"Scamming" airline miles?

[Sailfast 503]

I did a search, but couldn't find anything here that may have covered this before so, here goes;

 

Has anyone ever tried producing frequent flier miles by signing up for an account that accepts credit card payments and charging their own credit card to produce miles?

 

There are services that charge as low as 1% - to accept payment via credit card.

 

According to my super-advanced calculations, 100,000 miles can be racked up with a fee of $1000 . Purchasing 100,000 miles from United costs $3700

 

A 'saver' business class ticket from the US to Asia should, with plenty of advance booking, cost less than 200,000 miles. or $2000 plus some fees.

 

As long as the balance is paid in full by the next billing cycle, is there a downside to this, besides the fact that it's sort of immoral, but probably not at all illegal?

 

What am I missing?

 

p.s. I'd never try this sort of tactic with a local merchant or any type of mid sized business. Airlines, credit card companies, big banks can all blow me. Raise your hand if you have never been fucked over by an airline or bank... OK, settle down then. :)

 

 

[lounge_lizard 108]

I don't see how it can be immoral, and I'm sure it's not illegal.

 

If I sign up for an airline's loyalty programme then that's between me and the airline.

 

If my credit card awards air miles, then that's between me and and the card issuer. It's just another variation on loyalty points.

 

You just have to be careful that the airline allows you to accumulate miles on discounted seats, and that unused miles don't evaporate after a while..

[sailingbill 1,036]

Sailfast , go to the forums on "Flyertalk". They have extensive threads on this. I dont know the details, but Chase will wack your card for certain schemes..

[Evil Penevil 7,628]

 

According to my super-advanced calculations, 100,000 miles can be racked up with a fee of $1000 .

 

 

I'm not sure what you mean by, "100,000 miles can be racked up with a fee of $1000." The $1,000 you refer to the "finance charge" some companies add to the purchase price for goods or services. You would still have to make and pay off $100,000 in purchases to get 100,000 bonus frequent flyer miles through the card. Cash advances and balance transfers are excluded from bonus points, so you'd have to make real purchases. If you can run up legitimate purchases of that size, you will indeed get the equivalent in FF miles, usually 1 FF mile for every dollar spent. There are many people who do just that.

 

I have a friend who has a small business and pays all his business expenses via credit card, including the rent on his premises. But it still takes him nearly a year to run up $200,000 in charges on the card.

 

But if you attempt any fraud in collision with the seller, such as charging an item to the card but immediately returning it for a cash refund, you could get into real trouble.

 

Evil

[short 215]

Sailfast, what time of year do you fly to Thailand and where from?

Edited October 6, 2014 by short

[Sailfast 503]

 

I'm not sure what you mean by, "100,000 miles can be racked up with a fee of $1000." The $1,000 you refer to the "finance charge" some companies add to the purchase price for goods or services. You would still have to make and pay off $100,000 in purchases to get 100,000 bonus frequent flyer miles through the card. Cash advances and balance transfers are excluded from bonus points, so you'd have to make real purchases. If you can run up legitimate purchases of that size, you will indeed get the equivalent in FF miles, usually 1 FF mile for every dollar spent. There are many people who do just that.

 

I have a friend who has a small business and pays all his business expenses via credit card, including the rent on his premises. But it still takes him nearly a year to run up $200,000 in charges on the card.

 

But if you attempt any fraud in collision with the seller, such as charging an item to the card but immediately returning it for a cash refund, you could get into real trouble.

 

Evil

Evil,

 

Just about anyone can except credit cards with a smart phone and the fees are bargain basement now as there is so much competition. I was actually referring to the idea that one might open an account, charge their own credit card, then pay off the balance in full.

 

Now, obviously, I'm purchasing nothing, but, the credit card company makes exactly the same amount either way. For example, I use my airline cards for just about everything but carry little to no balance on them. I do pay the yearly fee and the credit card company makes money off the merchant through the fees they charge them. If I do make a huge purchase that I cannot pay off in cash, I use money from other sources or even equity lines off property I own.

 

The credit card companies "gamble" that I'll pay ridiculous interest rates by spending more than I can afford and carrying a large balance in exchange for the carrot at the end of the stick that are ff miles. In effect, they hope I'm stupid.

 

I have to plan my trips far in advance so I'm able to book my awards tickets as soon as the airline posts them (approx. 330 days advance). I get first dips on "saver" business class awards that have been in the 130K mile range. Last year I traveled Asiana first class suite one way and business class on ANA return for 135K miles.

 

I think "fraud" might be a strong word here. As fraud pertains to criminal activity, and although what I'm discussing may or may not go against credit card "rules", it would certainly not be considered it criminal.

 

My partner and I also lived, more or less for free, at one of the biggest casinos in the world 20-25 nights a month for over three years using methods that might be considered devious by some, but certainly not illegal or even immoral. They no longer do business with me but the staff misses us and our propensity to over tip. :)

[Sailfast 503]

Sailfast, what time of year do you fly to Thailand and where from?

Your not going to turn me over to the airline morality police are you? :) (just kidding)

 

I fly out of JFK in the winter. Sometimes to BKK, other times to HKG for a stint in Macau. Last year I flew into Manila and out of BKK.

Edited October 6, 2014 by Sailfast

[short 215]

Sailfast, I asked you that question to see if I could help you without you conflicting with me for limited seats during certain periods. If you want to know more, send me a PM with specific dates. And no, I am not a travel agent or anything like that. I play the airline and credit card system and am more than willing to share my knowledge at no cost as long is it does't result in me losing a comfy ride.

[Sailfast 503]

Sailfast, I asked you that question to see if I could help you without you conflicting with me for limited seats during certain periods. If you want to know more, send me a PM with specific dates. And no, I am not a travel agent or anything like that. I play the airline and credit card system and am more than willing to share my knowledge at no cost as long is it does't result in me losing a comfy ride.

I'll PM you... Hope you understand I was just joking about the morality police bit... all in good fun!

[MM 6,562]

I still don't understand how you can charge 100K without buying that much in goods and services.

[MrDK 59]

Purchasing 100,000 miles from United costs $3700

If that is the rate, I should consider selling the 1 million miles that I have.

[LBJ 533]

I still don't understand how you can charge 100K without buying that much in goods and services.

Yeah, I don't get it either. Can you explain it in detail Sailfast?

[MM 6,562]

Yeah, I don't get it either. Can you explain it in detail Sailfast?

Glad to hear we have another slowpoke in the audience.

[Evil Penevil 7,628]

Yeah, I don't get it either. Can you explain it in detail Sailfast?

From his follow-up post, I believe he is talking about making charges to a merchant account which he would also control. It's unclear whether he already has such an account or would try to set one up.

 

It is almost impossible to set up a fake merchant's account; the banks require a lot of information about the company/individual's business. But if he or a close relative/friend already has a merchant account, then "faking" purchases at levels high enough to give him 100,000 FF points would amount to felony fraud. Banks are very sensitive to any transaction that could be suspected as money laundering or terrorist financing.

 

Sailfast- talk with a lawyer before you attempt anything along these lines. Many, many small businesses have come to grief because of "irregularities" involving suspicious credit card charges.

 

Evil

[MM 6,562]

From his follow-up post, I believe he is talking about making charges to a merchant account which he would also control. It's unclear whether he already has such an account or would try to set one up.

 

It is almost impossible to set up a fake merchant's account; the banks require a lot of information about the company/individual's business. But if he or a close relative/friend already has a merchant account, then "faking" purchases at levels high enough to give him 100,000 FF points would amount to felony fraud. Banks are very sensitive to any transaction that could be suspected as money laundering or terrorist financing.

 

Sailfast- talk with a lawyer before you attempt anything along these lines. Many, many small businesses have come to grief because of "irregularities" involving suspicious credit card charges.

 

Evil

 

Does that mean that the merchant account would then return the charged amount (minus commissions) in cash or other items of value to Sailfast under that scheme?

 

I've got it! He can buy BitCoins now with a credit card

[Sailfast 503]

Martin & LBJ, Anyone who has a paypal account can rack up miles by attaching a credit card to that account. The fees associated with paypal, prohibit the financial side of this to work. There are so many upstart companies that offer scanning hardware for you smartphone with financial software that charge very low fees to make charges. Just charge your own personal card and then pay off the balance with the funds.

 

Evil, I'm pretty well versed in FinCen, the bank secrecy act, the patriot act, suspicious activities reporting. I do some of this reporting on a regular basis. I may in fact raise some suspicion if it ever got that far. However, I am not convinced what I am proposing is anything close to felony fraud or even illegal. The could they freeze my miles and/or close my accounts completely and report me to any one of several federal agencies. Nothing much would come of it I'm afraid.

 

Since I am paying all fees to the credit card company issuing the miles, I'd like to see some evidence to support your theory that it's felony fraud. I looked and could find none, but of course it could be there. i did find lots of evidence of airlines freezing accounts, but none were law enforcement got involved.

 

Sail

[Sailfast 503]

 

Does that mean that the merchant account would then return the charged amount (minus commissions) in cash or other items of value to Sailfast under that scheme?

 

I've got it! He can buy BitCoins now with a credit card

There is a famous event were the US Government was selling US dollar coins at face dollar with free shipping, payable by credit card. Kind folks wracked up millions and millions of miles buying the coins and depositing them in their bank and paying off the charges.

[Andrew19 8]

I don't know how much the FF points are actually worth in United, but certainly won't be worth their $3,700 pricetag. If you join a Frequent Flyers forum you'll see all kinds of posts and advice on how to maximise your miles.

A FF point in Qantas/Emirates is roughly worth 1.5c. Plenty of credit cards give you 1 FF point for every $ you spend (American Express cards give you even more).

 

The credit card issuer charges your merchant a fee. Part of their fees funds this FF scheme. Simple as that.

[MrDK 59]

Several years ago I put together a sales promotion for my distributors where a certain number of miles were awarded for the sales of each of some select products.

At the end of the promotion we bought from Delta all the miles in a single purchase.

The cost per mile was 1 cent and minimum purchase was 1,000,000 miles.

I am sure that is the same kind of program that credit card companies, like Amex, use to be affiliated with a list of airlines.

[Harvey 249]

Buy *money* with your mileage card, then use the money you bought to pay off your bill.

 

Money meaning gold coins for sale, etc. You'll still end up paying a premium, but they'll be cheap miles in the end.

[Sailfast 503]

Sailfast , go to the forums on "Flyertalk". They have extensive threads on this. I dont know the details, but Chase will wack your card for certain schemes..

I've spent a couple of days perusing Flyertalk and doing some real life research. Over at FT they are creative, to say the least, and the gist is that my method might work, could create some red flags with the IRS but is definitely not illegal. What I learned is that with some time on my hands this winter, some expendable income to float around, I'll be flying in a first class suite again soon enough.

 

I would note that I could also get a part time job that paid a middle class salary and get the same results by paying cash but that would be boring.

 

Quoting Paul Newman in one of my favorite movies of all time, The Color of Money.... "Money won is twice as sweet as money earned"

 

I'll be sure to PM Evil if they put me in a labor camp. :)

[brotherbuzz 3,206]

Can I assume you've already done the CC route? Back when I used to churn them every 3 months but Chase (United card) doesn't like that so much these days. I still do Citi (AA) once a year or so for 40-60k miles but they are fee cards. And Flyertalk is probably the best place for info but drop by freefrequentflyermiles and see if anything interests you.

[joeaf 10]

I've spent a couple of days perusing Flyertalk and doing some real life research. Over at FT they are creative, to say the least, and the gist is that my method might work, could create some red flags with the IRS but is definitely not illegal. What I learned is that with some time on my hands this winter, some expendable income to float around, I'll be flying in a first class suite again soon enough....

FlyerTalk FFs are creative but they usually look for a cheaper way, and your scheme is “small potatoes” compared to other bigger schemes/loopholes that generate millions of FF miles. The only scheme I read about that drew the attention of the US govt was the “baht run” discussed in the link below.

 

One bigger loophole that lasted for years was the pin based (not signature) debit card and it did not draw the attention of the IRS. In the 2000s, one could use a pin based debit card to rack up 100K miles for $125 or $46 by making money order (MO) purchases. Back then, a $1000 money order purchase cost $1.25 from the USPS or $0.46 from WalMart and earned 1000 FF miles. In 2007, this loophole was eliminated, but not before many legally racked up thousands of FF miles by purchasing a MO, redeposit the MO, and repeat over and over.

 

There were many other bigger loopholes which legally generated millions of FF miles, but all these big loopholes were eventually eliminated, e.g. the “pudding guy” or “baht run”. These loopholes come and go, but eventually they get eliminated once it becomes too widespread, but during the period the loophole is open, one can earn many millions of FF miles as these two persons did.

 

The “pudding guy” became famous because he earned over a million FF miles on the 1999 Healthy Choice promotion and was one of the first creative FF scheme. He spent about $3k buying Heathy Choice pudding by the pallet, donated the pudding to charity, had the charity help him remove the UPC labels, and also got the charitable tax deduction. Because he was one of the first to use a FF loophole, they even made a movie about him.

http://en.wikipedia.org/wiki/David_Phillips_%28entrepreneur%29

 

The “baht run” became a famous FF mileage running scheme unique to Thailand in the early 2000s. A guy took advantage of cheap Thai (Star Alliance) airfares within Thailand and hired Thai farmers to fly as his employees. Back then, Star Alliance gave you a minimum of 1000 FF miles for each segment regardless of actual flight miles. Fly 100 segments and you earned 100K FF miles, 1K Star Alliance status and 6 system wide international upgrades (back then valid on any paid fare in addition to the other perks of 1K status. Per the article below, this guy legally racked up 5 million FF miles which cost him $8 per RT plus compensation to his “super elite” employees. His scheme drew the attention of the DEA because it involved flying segments between CNX-CEI in the area of the golden triangle.

http://viewfromthewing.boardingarea.com/2011/05/18/the-craziest-mileage-earning-schemes-and-where-you-should-focus-your-points-earning/

[Sailfast 503]

Joeaf,

 

Yea I read about the "pudding guy" Brilliant. The US government $1 coin promotion is the one that still cracks me up. Buying US currency with a credit card and having it shipped to you for free...who would have thought anyone would try some scams with that...lol

[Evil Penevil 7,628]

It's crucial to distinguish between schemes that involve: 1) exploiting loopholes in FF offers from airlines and other companies; and 2) making fraudulent purchases with a credit card to gain FF miles. There's nothing illegal about 1), but 2) is, although it might be rare for the credit card company to pursue the matter. A bigger risk of 2) is having your credit cards cancelled and your credit rating wrecked.

 

The Pudding Guy and the baht run took advantage of oversights in the wording of specific FF promotional offer or the rules of the program itself. For example, the Pudding Guy's idea wouldn't have worked if the company (ConAgra) had placed a limit on the number of miles it was possible to accrue through the offer. Had it wanted to, the company could simply have refused to accept his claim and forced him to sue.

 

Over the years, airlines have gutted their FF programs because they became such liabilities. With the changes that went into effect in 2014, it's very hard for anyone who isn't flying a lot on full-fare tickets to get much value from the FF programs.

 

Evil

Edited October 9, 2014 by Evil Penevil