THE value of credit-card points has long been a topic of debate among business travellers. The subject is also picked over online on an impressive number of dedicated blogs and forums. Now it is getting an airing in a different sort of venue: the corruption trial of an American senator.
Robert Menendez, a Democratic senator from New Jersey, is facing charges for allegedly doing favours for Salomon Melgen, a Florida-based eye doctor and friend of the lawmaker. Prosecutors say that Mr Melgen was trying to avoid repaying the government $8.9m that he had allegedly overbilled Medicare, the public health-care programme for seniors. And he wanted Mr Menendez’s help in exchange for lavish kickbacks. These included flights in a private jet, stays in a fancy hotel and more than $750,000 in campaign contributions.
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But at the centre of the third day of the trial last week was the issue of credit-card points. In 2010, Mr Salomon paid for Mr Menendez to stay for three nights at the Park Hyatt Vendome, a five-star hotel in Paris. Mr Menendez’s legal team argued that this does not qualify as a gift because Mr Melgen used American Express Membership Reward points to settle the bill.
Gary Leff of View From the Wing, a blog, notes that credit-card points are not considered to be worth anything in dollar terms and do not technically belong to the holder. Mr Menendez’s lawyers argued as much. They claimed that the points had “no intrinsic value”. And so did not need to be reported because they were worth less than the $335 threshold on the senator’s financial disclosure form.
But clearly credit-card points do have value, even if it is hard to quantify. And Mr Menendez seems to have known that. In an e-mail to Mr Melgen in 2010, he promised to pay back the cost of the room, nearly 650,000 points, as soon as he had earned enough air miles of his own.
However, that time was still a long way off. In 2010, Mr Menendez had accumulated just 58,000 points. At his rate of spending, it would have taken him 30 years to earn enough points to reimburse Mr Melgen, as an executive of American Express testified according to Politico.
Moreover, Mr Menendez did not seem terribly committed to settling this debt. Three years after sending the e-mail, the executive testified, Menendez spent about 135,000 American Express points on a high-end barbeque. That was nearly all he had earned in six years, leaving him with just over 1,000 points.
Mr Leff argues that the real crime is how poorly Mr Melgen spent his miles. The three-night hotel stay was valued at just under $5,000. That means Melgen redeemed the miles at a value of about three-quarters of a cent per mile. (Air-mile aficionados reckon the going rate is twice as high.) It would have been cheaper for Mr Melgen to spend his cash on the hotel and points on business-class flights. But Mr Melgen probably did not have value on his mind. There were much bigger amounts of money at stake, after all.
For now, the debate over the value of credit-card points remains unsettled. But if you want to argue about it, do it in the office or on an online forum. By the time the dispute reaches a courtroom, it may be too late.
Source: economist
The value of credit-card points