Analyzing credit card ‘rewards’

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A reader mailed ITN a copy of a letter sent to Capital One Services on Nov. 18, ’04, as follows.

I recently received a mail solicitation from Capital One stating that I had been chosen for an offer for a new kind of rewards card, the Capital One Go Miles Visa Platinum card. The card sounded interesting, except the literature made no mention of the number of miles required to obtain free flights.

I called Capital One to inquire about this. The response was that the number of miles that needed to be redeemed would be calculated using a formula that would be provided to me with my new card. I complained that the formula was important in my decision as to whether or not I should apply for the new card. Your representative responded that I would have to make my decision based on the information available. Since the other benefits of the card seemed attractive, I applied for the card over the phone.

The card arrived shortly thereafter and I activated it. The correspondence that arrived with the card contained the following statement in paragraph 23 of the Terms and Conditions: “Please see your original solicitation for the specific formula used for calculating the number of miles necessary for ticket redemption.”

As stated previously, the original solicitation did not address this issue. I immediately called Capital One and asked for the specific formula that would apply to me. I was told repeatedly by several of your representatives that I would not need this information until the time came to redeem my miles. I insisted that I did not intend to use the card until I knew the formula, because I wanted to know the value of the Capital One miles versus the value of miles obtained with other reward cards. Your representative finally told me that since my account was new, the information would not be available for a couple of weeks.

I called Capital One two weeks later and was told (after being transferred several times) that my multiplier was 80 (multiply the price of the ticket by 80 to determine the number of Capital One miles required to redeem the ticket). I called Capital One again in another two weeks to confirm the information and was told my multiplier was 90.

For purposes of comparison, I would like to tell you about some business-class flights I recently booked for a European trip in spring 2005. I used 90,000 Delta Skymiles (I collect one Skymile for every dollar of purchases on my American Express credit card) to redeem tickets for Delta flight No. 228 from San Diego to Atlanta and Delta flight No. 12, Atlanta to London, on May 20 as well as Delta flight 31, Moscow-New York, Delta flight 175, New York-Atlanta, and Delta flight 411, Atlanta-San Diego, all on June 10.

The current price for this trip on the Delta website would be $3,816.20. Using a multiplier of 90, I would need 343,458 (90 x 3,816.20) Capital One miles to redeem tickets for this same trip. Why would I use 343,458 Capital One miles when I could use 90,000 Delta Skymiles?

Please understand that I am not questioning Capital One’s right to establish whatever formula deemed appropriate to determine the number of miles necessary for ticket redemption, but I am very upset for the following two reasons:

1) your policy of not informing potential new customers of the formula used to determine the number of miles necessary for ticket redemption until after you have checked their credit history is one that is deceptive and arguably damaging to their credit report in the event they cancel the credit card upon learning how the redemption formula actually works and

2) since you apparently do not give the multiplier to the customer in writing, it can obviously change at the pleasure of Capital One.

In fact, the aforementioned paragraph 23 of your Terms and Conditions states “Capital One reserves the right to modify the terms and conditions of the Go Miles program, including the formula used to calculate miles for redemption, at any time without notice.”

My experience of having my multiplier increase from 80 to 90 in a 2-week period is evidence that this can occur. In my opinion, your policy makes it difficult, if not impossible, for a Capital One cardholder to know where he stands without continuous calls to your representatives.

Although I have not yet canceled my Capital One card, I have not used it. I would like to get a written response to this letter from Capital One before I decide upon my next course of action. Please respond at your earliest convenience.

CHARLOTTE RUBENDALL
San Marcos, CA

ITN sent another copy of the above letter to Capital One Services (Box 85520, Richmond, VA 23286-9175) and received no reply.

In a follow-up letter to ITN, Ms. Rubendall wrote, “I received a phone response from someone at Capital One around Jan. 1. They apologized for any inconvenience caused but essentially agreed with the facts in my Nov. 18 letter. They said I was free to cancel the card, which I did at that time (without ever having used it). I never received a written response to my letter.

Please login or subscribe to ITN to read the entire post.

A reader mailed ITN a copy of a letter sent to Capital One Services on Nov. 18, ’04, as follows.

I recently received a mail solicitation from Capital One stating that I had been chosen for an offer for a new kind of rewards card, the Capital One Go Miles Visa Platinum card. The card sounded interesting, except the literature made no mention of the number of miles required to obtain free flights.

I called Capital One to inquire about this. The response was that the number of miles that needed to be redeemed would be calculated using a formula that would be provided to me with my new card. I complained that the formula was important in my decision as to whether or not I should apply for the new card. Your representative responded that I would have to make my decision based on the information available. Since the other benefits of the card seemed attractive, I applied for the card over the phone.

The card arrived shortly thereafter and I activated it. The correspondence that arrived with the card contained the following statement in paragraph 23 of the Terms and Conditions: “Please see your original solicitation for the specific formula used for calculating the number of miles necessary for ticket redemption.”

As stated previously, the original solicitation did not address this issue. I immediately called Capital One and asked for the specific formula that would apply to me. I was told repeatedly by several of your representatives that I would not need this information until the time came to redeem my miles. I insisted that I did not intend to use the card until I knew the formula, because I wanted to know the value of the Capital One miles versus the value of miles obtained with other reward cards. Your representative finally told me that since my account was new, the information would not be available for a couple of weeks.

I called Capital One two weeks later and was told (after being transferred several times) that my multiplier was 80 (multiply the price of the ticket by 80 to determine the number of Capital One miles required to redeem the ticket). I called Capital One again in another two weeks to confirm the information and was told my multiplier was 90.

For purposes of comparison, I would like to tell you about some business-class flights I recently booked for a European trip in spring 2005. I used 90,000 Delta Skymiles (I collect one Skymile for every dollar of purchases on my American Express credit card) to redeem tickets for Delta flight No. 228 from San Diego to Atlanta and Delta flight No. 12, Atlanta to London, on May 20 as well as Delta flight 31, Moscow-New York, Delta flight 175, New York-Atlanta, and Delta flight 411, Atlanta-San Diego, all on June 10.

The current price for this trip on the Delta website would be $3,816.20. Using a multiplier of 90, I would need 343,458 (90 x 3,816.20) Capital One miles to redeem tickets for this same trip. Why would I use 343,458 Capital One miles when I could use 90,000 Delta Skymiles?

Please understand that I am not questioning Capital One’s right to establish whatever formula deemed appropriate to determine the number of miles necessary for ticket redemption, but I am very upset for the following two reasons:

1) your policy of not informing potential new customers of the formula used to determine the number of miles necessary for ticket redemption until after you have checked their credit history is one that is deceptive and arguably damaging to their credit report in the event they cancel the credit card upon learning how the redemption formula actually works and

2) since you apparently do not give the multiplier to the customer in writing, it can obviously change at the pleasure of Capital One.

In fact, the aforementioned paragraph 23 of your Terms and Conditions states “Capital One reserves the right to modify the terms and conditions of the Go Miles program, including the formula used to calculate miles for redemption, at any time without notice.”

My experience of having my multiplier increase from 80 to 90 in a 2-week period is evidence that this can occur. In my opinion, your policy makes it difficult, if not impossible, for a Capital One cardholder to know where he stands without continuous calls to your representatives.

Although I have not yet canceled my Capital One card, I have not used it. I would like to get a written response to this letter from Capital One before I decide upon my next course of action. Please respond at your earliest convenience.

CHARLOTTE RUBENDALL
San Marcos, CA

ITN sent another copy of the above letter to Capital One Services (Box 85520, Richmond, VA 23286-9175) and received no reply.

In a follow-up letter to ITN, Ms. Rubendall wrote, “I received a phone response from someone at Capital One around Jan. 1. They apologized for any inconvenience caused but essentially agreed with the facts in my Nov. 18 letter. They said I was free to cancel the card, which I did at that time (without ever having used it). I never received a written response to my letter.