Would you prefer instant closure or FR?

[enharu]

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@longtimelurker wrote:

I agree in general but in this case the story seems (as far as I can tell of course) genuine.  The problem seems to be having a high balance from years before, was converted to a TYP some time ago, wanted to cancel and got a retention offer.  She was told by a Citi rep that the gift card purchase was a problem, and this really seems to be an excuse.

But obviously we disagree who the bad person is!  Setting a cap for all seems to help everything. 

In your example, if I ended up buying every month  "too expensive" prescriptions (so it becomes unprofitable) what makes you think that Citi would say "Oh dear, we are not making a profit, but that is real spending so it's OK"?  I don't!   That's why saying "Up to $X gets 5%, after that 1%" seem simple and fair.

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Assuming she isn't lying, I would feel bad for her. However like for any kind of operation on this scale, there's bound to be collateral damage. Somehow she got flagged by the system, and her account got closed. 

There's no good or bad person, since no one is breaking the law. There's good and bad decisions however. I can understand legitimate GC purchases and people who just do it for fun and buy a couple thousand a month worth of GC for rent and other expenses. However for some obscure reason, some individuals think putting 100-300k+ on a CC with a low income is a good idea. Not even taking into consideration what is purchased and where the purchase is made, that alone is sufficient grounds for FR for many lenders, especially American Express. And based on this alone Citi can easily get away with the reason that the account is closed due to "risk" even if the matter gets brought to court, assuming it ever does.

Setting a cap does solve everything. it's the quick and easy way out. But at the same time it punishes legitimate spending just because a small group of people ruined it for everyone else. From the bank's perspective, having a cap isn't that "impressive" either for marketing purposes. A cap isn't going to stop abuse either. It is just going to make people abuse less and they move onto abusing other cards. What if Best Buy implemented a 10k dollar value cap in returns each quarter? Is that going to fix the showrooming issue? People who intend to abuse are still going to abuse it, and the only thing the cap did is to allow them to abuse less. However, at the same time it scares away legitimate customers who are scared they might get flagged just because they returned defective or expensive items. Rather than doing that Best Buy monitors purchase / return behavior and bans people who have been flagged as abusers. Kinda the same logic for Citi.

And citing your example, which case do you think is worse if it's made into the news?
1. Person X spends 4k a month on prescription drugs (note, the cap for most cards are 1.5 to 2k per QUARTER). Person X's account get shut down for buying too many medicine to keep himself alive. 

2. Person Y spends 10k a month on gift cards. Person Y's account get shut down for buying too many gift cards because he's bored of his minimum wage job and very much rather make money by buying gift cards.

And you have to take into consideration that most people who had their accounts closed were buying MORE than 10k a month worth of gift cards.

[Revelate]

Not certain why there's the hate towards Citi in this instance: it's fundamentally a sound business practice to encourage your unprofitable customers to go be customers somewhere else.

I agree with Open on this one: I have a certain amount of respect for any company that simply takes care of business... There may have been happier / nicer ways of dealing with the issue, but I would've proverbially taken out the trash if I were in Citi's shoes... Let them go drag down a competitor instead.

50K/month equates to $2500 in rewards assuming 1 cpp; that wipes out the profit from dozens if not hundreds of other customers. It may not be illegal, but I'd be willing to bet that Citi viewed it as stealing from them which would explain the door being slammed after the people using this trick got tossed out.

I'd rather have an FR too.

[Open123]

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@enharu wrote:

Setting a cap does solve everything. it's the quick and easy way out. But at the same time it punishes legitimate spending just because a small group of people ruined it for everyone else. From the bank's perspective, having a cap isn't that "impressive" either for marketing purposes. A cap isn't going to stop abuse either. It is just going to make people abuse less and they move onto abusing other cards. What if Best Buy implemented a 10k dollar value cap in returns each quarter? Is that going to fix the showrooming issue? People who intend to abuse are still going to abuse it, and the only thing the cap did is to allow them to abuse less. However, at the same time it scares away legitimate customers who are scared they might get flagged just because they returned defective or expensive items. Rather than doing that Best Buy monitors purchase / return behavior and bans people who have been flagged as abusers. Kinda the same logic for Citi.

 

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True, there are two alternatives. 

1.  Spend the time and resources to sugically determine who or which businesses making these outlier purchases are doing so legitimately.

2.  Eliminate the program and/or customers exhibiting certain purchase behavior.

Amex opts for 1, because a spend-centric business model relies on a model able to accomodate very high spending clients and businesses.  They already have measures in place to practice risk management on very high expenditures, which can used to isolate anyone exhibiting "outlier" spending to ensure the person has the income and/or finnacial resources to support it.

Citi and many opt for choice 2, since their business model isn't spend-centric, but one based on primarily on interest revenue derived from balances. 

[longtimelurker]

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@b_seeker wrote:

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@Open123 wrote:

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@longtimelurker wrote:

--  I haven't read Citi's T&C (may have once upon a time, but certainly don't remember it now), but I'm sure there's a clause in there where they have the righ to (1) change or eliminate the rewards at any time; (2) close accounts for any reason.  

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Citi® ThankYou® Rewards
Citi ThankYou® and Citi ThankYou® Preferred Card Terms and Conditions
•	Citi® ThankYou® Rewards is offered to certain cardmembers ("you") at the sole discretion of Citibank, N.A. ("we"), the issuer of your card account ("Card Account"). ThankYou Rewards or any portion thereof may be revised or terminated with 30 days prior written notice. Any revisions may affect your ability to use the ThankYou Points you have already accumulated. If ThankYou Rewards is terminated, you will only have 90 days from ThankYou Rewards termination date to redeem all your accumulated ThankYou Points ("ThankYou Points"). Rewards offered by ThankYou Rewards and the ThankYou Point levels required for specific rewards are subject to change without notice

•

You may earn ThankYou Points as long as your Card Account is open and current. If your Card Account is closed, you will not be able to earn ThankYou Points and you will lose any accumulated ThankYou Points that have not been transferred to your ThankYou Member Account. Balance transfers, cash advances, convenience checks, returned purchases, disputed or unauthorized purchases/fraudulent transactions, finance charges, Card Account fees, and fees for services and programs you elect to receive through us do not earn ThankYou Points unless otherwise specified.

•

If you are approved for a Card Account, a ThankYou Rewards Member Account ("ThankYou Member Account") will be set up for you. ThankYou Points post to your Card Account at the close of each billing cycle, and at that time we will transfer the ThankYou Points you earned to your ThankYou Member Account. ThankYou Points are not eligible for redemption until they are transferred to your ThankYou Member Account. ThankYou Points may not be redeemed and may be lost if your Card Account is not open or current.

Although, I think this is turning into rewards redeemed when the accounts were open and current that are now being clawed back as the bigger issue. At least that would be the smart area to target. 

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There is also in  the Thank You program T&C:

If your ThankYou Member Account is closed for any reason, you will lose any ThankYou Points in that ThankYou Member Account.

and

If your ThankYou Member Account shows signs of fraud, abuse or suspicious activity, you may lose your accrued ThankYou Points, and, as a result of this activity, we may close or freeze your ThankYou Member Account immediately.

So I think there should be general agreement that the T&Cs do allow them to close a card or all cards for any reason, and close the TY account, causing you to forfeit any remaining points, even if these were all earned for "normal" spend.   The question is their legal enforcibility, as this does appear to be taking of something of value, but Citi has covered this as well with:

ThankYou Points have no cash value.

We will see how this all plays out!

[longtimelurker]

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@Revelate wrote:
Not certain why there's the hate towards Citi in this instance: it's fundamentally a sound business practice to encourage your unprofitable customers to go be customers somewhere else.

I agree with Open on this one: I have a certain amount of respect for any company that simply takes care of business... There may have been happier / nicer ways of dealing with the issue, but I would've proverbially taken out the trash if I were in Citi's shoes... Let them go drag down a competitor instead.

50K/month equates to $2500 in rewards assuming 1 cpp; that wipes out the profit from dozens if not hundreds of other customers. It may not be illegal, but I'd be willing to bet that Citi viewed it as stealing from them which would explain the door being slammed after the people using this trick got tossed out.

I'd rather have an FR too.

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With such dramatic action though, you do encourage others to fight.  So as with Chase, people are filing with the AG, Consumer Protection Agencies and file in small claims court.  So even if these all lose, there is some cost to Citi.  It might have caused less pushback if they had closed the cards to prevent future abuse and just allowed those impacted to redeem their remaining balance.

[Open123]

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@longtimelurker wrote:

With such dramatic action though, you do encourage others to fight.  So as with Chase, people are filing with the AG, Consumer Protection Agencies and file in small claims court.  So even if these all lose, there is some cost to Citi.  It might have caused less pushback if they had closed the cards to prevent future abuse and just allowed those impacted to redeem their remaining balance.

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For Citi, there's the risks of "inaction vs. action."  

1.  Inaction - this would save them costs, but sends a clear message to others that when push comes to shove, if one complains enough, they'll give in and wilt.  This is the Citi of the past I had remembered with absolutely no backbone.  It was during a time when they were so misguided on "customer service" they'd make exceptions for everyone under the Sun.  

2.  Action - spend the short term costs and fees to fight it and win.

Option 1 is better for Amex, since the top 10% of their cardholders literally comprise of 80% of their revenue.  They need a legal reason to allow cardmember A to earn rewards unabated with GCs (on cards other than BCP), while not allowing person B.  The FR is a fair and impartial process which doesn't discriminate, at least not legally.

Option 2 is clearly better for Citi.  They don't have the Amex type of huge spending customers, especially when it comes to this kind of spending.  Citi can easily absorb the loss and let everyone keep their points.  It's a minimal cost to them; but, if they roll over, it'll be open season on them for any of their future promos.  This is what they "cannot" afford.  The prudent thing for Citi to do is to fight this and win these cases, then they'll never have to deal with it again, since we "perk abusers" will know better and find easier prey.  They are changing for the better because a few years ago, they would have wilted and given in to the complaining.  Citi's weakness in the past was always being too focussed on customer service, making exceptions for everyone who complained and taking too seriously the vocal minority of social media.  I'm impressed they've learned their lesson and have the ability to adapt, which is unusually rare for large corporate behemoths.

From experience with customers who complain incessantly, if you give an inch, they'll take a mile.  Better to stand firm, go to court and send a clear message it won't be tolerated.  Why is there less abuse with Amex?  Because everyone knows about the real concerns of FR.

Now, Citi can let it be known there's a real risk for account closure and points clawback with them too.

[Open123]

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@Revelate wrote:
Not certain why there's the hate towards Citi in this instance: it's fundamentally a sound business practice to encourage your unprofitable customers to go be customers somewhere else.

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Right, which is what they forgot when expanding through takeovers, rather than growing their business organically.

During the era of "Cal Fed" type bank takeovers, they tried to be the supermarket bank catering to "everyman" with not only minimal standards, but exceptions for made for everyone.  Citigold was once something of value, but now not even worth the paper it's printed on with so many exceptions made for membership.  For instance, you can have no money, a negative networth, and still qualify for Citigold if you have a mortgage.  This is what I mean by giving in to anyone and every customer who complained or whined.

Before their new management ran them into the ground, I remember the old Citibank in NY required a minium of $10k just to open a checking account.  Anything less, they weren't interested and would never waive the fee.

[longtimelurker]

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@Open123 wrote:

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The prudent thing for Citi to do is to fight this and win these cases, then they'll never have to deal with it again, since we "perk abusers" will know better and find easier prey.

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So, any suggestions!

[Open123]

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@longtimelurker wrote:

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@Open123 wrote:

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The prudent thing for Citi to do is to fight this and win these cases, then they'll never have to deal with it again, since we "perk abusers" will know better and find easier prey.

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So, any suggestions!

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It's like baseball.  For pitcher or hitter, others will adjust to you.  Once they adjust, then you have to readjust to maintain success, or be out of the game.  

We consumers will always adjust by finding an area where they're not as focussed.  As always, first in and first out is the name of the game in any level of arbitrage.

[longtimelurker]

I'm sure people are looking at this one then:

http://www.tdbank.com/personalcreditcard/easyrewardscard.html#, 5x GGD for 6 months, PLUS cable phone and utility....

Rewards Terms and Conditions:  Nothing there even about abuse!  And Whether or not a purchase is eligible is based upon the Merchant Code, not what it is...

Eligible Retail purchases are limited to dining, grocery and gas purchases as well as cable, phone and utility bill payments.

Purchases that are not coded as an Eligible Retail Purchase or are made at superstores, warehouse clubs, discount stores, and their

affiliates only receive 1 EasyRewardspoint per dollar spent. Merchants who accept Visa credit cards have a merchant code based in

part on the kinds of products and services they sell. Whether or not a purchase is eligible is based upon the Merchant Code. Some

purchases that appear to qualify may not qualify if the Merchant processes the transaction with an ineligible merchant code. For

example, online and catalog purchases may not be eligible to receive the Promotional Offer unless the merchants process the

transaction using an Eligible Retail Purchase code.