the bill arrives, depriving the banks of earning any interest on what essentially is a loan.
Frequent flier advocates said the United restriction indicates banks are growing increasingly disgruntled with the way affinity cards have backfired.
Such cards have been available for about five years.
″Quite a few people have figured out how to play the affinity card game,″ said Randy Petersen, publisher of a newsletter called Frequent that covers frequent-flier programs.
″People go down and buy travelers’ checks with the credit card, then use the checks to pay off the balance, racking up tremendous amounts of mileage. I know one guy with a $15,000 credit limit who does this once a month,″ Petersen said in a telephone interview from Colorado Springs, Colo.
He said some doctors charge all their office and medical supplies on airline affinity cards, easily earning free trips to Hawaii.
Joe Brancatelli, executive editor of OAG Frequent Flyer, a magazine published by Official Airlines Guide Inc., said the United move was an important development.
″This could cause a major revolt,″ with frequent fliers dropping their United Mileage Plus affinity cards, he said.
United and First Chicago went on the offensive last week, informing Mileage Plus First Card holders in a letter that they were limiting the number of mileage points one could earn with the card to 10,000 per billing period, with a maximum of 50,000 per year.
Twenty thousand mileage points earn a free round-trip coach ticket within the continental United States under United’s program.
The restriction takes effect Jan. 1. The bank and airline softened the blow by dropping the card’s annual fee to $60 from $75 and offering qualified cardholders the higher-prestige Visa Gold Card at the same price.
Adam Aron, senior vice president of marketing at United, said the restriction would affect less than 1.5 percent of the 400,000 cardholders, or fewer than 6,000 people.
Without the mileage cap, the remaining cardholders would end up paying for the minority’s excesses through higher interest rates, he said.
″It costs money to service those loans and if a bank is losing money on those people, it will have to charge more of other people to make a profit,″ Aron said Tuesday in a telephone interview.
He said the new restriction amounts to a shift in the card’s benefits ″to the people who have the potential to make the card profitable.″
The banks that issue affinity cards for American, TWA and Northwest airlines said their cards carry no mileage limits and they have no plans to implement them.
Rich Thompson, a customer service representative for Bank One in Columbus, Ohio, said his bank closes the accounts of Northwest affinity card holders who use the card to buy things that they turn around and sell to others.