Money Angles

By Andrew Tobias

It is a busy time for justice. Chicago commodity traders indicted for cheating the public . . . Leona Helmsley facing 20 years in a Holiday Inn (the logical sentence) if convicted of tax fraud -- it's hard not to be interested in these cases, but equally hard to have any impact on their outcome. How refreshing, then, to hear of a case, however small, in which one of us -- specifically, my pal Joey -- gets to be judge and jury. This is the story of Joey's revenge. It could save you a few bucks, or perhaps even earn you a first-class upgrade.

The crime, as Joey sees it, is the way some banks try to trick their customers. "Look at this!" he'll occasionally shout at me over the phone, as if I could see the checks he's waving. "They look just like regular checks! They've got my name and address preprinted on them, and my account number in magnetic ink at the bottom!" "So?" I ask.

"So -- but they come from the bank that issues my credit card, and it's my credit card account number at the bottom of the check!" "So?" I ask.

"So -- well they give you this big friendly pitch about how you can use the checks for anything, like to pay the electrician or to pay tuition!" "So?" I ask. (I too think these checks are a minor scandal, but I like to hear Joey get worked up.)

"So what they don't tell you in their letter, or they tell you only in fine print someplace, is that from the minute you use one of these checks they start charging you 19.8% interest." "Yes?" I ask.

"And not just on the check you wrote, on the rest of your charges too."

Some banks, Joey thinks, use these checks as a way to trick thrifty cardholders, who normally pay their bills in full and accrue no interest charges, into starting the meter running.

"Joey, every time you get checks like these you call me. This is an old story."

"Ah," he said in a hushed, conspiratorial tone. "But this time I got them back."

It seems this particular set of checks came from Joey's Pan Am-affiliated MasterCard. It's one of the many airline-affiliated Visas or MasterCards that give you a frequent-flyer mile free for every dollar you charge, even if you pay your balance in full within the grace period. To a frequent-flyer junkie, these cards are irresistible.

"First," said Joey, "I called to be sure I'd really get frequent-flyer mileage if I used these checks. ((Usually with the checks you don't.)) They | said yes. Then I made sure my account balance was zero: I paid all my outstanding charges and quit using the card. ((He switched to his United Airlines Visa.)) Then I took one of the checks they sent me, made it out to myself for $10,000 and deposited it in my bank. So I was borrowing $10,000 from MasterCard. ((He has a big credit line.)) But at the same time, I sent MasterCard a real check for $10,000." A couple of days later, three things happened:

-- MasterCard's computer started licking its chops when it saw Joey had used one of his checks to borrow $10,000.

-- MasterCard's computer then saw the $10,000 payment, so MasterCard couldn't start charging him interest.

-- MasterCard's computer awarded Joey 10,000 Pan Am frequent-flyer miles.

Cost to Joey: nothing. Cost to MasterCard: 10,000 frequent-flyer miles. (The bank that issues Joey's MasterCard pays Pan Am a penny or so for each mile awarded -- about $100 in this case.) Lessons for us: Resist those tempting blank checks your credit-card company sometimes sends (unless you're really looking for a way to borrow money at 19.8%). Switch to a credit card that offers frequent-flyer miles. (If you're charging things, you might as well get a free trip once in a while.) Don't mess with my pal Joey.