Credit cards are morally ambiguous financial instruments. They can be used for good, to pay for something when you don’t have enough money. And they can be used for evil, to pay for something when you don’t have enough money.
Ted Facnauu is concerned about the evil part. He contacted me after I penned a column criticizing the ethics of travel hacking. Facnauu is particularly troubled by “manufactured” spending that can generate hundreds of thousands of loyalty points every month, often by buying a handful of gift cards.
“It happened to a neighbor,” he says. “She dabbled in some credit card schemes similar to what you wrote about. Now she’s in financial trouble and can’t get out.”
He believes a small group of travel bloggers who are paid to endorse the credit cards are to blame for getting his neighbor into debt, and he wants to see them brought to justice.
“Did some blogger make money on her credit card application?” he wonders.
I tried to find out. I made an effort to reach the neighbor to determine who pushed those cards on her. But Facnauu said she didn’t want the publicity. That’s not unusual: Over the last few years, I’ve been in touch with one or two other “victims” of bloggers who peddled these cards, and they were shy about having their names or stories used.
I understand their reluctance. If you’re credit-card churning, doing manufactured card spending and travel hacking, you probably don’t want a reporter asking questions.
Facnauu wants to know if this arrangement — where bloggers endorse credit cards that allow users to collect points, and are rewarded with a generous commission in exchange — is a scam.
“They are luring in readers who blindly sign up, and some of those people may have not even learned some of the financial basics on the responsibilities of using a credit card,” he says. “They are shown how to buy thousands of dollars in cash products, but not shown the risks of what could happen if something goes wrong. And since the credit card companies are paying the bloggers to basically continue this cycle, someone is bound to get hurt.”
And here comes the inevitable disclosure: This blog is part of an advertising network called BoardingArea that hosts some of the most famous loyalty program blogs in America. Many of my colleagues earn a considerable amount of money from credit card commissions.
Although BoardingArea doesn’t control the editorial content on this site, I’ll be the first to acknowledge that there’s a perception that I’m part of the problem, no matter what I write.
Here’s another disclosure: Although travel is one of my specialty areas, I’ve avoided playing the loyalty game. I don’t like loyalty programs. They’re like Vegas: the house usually wins. The closest I’ve come to active participation in a program is my beloved Starbucks gold card. (I’ve sucked down more espresso than my doctor should know, and collected a sky full of gold stars, but that’s a whole ‘nother story.)
Also, in the past, two hotel programs have bestowed lifetime elite status upon me instead of paying for consulting work. I would’ve rather had the money.
I don’t hack, churn or manufacture with any credit card, but I’ve become more curious about it recently and I’ve started to ask more questions.
So, now that we have all that out of the way, what’s next? Well, I asked someone I know and trust, loyalty program expert Tim Winship, who edits the site Frequentflier.com.
“I loathe the credit card shilling that is currently funding so many of the travel blogs,” he told me. “My issue centers on editorial integrity. As long as their incomes depend on commissions from credit card sign-ups, these bloggers are morally compromised.”
But what if they disclose those relationships?
“No, acknowledging the compensation arrangement doesn’t make it any less egregious,” he says. “Most readers don’t read the fine print, or fully understand its implications.”
Winship is less worried about consumers like Facnauu’s neighbor.
“The great majority of the people I see churning cards and manufacturing spending are pretty financially savvy. I just don’t see this as a problem on the same scale as, for example, payday loans,” he says.
In other words, I’ll never get a meaningful number of complaints from disgruntled credit card customers, because they’re too savvy or too smart to go public when things go wrong.
Facnauu says I still need to take up this cause.
“Someone like you, who has a lot of years in the industry and who understands all sides of the issue could possibly communicate with the credit card companies to get them to stop paying commissions for credit card links that these bloggers put forth solely in the mindset of teaching and enabling their readers to break program rules and cross ethical and moral boundaries,” he says.
I agree: travel hacking in general, and manufactured spending specifically, is ethically troublesome. You’re using something in a way it wasn’t intended. And critics have suggested it could have unintended consequences, like raising prices or making travel worse for those of us who don’t have elite status. Those are valid concerns.
Perhaps a good start would be for readers to stop confusing these bloggers for journalists or travel industry experts. They are, for the most part, loyalty program specialists. They’re also salespeople and advocates for the credit card companies, a fact clearly disclosed on their sites.
But ending this little arrangement may be beyond my advocacy mission. I have a strict policy that I get involved in a case only when I’m asked directly by someone who needs help. And no victims have contacted me for assistance with their loyalty credit card — at least, not yet.
Besides, one of my New Year’s resolutions is to lay off loyalty programs, and I’m really trying to keep that promise.
How am I doing?