Why CC doesn't simply forbid Gift Card purchasing?

[Open123]

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@Anonymous wrote:

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@Anonymous wrote:

OK.   I admit that I might have got that impression from:

Those people are pretty much like cancer anyhow

Good riddance, at the very least.

Gives them time to actually cool down and reflect upon their actions.

I DO agree with a lot of your posts, but I think you shouldn't be too surprised if people got the wrong impression from the above!

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I would like to apologize for that post. There's a few things why I referred to them as cancer. I made that comment with certain individuals on FT and FW in mind, who basically charged over 50k, and in 1 case, even up to half a million, in a month. Such manufactured spending is pretty much outrageous and out of control, like cancer is. I am sorry if I tried to group everyone else up with those. Not my intentions, and I should have elaborated on that. While those people literally made it out like a bandit (good for them by the way), these same people are the ones who ruin perks for most people. And for normal people who does legitimate spending, this gets pretty annoying and frustrating. So, getting rid of those bad eggs is pretty much good riddance.

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 I had taken it that you meant their actions were a form of financial "cancer" for Citi's TY program; not that the individuals were "cancers."

"There is no waste of time in life like that of making explanations." - Benjamin Disraeli

[Anonymous]

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@Open123 wrote:

 I had taken it that you meant their actions were a form of financial "cancer" for Citi's TY program; not that the individuals were "cancers."

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Well yea that as well if you look from the bank's perspective.

Too much free time on a Sunday. Kinda sad I know.

[Open123]

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@Anonymous wrote:

People need to be able to express opinions. Others can disagree of course, but no one should be made to feel criticized or ridiculed for that opinion. You have never done that and I think if people were to carefully read what you wrote they would see that you were not judging and I don't quite understand why the conversation ever took that turn.

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+1

One should never have to apologize or explain for expressing a well thought out viewpoint.  I learned a long time ago to ignore those who demand explanations and apologies.

[Open123]

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@Anonymous wrote:

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@Open123 wrote:

 I had taken it that you meant their actions were a form of financial "cancer" for Citi's TY program; not that the individuals were "cancers."

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Well yea that as well if you look from the bank's perspective.

Too much free time on a Sunday. Kinda sad I know.

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Your analogy isn't completely off base. 

I'm sure Citi and most people in general would agree their actions are a form of "financial cancer" to the rewards program, which is the reason why Citi has chosen to address it so aggressively.

[oscar_actuary]

Open123 said "They do what they do, and we do what we do.  No quarter asked, and none given."

That's basically where I stand. 

Back to OP, at it's simplest. CC companies make huge profits on GCs, just not all of them. 

Three yrs ago I was putting maybe $15k / yr on Credit, mostly using for 0% balance tranfer deals when interest rates were higher.  This year we'll move $50k through the cards.  Some of that will be pre-buying gift cards to Olive Garden during the Dine-Out 5% back quarters.  I used to be a Dave Ramsey deciple.  Now the lure of rewards has lead to using the CC for everything, like they wouid want.   The CC companies are making bank off of us for the charges they collect from the retailers.  In turn, prices are higher at the stores in part due to increasing use of credit cards (if in fact it is increasing).  We all should take care of our interests in the "game".  It's one wonderful aspect of capitalism. 

Look how PenFed is tweaking rewards, I hear.  Maybe that leads to less proftits over all.  Some folks will stop using the card for those 1% items as well.  On a related note, it's not unlike Life Insurance companies selling Term and struggling in the internet age, where the pricing actuaries project profits based on estimates on sales across various sex, age, risk categories.  The problem is due to customers "spreadsheeting" via online brokers, the sales are skewed towards the less profitable cells.  Savvy customers, insurance or credit card, will learn to maximize their gains.  It's actually honorable - in a survival of the fittest kind of way.

fwiw, Discover Financial is doing just fine.

According to yahoo finance

Profit Margin:  34%

Operating Margin 59%

Compare that to "Big Oil" Exxon

Profit Margin:  11%

Operating Margin 13%

 Not begrudging Discover.  Like they should not begrudge me collecting cashback for buying gas station gift cards next quarter.  Maybe they'll cancel me, maybe I'll use a better card one day.  It's business.  Finally, with their incredible rewards mall, unlimited 10% etc, I think Dsicover is on top of the risk/rewards dilemna and figure it works well for them.

[Anonymous]

OK, then I retract (most of) my remarks!   It's just that I disagree with some of the characterizations in various threads, and I think it is partly a different mindset.  While some are indeed complaining about how bad Citi shut me down, just as enharu says, a number of FT posters are viewing this as continuation of the "game".  They originally got a lot of rewards, Citi countermoved by shutting down their cards and taking their points, now it's their move. 

If you read the endless thread, there is quite a split, between "old-timers" who take the view that, as one of them said, "you win a lot, you lose a little, you move on", i.e. basically you lost this round, find the next opportunity, similar to what Open123 has said.  Others take the view that it is at least worth a try to get the legal system to get more out of Citi.   Yes, the cry of "Justice" is sickening, but trying to optimize the gains makes sense, if there is a chance of winning (which is of course debatable).

Yes, it screws up other normal "non-abusers" but so do a lot of things in life, and credit cards perks are just that, perks, and can all go away at any time.

[Anonymous]

+1

[b_seeker]

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@oscar_actuary wrote:

Open123 said "They do what they do, and we do what we do.  No quarter asked, and none given."

That's basically where I stand. 

Back to OP, at it's simplest. CC companies make huge profits on GCs, just not all of them. 

Three yrs ago I was putting maybe $15k / yr on Credit, mostly using for 0% balance tranfer deals when interest rates were higher.  This year we'll move $50k through the cards.  Some of that will be pre-buying gift cards to Olive Garden during the Dine-Out 5% back quarters.  I used to be a Dave Ramsey deciple.  Now the lure of rewards has lead to using the CC for everything, like they wouid want.   The CC companies are making bank off of us for the charges they collect from the retailers.  In turn, prices are higher at the stores in part due to increasing use of credit cards (if in fact it is increasing).  We all should take care of our interests in the "game".  It's one wonderful aspect of capitalism. 

Look how PenFed is tweaking rewards, I hear.  Maybe that leads to less proftits over all.  Some folks will stop using the card for those 1% items as well.  On a related note, it's not unlike Life Insurance companies selling Term and struggling in the internet age, where the pricing actuaries project profits based on estimates on sales across various sex, age, risk categories.  The problem is due to customers "spreadsheeting" via online brokers, the sales are skewed towards the less profitable cells.  Savvy customers, insurance or credit card, will learn to maximize their gains.  It's actually honorable - in a survival of the fittest kind of way.

fwiw, Discover Financial is doing just fine.

According to yahoo finance

Profit Margin:  34%

Operating Margin 59%

Compare that to "Big Oil" Exxon

Profit Margin:  11%

Operating Margin 13%

 Not begrudging Discover.  Like they should not begrudge me collecting cashback for buying gas station gift cards next quarter.  Maybe they'll cancel me, maybe I'll use a better card one day.  It's business.  Finally, with their incredible rewards mall, unlimited 10% etc, I think Dsicover is on top of the risk/rewards dilemna and figure it works well for them.

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I always hate when people do this. Comparing two completely different industries doesn't mean much when given no additional context. Different industries just naturally have different profit margins. Just showing two random companies only proves a point when you explain why it is an apt comparison. A more interesting comparison is Discover Financial and Citigroup. Citigroup actually operates at a similar margin to Exxon(It's 13/15).

I'm trying to claim to be a stock/profit margin/etc expert. Just curious why I'm supposed to care about your comparison.

[Open123]

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@Anonymous wrote:

Yes, it screws up other normal "non-abusers" but so do a lot of things in life, and credit cards perks are just that, perks, and can all go away at any time.

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From an individual's perspective (say, mine), to what end would I make decisions considering the welfare of others?  If I'm making a decision for myself, I couldn't care less what's better for you, my neighbor or society.  I'm not interested in making any sacrifices for the "greater" good.

I *only* care to maximize my own utility of benefit, just as Citi will maximize theirs.

A case in point.  If I have an infection which hurts, the last thing I want to hear is the "antibiotics are abused and will become ineffective in 50 years."  I don't care about 50 years later.  I don't care about how it works for anyone else's potential infection.  *All* I care about is treating mine.

In my view, it's a specious argument or criticism to expect or suggest any indvidual makes "personal" financial decisions by considering the greater good of everyone else. 

[Anonymous]

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@Open123 wrote:

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@Anonymous wrote:

Yes, it screws up other normal "non-abusers" but so do a lot of things in life, and credit cards perks are just that, perks, and can all go away at any time.

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From an individual's perspective (say, mine), to what end would I make decisions considering the welfare of others?  If I'm making a decision for myself, I couldn't care less what's better for you, my neighbor or society.  I'm not interested in making any sacrifices for the "greater" good.

I *only* care to maximize my own utility of benefit, just as Citi will maximize theirs.

A case in point.  If I have an infection which hurts, the last thing I want to hear is the "antibiotics are abused and will become ineffective in 50 years."  I don't care about 50 years later.  I don't care about how it works for anyone else's potential infection.  *All* I care about is treating mine.

In my view, it's a specious argument or criticism to expect or suggest any indvidual makes "personal" financial decisions by considering the greater good of everyone else. 

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In case it's not clear, we totally agree!