Posted by Chuck on May 19, 2017
Credit Cards

Published on May 19th, 2017 | by Chuck

122

The Collateral Damage of US Bank Altitude

We posted a warning not to buy gift cards with the US Bank Altitude card since it could trigger shut down on all your US Bank credit cards. From numerous reports it seems the issue is not limited to the Altitude card, but all US Bank cards are prone to getting review for gift card purchases.

Many have reported getting shutdown due to gift card purchases on Flexperks (1, 2, 3, 4) or Club Carlson as well (1).

In the past, MSing on US Bank cards wasn’t much of an issue, as I understand. But this new RAT team is apparently on the lookout for gift card activity on any card. Good chance they created/beefed-up the team due to the Altitude roll-out, and as collateral damage we need to be careful on all US Bank cards.

It’s a good idea to keep your US Bank cards purchases looking normal. The issue seems limited to gift cards as other forms of MS are harder to detect.



122 Responses to The Collateral Damage of US Bank Altitude

  1. Gabe says:

    Another collateral damage: Chase had a quick look at the Altitude T&C and said: “CARDMEMBER year? Why didn’t we think of that?”

  2. Superchurn says:

    so here’s probably a naive question. but if the merchant fees are more or less set for a specific card and MCC, and the bank is making that money regardless of what is purchased at that merchant, why do the care so much about MS?

    i’m probably overlooking something obvious here.

    • nta says:

      Because MS more or less gives you a fee-free cash advance.

    • Nick says:

      Because banks don’t make money on us earning and churning their sign-up bonuses. They make money by us accruing interest on our CCs and having our money sit in their bank accounts that they can invest.

    • Rob says:

      Paying 3x points on a charge is not profitable for the banks. Otherwise they would just make a 3x point card on all charges. Their logic here is that a customer who is manufacturing spending on gift cards in 3x categories is ultimately a money loser. They want people who put all of their normal spend on a card and they will gladly give you 3x points on the 10-20% of natural charges, while giving you 1x on most of your charges. Then they will make money overall.

      • Superchurn says:

        i suppose i can see their reasoning there. but by that logic, people that only spend in bonus categories are also “bad”. banks don’t shut them down for that, though.

        • Greorge Smiley says:

          Of course they do.

        • Shifty Sam Salad says:

          They do. Go read the Chase shutdown thread.

        • Chucks says:

          People who only spend in bonus categories are bad, but banks have capped, crippled or killed most bonus cards to the point they generally don’t care.

          Chase will take a 7500 UR/max bet with you per quarter on the grounds you’re gonna goof and pay interest, fees, forget to sign up, pay at a miscoded merchant or take a balance transfer. But start spending heavily on a category that’s going to make a bank really have to pay up and you’re going to run into issues.

          • Superchurn says:

            Maybe I just haven’t been in this hobby long enough to see it.

            All the more reason to make only putting spend toward signup bonuses a goal 😃

    • Joseph says:

      I think US Bank is losing money because the merchant fee can not offset the cost of giving 3 X on mobile and 2X Flexperk points. But I don’t understand why they do not want to set up a cap but shut down accounts instead.

    • Jon S says:

      I’ve always been puzzled by that too in the most innocuous cases (it seems like the merchants are the real losers, funding both the MSers’ profit and the issuer fees), but some are particularly bad for the issuer:

      1) They may be losing money on a bonus category, which they accept as a small loss leader. In that case, MS’ing within the bonus category is pretty bad for them.
      2) They know that some people are just signing up for cards for the sign-up bonuses, but if somebody needs to MS in order to meet a bonus, that person is an even less attractive customer. The issuer is getting a pretty bad return on their bonus investment for those customers and they want to avoid them.

    • James B. says:

      Good question. Several years back, I received a phone call from an Amex manager who told me to stop purchasing VGCs at CVS and he said all my accounts are temporarily frozen. He said Amex is doing an account review. I had purchased about $3.5k of VGCs in 1 week to meet a bonus spend requirement.

      The banks want their customers to put regular spend on their CCs, not just GCs. They see GCs as a way to game the system and not as regular purchases and spending.

      In the future, it is very likely that other banks like Chase and BOA will follow suit.

      • Superchurn says:

        I’m just wondering…if you consistently MS, you’re still creating a consistent stream of merchant fees for the banks anyway..so what does it really matter what exact you’re buying? It should be the same difference to the banks if you’re buying GC or groceries

        If they made less money when you bought s a GC, I could understand more why they get upset

        • Chris says:

          If the merchant fees are say 2.5% and you’re getting a solid 3% back doing only MS, then the bank is actually losing money which is probably what’s upsetting them. They’re willing to give you a bit of 3% or 5% or whatever if you offset it with regular 1% transactions too.

          • Superchurn says:

            yeah that would make sense for category cards i guess.

            doesn’t seem like it would matter for non category cards or signup bonuses though because the rate would be the same on all purchases.

        • James B. says:

          You have a good point. That is why some banks like Chase and BOA do not have a specific policy against purchasing GCs to trigger a bonus.

          Other banks like Amex and US Bank do not want clients that are only gamers who receive the bonus through purchasing GCs.

        • former MS says:

          The key point is that the merchant might lose a little money on the high-reward transaction. (e.g. Amex OBC 5%) That might be OK in the scheme of things, because it’s not “too much” and the average user will spend in lower reward as well. But, with proper MS, you can spend several times your income, magnifying a small loss per transaction into a big loss over a large number of transactions. If you are not doing MS, your income limits your spend. With MS, no suh limit

    • JohnFromATL says:

      There is a natural limit imposed in organic spend. It is based on using your income to pay for what you buy. When you MS, you use what you bought to pay for what you bought. This makes an open ended loop. Theoretical unlimited points being earned. There are also bunch of concerns raised around open loops, including FinCEN and regulations on banks.

    • Jeffrey Wang says:

      Interchange fees don’t cover the amount of bonus points they have to give to customers for bonus category purchases.

      The issuing bank (US Bank) only makes direct money from regular 1% purchases. They also make money through interest from revolving credit balances.

      Think of the bonus category purchases as loss leaders. They are willing to eat those losses as long as you don’t abuse the system and make regular purchases. The people that makes these gift card runs are people who are more likely to only use the card on bonus categories and don’t carry balances.

      In the end, banks don’t really care for these customers because they cost the bank more than they receive. So, they are more than willing to close down these accounts as it’s very unlikely that the bank will end up with a profit from these customers.

  3. Dan says:

    US Bank seems to have very low tolerance for gift card purchases. I certainly understand there are reasons to shutdown the whales, but one or two gift cards a month?

  4. Mark Spivey says:

    So they are doing this via Level Three transaction data, right?

    • James B. says:

      I would not doubt if US Bank actually calls the merchants and asks what was actually purchased in the transaction.

      • digitalpop says:

        No way could they do this! Serious violation of consumer privacy.

        • Sarah says:

          Um, is this a joke? You don’t have “privacy” when you use a credit card.

          • Andy says:

            Yes, you still have an iota of privacy left as Level 3 information is still not prevalent. CVS wouldn’t disclose your prescription. And companies like ibotta and checkout51 wouldn’t exist as their selling point till date is accumulating your spending pattern !!

        • James B. says:

          How did Amex know that I purchased VGCs at CVS?

          I suspect Amex called the CVS to verify large purchases (for fraud prevention) and asked what was purchased. Or does CVS pass level 3 info to the banks?

          • Bob says:

            Pattern recognition. It is not hard to spot $500 VGC transactions in the long-term. The transactions have very stable patterns, especially once you work in location. Unless you’re doing 200s and 300s as much as you’re doing 500s, anyone in IT with half a brain could catch you very easily. CVS does not do L3 so Amex is doing very educated guesses via data mining

      • Bob says:

        No one does this in the banking industry. It is all computerized data mining

        • James B. says:

          I purchased the VGCs at CVS in uneven quantities with other items added into the same charge. Thus how did Amex know about the VGCs purchases?

          • Bob says:

            Do you understand what data mining means? It means the computer looks for trends. Really fast. Not just your trends, but also in comparison to millions of other customers. Do this trick once and it might fly under the algorithm. But who else is making multiples of hundreds worth of transactions at a couple of CVS? There are tens of characteristics their computers can pull and track your activity with. Quit the “How do they know I’m not paying for my prescriptions?” Because your patterns don’t fit the thousands of other people who are actually filling prescriptions and making regular drugstore purchases. It’s that simple. We rely on banks not caring about MS, but they all know and could catch anyone doing it in half a heartbeat. Whether they care or take action is another story.

            But…,believe what you want. You think there’s a team out there calling stores to ask about your transactions? Lol k, you’re not that special tho

    • Frank says:

      Don’t need that level of information. Simple data mining can easily detect pattern of MS. We are more patterned than you think.

      • Superchurn says:

        I fear this is the correct answer. the right combination of transaction disguising, coupled with a semi-benevolent bank is what allows MS to work, at least for GCs

  5. sam says:

    Not the same amount I’m “sure” they’re concerned with, but didn’t US Bank just send out offers to people with some of their co-branded cards for using paypal 3×25$ transactions for $25 statement credit? They explicitly said giftcards counted as purchases for the offer, and now its taboo to use their cards on them? Or do they just not care if paypal is involved?….

  6. iahphx says:

    So if you need to meet the minimum spend on this card, what forms of MS other than gift cards should you use?

  7. Steve says:

    I think the important question going forward will be how much GC purchasing, or at what pace, can be tolerated? Can a person buy a $500 VGC once per week? Per month? Will organic filler spend matter at all? Is there a predictable pattern?

    • Terri Clark says:

      That has been on my mind too, Steve. How to figure out how much each bank will tolerate without pushing the envelope too much. I try to think like a “normal” person, as in, how often would a normal person purchase VGC?

  8. ABC says:

    I would assume that the age of the account is important.
    “It’s a good idea to keep your US Bank cards purchases looking normal” and if normal is buying GCs keep doing it.

    • Frank says:

      That is important, in the sense that, like Amex, banks usually do structuring for new accounts. For established accounts, especially those accounts that are in good standing for long period (bank doesn’t lose much money), it is such a waste of resources to dig deep.

      • Sergey says:

        Not true. My Flexperks visa was 5 years old, when it was shutdown. I was doing MS all these years without a beep.

        • Frank says:

          You are doing heavy MS for many years. The bank, if they want, can easily detect that they have been losing a good deal of money. That’s exactly why you got shut down. You are in such a dangerous state, far from “good standing”. Any bank that wants to take steps to mitigate rewards abuse, your accounts are obvious targets. We are doing MS for quite a few years as well on almost all good credit cards as well, none of us got shut down. You clearly take it too far.

        • Frank says:

          At most the same as my household income for each bank per person per year. I guess doing this won’d really raise a red flag of bank, especially mix normal spending with MS.

          • EastSideBK says:

            Frank,
            Thanks for your feedback. To clarify your question, if your household income is $100,000 and you have 4 people in your family (yourself, spouse, and 2 kids) are you saying your are doing $400,000 per bank per year?

          • Frank says:

            Well, I guess kids don’t really have their own credit cards. Authorized user is basically using my/my wife’s account, so it doesn’t really extend the limit. At the time they have their credit cards, I guess they already have their own steady income and they will have their own households. Usually its like my wife/ I do less than 80% household income/year, in total around 150% household income MS plus regular spending.

  9. MSer says:

    Don’t see the point of having the card if you can’t MS. Bennies aren’t worth the juice or the hassle. Amex is so much better in every respect.

  10. DjRocket says:

    Everybody seems to be focused on the fact that the “RAT team” is supposedly looking into what you buy. I’m thinking they actually care about how you PAY OFF what you charge on your CC. Notice that the Altitude is the CC for the USB customers. The implicit expectation there I would assume is that you meet your banking needs with the USB. And if so, you should be paying off your CC with a USB account, not some external bank. Now how you fund your USB checking account to pay off your Altitude is the key here. If it’s payroll deposit or pension or stock sell off, all good, buy whatever you want in any quantity . But if it’s Money orders or continuous transfers from another bank, it becomes very clear what you’re doing. That’s my hunch here.

    • Bob says:

      This theory does not make any sense b/c shutdown stories came in within a week of the card rollout. No one is paying off their bill a week into a new card. They are going off of purchases.

      • DjRocket says:

        True, but we also have plenty of stories of folks loading up the card with GC’s in the first few weeks and be just fine. We don’t really know the percentages of the shutdowns wrt to the total amount of “abusers”, or sufficient details of the circumstances of those shutdowns. Were there other markers that triggered a review of the account? Was there a previous history of “abuse” that put the customer on some kind of “watch” list, was it a random review of a user who put thousands of dollars in the first couple of days, etc. Who knows? I’m just saying that, yes, while I purely speculate, it makes a whole lot more sense to let the customers buy whatever the h*ll they want with their card, but watch how they pay it off, especially if the Altitude is “exclusively for the USB customers”.

        • Bob says:

          No….USB is a shit bank, they are not that sophisticated. The shutdown team is run by a couple of people who have a lot of power, like fucking Keith. They are looking at buying patterns 100%, read all the interviews about the card and what people have been told on the phone and behind the scenes. Someone knows a USB banker in Fargo, ND and she confirmed they are looking hard at purchases. It is not hard to mine the patterns, like I said.

  11. AlwaysFlying says:

    My cards: 1 x Club Carlson (stopped spending after Buxx shutdown), 1 x Amex Flexperk Business (no spend after Olympic bonus), 1 x Visa Flexperk Gold (using for occasional dining), 1 x Altitude. Went to Simon and bought 3 x $500 GC the first Saturday after I received the card and spent $1512. Today the total spent about $3k and none of my cards closed. I only buy GCs to finalize bonus spend. I find somehow funny this “MS” talk because for me all of that died way back with 5% VGCs…the profitable days are long gone.

  12. chris says:

    Hey DoC, what about datapoints on funding bank accounts with Altitude?

  13. fiveoh says:

    Anyone have issues using plastiq with US bank cards?

    • Mike says:

      Same question

    • anthonyjh21 says:

      No problems here. Paid our mortgage the first day I activated it. Even better was the fact that it triggered the $325 travel credit which I wasn’t expecting.

      • J.M. says:

        Which service did you use? I used Plastiq and it didn’t trigger the bonus.

        • anthonyjh21 says:

          Plastiq. Maybe it depends on whom you pay? Not really sure why it triggered but I know 100% it was that purchase because it was the first purchase made on the card and the details show something about 1 guest (for reservations?).

  14. Rekha says:

    Prepaid cards are part of BSA reporting.bank have to monitor the account.It require lot of compliance in that regard.MS to buy prepaid card is not worth for bank with compliance requirement.

    • Dan says:

      go away///

      • Robert says:

        She has to go away because she offered what she claims are facts that differ from your opinion? Or because it’s info that hurts what you want to do? don’t influence commenters from commenting because you don’t like the comment. Who died and made you a flyertalk representative?

  15. Daniel says:

    Think we have to watch out on the Fidelity Visa; that’s run by Elan Financial, which I believe is a subsidiary of US Bank.

  16. DarLong says:

    Will it be okay to reload Amazon gift card balance with US Bank credit card or I’ll also get shut down too?

  17. ws says:

    Say Chuck, please define, “looking normal.”

    Ask as I have had Club Carlson Business cards — 2 of them actually — within the family. annual fee of $60 produces 40k CC points….. (just hit), and for the 12 months ahead, I was thinking to spend the 10k or so, to get the free night certificate — plus the additional 50k points….

    I was thinking to do maybe a half of that with gift card buyin & re-selling, (not visa, but via mutliple sources & outlets over the year), a third or so with vgc’s, and ok, a bit of miscellaneous organic spend….

    Is this RAT team really going to shut us down for gift card buying & reselling activity? (I’m even set up as a schedule C as a small business at it.) Or is this an “altitude” which declares, paypal-like, you’re guilty til proven innocent — and you have no say in the matter?

    • Chuck says:

      Hard to say anything for sure. I’d keep away from Visa gift cards or even any gift card at merchants who also sell Visa gift cards, like drugstores, grocery, or giftcards.com.

  18. Ed says:

    This is no way to attract the affluent cc user and traveler. We don’t just buy gift cards. Good grief, what are they going to do at holidays, birthdays, gifts for clients, as normal spenders buy gift cards? Are they going to shut everyone down and turn away their customers? This bank’s shutdown team has got to be the biggest thorn in the flesh for those at that bank who’ve worked hard to create an attractive card that could have been their customers go-to spending card for everything. If someone higher up doesn’t slow down that department they’ll lose not only good cc users, but also their checking customers as well as some of their business checking customers. I’ve seen it happen to other banks. I have not appied for this card and will stay clear of using any of their cards for now (no ms plans at all for them, but did do regular spend). I’m also a business customer. They are going too far and they should just place caps as other banks have done. This is not a way to market your bank to increase share.

    • Jim Lee says:

      Well, personal experience, two years back, Discover card shut down a lot of accounts from one particular ethnic group, or to be clear, Chinese. Over a Chinese forum, we saw dozens and dozens of accounts closed for no good reasons. Keep in mind that the account owners are almost all have perfect credit scores. They were just not profitable for Discover. Meanwhile, no such report @flyertalk, @reddit, or here at all.

      I myself got two cards closed, one of them has 12 years history with Discover and I never abused their rewards program.

      What I am trying to say that is don’t underestimate the stupidity of the bank executives or their shortsighted plan to cut loss temporarily. Most of them don’t care about long term marketing at all, since by then they already left the company for better pays or got their gold parachute.

      • Ed says:

        So true. But, bad publicity, lost customers will catch up with a bank and eventually the effects hit shareholders and then executives. Look at Wells Fargo and the repercussions of the pressure to open new accounts which lead to unauthorized opening of accounts. Heads rolled.

    • Eric says:

      Have any “normal” people been shut down by USB? If not, I don’t think your statement holds much water.

  19. HG says:

    Keith and Kristi have way too much autonomy. They don’t like this and just decide that’s policy going forward.

    Last year Keith closed a 25k Fido and 9k FPTR without cause. He told me to wait at least a year before applying to cards. He left a worthless 4.5k FPSR open to torment me. Last July my FIA Fidelity then transferred to Elan. 14 months after Keith closed those accounts, I apply to Alt Reserve. Apparently it hits his inbox, and he denies it AND he closes my Elan Fido that had transferred from FIA.

  20. Cali4win says:

    Can you reach out to USB to ask why they’re not following California laws regarding requiring a 30 day notice before closing accounts?

  21. Sergey says:

    There are two types of gift cards, but it seems US bank doesn’t care. I may understand visa/mc/amex gift cards, which is “kind of ” money. But, store gift cards? I just don’t get it, what is bad, if I buy $500 ebay/amazon/best buy gift card? I recall their risk department gragons argued that we are avoiding cash advance, but I hardly see how store gift cards are cash. Am I wrong?

  22. Chris says:

    ***Saturday Morning Rant*** just venting lol

    The credit credit card companies are only middle men who steal funds from every transaction. We’re doing them a favor by including them in out transaction which in tune makes us both money at the cost of the merchant. If the credit card company is going to be a poor partner and try and take all or most of the money from our transactions then it is a bad partnership. In a lot of cases if you talk with your merchant and ask for a reduced cash price they will oblige. This now makes you and the merchant partners and the credit card company is left out. What would have gone to the credit card companies is now able to be split between you and the all the merchant . *** Take away *** (Credit cards companies are not needed)

    It doesn’t’ seem that all gift cards should be treated equally.

    Ebay gift card (vs) Visa gift cart

    Master card gift card (vs) Local restaurant gift card

    Just a few examples the phrase cash equivalent would lead you to believe that you could use the equivalent item similarly to cash. Which none of the gift cards really can be used that way. Visa and Master card gift cards have a lot of versatility but are still not really equivalent. An Ebay or local restaurant gift card would be much further away from being equivalent to cash since you can only use them with a single merchant .

    All of this seems odd since I buy, receive, and give gift cards regularly and I can guarantee that a large percentage off them were purchased with a credit card. These purchases include ones from the average Joe also who doesn’t even care about points.

    This all seems to be related to the banks not wanting to pay out on the bonuses they offer. The sign up bonus or the bonus category spend is all they care about. If neither of them applied to your account then they wouldn’t care if you were buying gift cards of any type. They tell you it’s to prevent fraud and it’s for our safety but that’s a bunch of BS. It’s all about them weaseling out of bonus obligation.

    Unqualified marketing departments have been creating bonus programs with flaws and loop holes that they didn’t pro sieve. People find them and use them resulting in punishment or a ban. The marketing departments should be punished not the cardholders.

    One word Unlawful. Banks are basically stating that if you don’t fall victim to their traps and let them prey on you and take your money then they will ban you from using their products. The flip side is if they can continually take your money then you will be a customer/victom for life no matter how many gift cards you buy.

    This is predatory and should be looked at by a regulatory agency.

  23. iahphx says:

    Are the shutdowns continuing? I’ve been putting travel and otherwise unbonused spend on my Altitude card, and I can prepay some taxes and insurance with it, but I probably need some MS to get to $4500 in 90 days. I figure I’m better off waiting for more info to trickle out, but if anyone has good ideas, I’d love to hear them.

    • James B. says:

      Try funding some savings or checking accounts with your Altitude card.

      Also, try funding some Kiva loans.

  24. Alan says:

    just got a notice that my card was removed from apply pay by us bank.
    does it mean i got shut down?

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