American Airlines has begun to excommunicate members for signing up for their credit card offers. But what’s the whole story and do they have the right to do it?
American Airlines Encourages Credit Card Sign-Ups
American Airlines, like every other major carrier, blankets their credit card offers on the home page, in their emails, in-flight – any time a traveler encounters the brand. Uniquely, American has two banks that offer Advantage miles for credit card spend (Barclays and Citibank.) Each has multiple products for both consumers and businesses.
American made more money from their loyalty program last year than they did from flying passengers and cargo to the extent that some investors on wall street asked whether the carrier should split off the program from the airline. Airlines make money from banks by selling miles to them. Banks make money from credit card swipe fees and interest.
American Shutting Down Accounts
Many in the frequent flyer community have reported that their American Airlines accounts have been shut down entirely on the basis of signing up for too many cards.
Some customers (that’s what they are, American) signed-up for multiple versions of the same card in 2018 and 2019 had their Advantage accounts shut down. Customers in this situation lose their miles, status and any other benefits associated with the account.
American Airlines Owns All of Your Advantage Miles and Controls the Accounts
It should be crystal clear that American Airlines controls and owns their program in its entirety but also owns your miles. If American chooses to change the program rules, repossess points, or disable accounts, they have full autonomy to do so.
While it won’t engender any loyalty in shutting down an account, it’s likely that American has determined at that point that they no longer want the customer’s business going forward because program violations are too egregious whether violations were committed wittingly or unwittingly.
Courts Can Do Nothing About It
For those that wonder what the legal ramifications are for the repossession of points, the answer is that there are none. Cases have been brought to trial against both Northwest and United. In both cases, the airlines have won. United even went so far (in a case about lifetime status) as to admit that the customer should not have trusted them and they had no intention of being a good actor in the transactions.
Where I find this particularly sticky is when points are sold. If a traveler earns points from flying and the program wants to alienate their customers, I can see how a court would decide that American holds all of the cards. In the case of selling points, I think it is less so. A transaction was made, and if those points are repossessed the airline owes a refund for the money paid by the consumer.
Points and miles earned from credit card transactions seem to have a similar real cash value concern but may fall in between what I see as 100% within the rights of the program, and 100% outside of contract law. Credit card sign-up and points earned from purchases are intentionally opaque. However, the government places a value on points earned for tax purposes. The government can’t say the miles and points hold a fixed value when they want to tax citizens or divide assets, but then claim they are worth nothing when a cash transaction has been made to acquire them.
Who Is Taking Advantage of Whom?
I can agree with American that some bad actors should be excommunicated from the program at their discretion. Kind of. If a customer exploits a loophole I can understand American’s concern. But it’s also kind of their fault.
However, there are three reasons why American is wrong.
- The carrier solicits (to no end) customer card sign-ups because the bank purchases a large volume of miles in one transaction. They flood consumers with the card offers at every turn. American flyers will be asked to sign-up for a credit card when they book, log in to their account, sit down at their seat, open the in-flight magazine, walk through the terminal, on TV, over the PA system on the plane and many, many more. If American doesn’t want members to sign up every time they ask, then stop asking. They have the data to tell whether a customer has the card already anyway, don’t they have a duty to utilize it?
- American doesn’t disclose that customers are only eligible for bonuses every so often in the headline pitch. Some consumers do not know credit card intricacies and don’t read the fine print when returning an application from their middle seat in economy. American knows this and generates revenue and profit (some quarters – their only profit) from such opacity. Other banks and airlines do a better job of this. It’s not fair to penalize a customer for consistently buying what you’re selling.
- It’s not really American’s problem. They aren’t the victim here, it’s their banking partners. If banks indicate that members have violated the terms of their sign up offer then it is the bank that should fight the consumer. Why does American even have a dog in this fight? They get paid every time a customer takes out a card earning a bonus – do they have to give the money back to the bank for the miles that were purchased?
What’s still stranger is that Barclays has no idea why American Airlines is doing this. Consider you’re Barclays for a moment. You pay American Airlines some amount between $500-700 plus the benefits you have to perform in connection with the card every time they bring you a new customer. Then, they shut down those new customers, keeping the $500-700 and angering your customers. Miles to Memories details a call he had with a president for Barclays, unaware this was taking place.
American Airlines is allowed to run their program how they wish until it violates the contract made with other companies, in this case, the banks. If the banks have an issue, they should claw back the bonus for violators as other financial institutions have done. A few years ago, Bank of America would allow seemingly unlimited sign-ups for credit cards. I knew one person with nine Alaska Airlines credit cards. That person is taking advantage of Bank of America, but Alaska benefits with every sign-up and has no reason to pursue the customer. American Airlines shouldn’t penalize customers for saying yes to their offers which costs them and the banks they partner with, money.
What do you think? Is American Airlines right to shut down those that continually get new credit cards? Do they have no right? Does this operate outside of the limitless program allowances granted by US courts in the past?