Cashing in on banking loopholes

• Source: Global Times
• [23:12 June 30 2009]
• Comments

A passenger holds a boarding pass from Nanjing Lukou Airport. Photo: CFP

By Guo Lu

Money may not grow on trees, but it can grow on credit cards. Most airlines in China offer frequent flier miles to airline credit card holders, and now scalpers are buying credit card points back from card holders, cashing them in for free tickets and selling the air tickets to travel agencies.

Chen Ping, a Beijing office worker, said he felt “very lucky” when he discovered he could sell his Industrial and Commercial Bank of China (ICBC) credit card points for money instead of using them for items on the credit card online shop.

“I saw an online advertisement saying that they would buy back points from any credit cards. So I thought, ‘why not sell my points to them?’ I never use them anyway.” His ICBC card had accumulated 150,000 points since 2007.

“I negotiated with the buyer and he said he would pay 20 yuan ($3) for every 10,000 points. And I got 300 yuan ($44) at last.”

The buyer told Chen to set up an account on the alipay.com, a Chinese online payment service, and to obtain a new airline membership card to which the ICBC card points could be transferred. Chen did so, transferred the points, then sold the membership card alongside its password online to the buyer. Chen got his money and the deal was done.

Chen said there were many such online buyers. “Points will be cleared off after two years anyway, so I’d rather cash them in for money.”

A sales manager named Zhu from a Beijing-based points buying website www.bjxykjf.com, told the Global Times the prices could range from 18 to 800 yuan ($2.60 to $117) for every 10,000 points.

“If you are a China Merchants Bank platinum credit card holder, we can offer you a price of 800 yuan for every 10,000 points. If you are only a China Citic Bank classic credit card holder, then the price is lower, about 18 yuan for every 10,000 points,” Zhu said.

When asked if the deals were safe, Zhu said, “we only trade the points for free air tickets, and sell them to ticket agencies at a cheap price. We won’t steal your card information.”

However, experts warned that the deals could backfire on cardholders, because there was no legal support to protect them.

“There are no effective ways to supervise the trading so far, even though it is taking advantage of banking laws,” said Cui Guopeng, a customer relations manager at China Minsheng Banking Corporation (CMBC). “On the other hand, cardholders should be aware that banks have no responsibility concerning any dispute caused by points trading.”

Financial institutions have taken note of the trading and some are taking steps to discourage it.

CMBC announced yesterday that holders of its classic cards would now only be able to use their points once a year for free airline mileage rewards with no fees. If the cardholders want to use the points more often, they will be charged for 30 yuan ($4.40) or 15,000 points for each 500 miles used since yesterday. Previously CMBC mileage rewards were free with no limitations.

A CMBC customer service representative said, “Credit card points are now not allowed to be transferred to anyone than the cardholder.”

Industrial and Commercial Bank of China also instituted a similar points policy beginning yesterday, according to its website.

Meanwhile, China Construction Bank, Bank of China and Bank of Communications still offer free mileage rewards.