American Airlines has been locking and/or terminating accounts, and cancelling upcoming award travel for some. The common thread seems to be people who have received a number of credit card welcome bonuses, presumably related to the use of targeted Citi/AA mailers.

This kinds of adverse action (from AA) has historically been reserved for people selling their miles to brokers, but the scope of those affected by this situation seems wider. Even if you’ve never sold miles, sold a mailer, bartered miles, created a fake account (to encourage mailers), or made award bookings for others you might still find yourself affected by this situation.

For more on this, and to see if your account may be locked already, here are some resources:

Only AA knows what they’re going to do here, so we’re not going to speculate. But for our discussion here today we wanted to talk about strategies for dealing with a locked account and how this affects broader points & miles strategies going forward.

 

Robert: There’s so much to unpack here, so many scenarios that people may be dealing with. Let’s start with perhaps the most pressing situation and that’s for someone with upcoming award travel booked who is concerned their tickets may be cancelled by AA.

The way that AA is going about this is pretty unnerving for those affected. By that I mean there are reports of people having their award travel cancelled on short notice, and that obviously puts people in a bind.

Update: My account was terminated by AA 48 hours prior to award travel. Here the full story here.

To determine if your account is locked, follow the guidance in the FlyerTalk wiki:

  • If you call AA Reservations at 800-882-8880 and are transferred to an agent straight away rather than the usual prompts you may be locked
  • If you try to make an award booking and it fails to ticket within 24 hours that’s a rather strong indicator that you are locked

Whether your account is locked -or- you’re concerned it may be locked based on past involvement/use of mailers -and- you have upcoming award travel you’ll want to explore backup plans should AA decide to cancel your tickets.

This can be tricky though because:

  • You may already have seats on an flight that you want to book backup seats on (and airlines often don’t allow 2 simultaneous reservations on a flight)
  • You may have already taken some of the award inventory with your existing reservation
  • You may have return flights or tickets booked for others in your travel party with other AA accounts and/or currencies
  • You’re unsure whether AA will or will not cancel your ticket, and if they do how much notice they’ll provide prior to takeoff

If you’re concerned about AAdverse AAction, I think it’s prudent to book an alternate itinerary that you can cancel with low fees. Examples of this would include Southwest flights, or award booked with British Airways Avios or Virgin Atlantic miles. But this is often easier said than done. Especially internationally.

If you have a peach itinerary booked with AA miles: Who knows? You may be able to fly just fine.

You certainly don’t want to overreact, but I think we’ve got enough datapoints to warrant concern. I think it makes sense to start planning backup strategies. Especially if you already know your account is locked.

What do you think, Sam?

 

Sam: What a ‘best of times/worst of times‘ we have had in the past month or so.  I think when this story first broke I was initially very much the optimist–that AA would only be taking action against those who went the hardest at using mailers–creating fake accounts and redirecting applications.  As time has wore on and we’ve seen more and more data points I think it is safe to say I was wrong about the limited scope of this issue.

One thing I think this illustrates is that we’re living in a sort of ‘echo chamber’ with respect to miles and points.  This is probably the most unnerving news to come out in this space in quite some time. But to anyone who’s just an average user of AA miles this is not news at all.  So one major takeaway is for us to remember we’re fringe users of all of the programs we play along with.

And when you’re existing on the fringes you’re an easy target–there’s no one to advocate for you, and the masses who are happy are unsympathetic.

But all of that is background–back to the issue at hand. I think your advice is spot on to book something that’s a backup.  I know we discussed doing that on the latest Patreon podcast and I’ll echo it here. The idea of a $150 or $300 change/Cancellation fee certainly hurts–but not nearly as much as getting stuck halfway through your trip (a tactic AA has been known to use).  On the podcast I called this trip insurance, so thinking of the cancellation fee that way could help take the sting out from it possibly.

Beyond this I think there are some best practices to work on not just for AA, but in general, and I’d love to spend a little time discussing those.

The first of these, and one I know you did on your upcoming AA trip is to book one way tickets.  This distributes risk in a single program and likely halves the issues if there ever should be any. It doesn’t completely eliminate risk, but it does allow you a little comfort knowing you might only need to scramble to find a way to or from your destination instead of both.

The next is a broader discussion which I don’t know if we should get into here, or on a podcast. For as long as this blog has existed the advice has been earn, burn, repeat. Hoarding miles is never a good idea. The possibility of adverse action not only increases, but also as your account balance increases you become a much bigger target for Adverse Action.

My heart goes out to those who’ve got 1million or even 2million or more AA miles locked up or shut down. But that’s a bit like robbing a bank and then posting pictures about it online.  The miles are on AA’s books and so they could at any point decided to take them back.  The solution is to travel with them. Now, not later.

But the broader advice is moderation. Will the current <insert best deal here> last forever? No, it won’t.  And that’s fine. There will be another deal. And if you can hold back you just might live to play the game long enough to travel the world. My biggest advice?

The last thing I want to talk about is the importance of Diversification. There were people doing only AA mailers. That not only is extremely risky, but it means you’re missing out on some of the cult classic cards and opportunities that are out there in other programs. This game really now is one of managing multiple programs effectively. Or as we like to call it–digging dozens of holes in our backyard and trying not to fall into one!

Any other ideas Robert?

 

Robert: The word I keep coming back to here is Unprecedented.

If the issue is related to credit card churning, I’d expect shutdowns to come from the bank(s) issuing the card(s) – not the airline. They way AA is reportedly handling this is brutal because they’re not only cancelling upcoming award travel, they’re wiping out account balances and shutting down accounts. Those account balances could have been built up from a variety of activities that have nothing to do with each other, and it seems unfair to me (or perhaps even unwise) for AA to wipe out miles earned from flying, shopping portals, and other activities.

If every bank and airline out there handled situations like this the way AA has been, it would be rough. So much of this game involves finding ways to skirt churning restrictions. Here I’m thinking of things like Amex Green Star Referrals that lacked lifetime language. And Chase Just For You offers that bypassed 5/24 restrictions.

Maybe AA is taking advantage of the unregulated nature of frequent flyer programs vs tighter banking regulation. But the way banks generally handle unintended credit card application links that accidentally get in the wild is to disable the links, take their lumps, and move on with hopes of running a tighter ship in the future.

The way AA is handling this it seems like they’re really upset about it and impacted meaningfully financially by it. I’m sure they’re considering their actions carefully. I just hope they take the long view when terminating accounts. What do you think, Sam?

 

Sam: Great points Robert. I haven’t seen much discussion about the financials and such. I’ll venture into rumor mill territory here with a bit more of my take on that side of all of this.

Unprecedented is totally the word for this. And the way they’re going about this, locking accounts and confiscating miles and tickets. The whole thing reminds me of someone trying to meet a quota. Almost as if costs have gotten out of control and as a result they’re trying to confiscate miles and cancel travel to get things back at equilibrium.

Heck it could just be a cash grab. According to TPG, “Due to a revenue recognition change effective January 1, 2018, airlines now actually want you to use your miles. That’s because airlines have to defer revenue when miles are earned, whether through flying or earned through credit cards. This revenue can’t be recognized by the airline until “mileage credits are redeemed and transportation is provided.” (Source)

So if you’re AA you could get people to use these miles with all kinds of funny web specials and such–or you could just confiscate them. And if you do the latter you get to pocket the entire value of those miles instead of the difference between the cost of transportation and the revenue from the iles.

The whole thing reminds me of the opposite of our recent Amex theory–that Amex needs *more* customers of any type which led to GreenStar offers allowing us to apply for cards we’ve already held.  Here AA wants less of a specific type of customer, and is firing the ones they think are a drain on resources, revenue negative customers. 

So is it that hard to believe that a group of people savvy enough to coordinate applications, and really create a gravy train would then use those miles in a very high cost method? Thereby starting to become a liability to the issuer of the miles (and not the CC company so much, as their costs are fixed). I think that’s certainly a possibility.

It’s a curse of something getting too popular. If enough people start doing one thing then we cannot have nice things.

What do you say Robert? Too far out there to be true?

 

Robert: I think you’re absolutely right that we need people interacting with programs inefficiently to be able to do what we do.

However, I don’t think a few hobbyists like ourselves are the problem here. I think the problem is people who turned it into a business. Groups of people who pushed it very aggressively and sold the miles to brokers who are equally as good at award redemptions (for others) as they were accruing signup bonuses. The net AA has cast here seems to have caught up hobbyists with heavy hitters, and that’s what I think (hope?) they’re trying to discern as they review locked accounts. We’ll see.

Often times points enthusiasts (especially the newly converted) will wonder, “Why doesn’t everyone do this?” This is why. This is the kind of situation that makes people say, “See, I told you so. I knew this would all come crashing down on you!” This game is not for the faint of heart and situations like this explain why a lot of people rightfully shy away from aggressively pursuing points & miles.

What’s unfortunate is when a small-time hobbyist does the one thing that really tweaks a bank, or in this case an airline, that triggers adverse action. Because a small-timer hasn’t profited that much from the exchange yet their account is potentially terminated.

Do you think actions like this will effectively thin the herd?

 

Sam: Great Point about the heavy hitters. They’ve certainly caused issues with respect to many other great things in the past.  Accidentally getting swept up with them is a very real possibility here.

The irony of our talk right here is that I don’t even know if my accounts are locked.  Your list of activities which might lead to lock/shutdown? I’m guilty of all of them (Sold miles, mailer funny business, booked tickets for others, and of course the ever famous fake account for my dog).  Wow reading this back now has me a bit worried about my account.

And if I’m worried, I bet others are as well.  So Yes, I do I think this will thin the herd.  I do think this thins the herd because it has a chilling effect beyond the accounts frozen/closed.

As this story gains momentum it begins to become folklore of sorts. People online like to repeat stories as facts. In a year it will be, “Remember, AA can and will shut down your account for earning too many miles.” In two it might be, “3 Mailers in 2 years is absolutely the limit of safe.”  Like folklore the ideas might sound reasonable, but they’re likely not backed with any actual science.

So AA can create Fear, Uncertainty and Doubt (FUD) among the group they want less of (churners) and do relatively little damage to their brand, image and how other regular customers view them.  And if they stop the rampant churning in the meantime they’ve used minimum resources to extract maximum gain. Which is smart.

It really seems like a no-lose situation for AA. Unless someone, somewhere stands up to them, and causes some larger ripples there just isn’t going to be enough sympathy over this from average users.

Either way, I know we’ll continue to keep at least one eye on this story.

What’s your take? Share any thoughts below. 

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13 thoughts on “Shop Talk: AA Locking/Shutting Down Accounts

  1. This is a good article that brings up many valid points.

    My locked account was terminated a few days ago. AA didn’t even send an email. How UNAAmerican. All upcoming award flights were cancelled that were booked using my points. I have non refundable hotel reservations (free cancellation date has passed) and paid the AA taxes and fees using CIti AA cards. insult to injury. Citi continues to encourage me to use my cards, and sign up for checking account offers. Miles earned from my credit card bills this month have no account to go into. I’m considering disputing the charges with CIti for a refund on my taxes and airport departure fees for the flights booked using Citi credit cards for the flights. I’ve paid Barclays annual fees for AA cards for years.

    If your account is locked right now, take screen shots of your existing reservations, fees paid, and account history. It will disappear when the shut down happens. Since nobody is getting unlocked, just shut down one by one, consider donating your miles to charity. That still works. Then at least AA doesn’t get them, charity does.

    I hope someone starts a class action lawsuit. The communication from AA is non existent and Citi has it’s head in the sand. Do the Citibank shareholders know what a cluster muck this is? Citi bought the wiped out points. Other airlines and banks have to be watching closely to see how far AA can push the limit.

    • Fairly hard. We had regular credit card sign ups for real family members, several times a year. No selling, ever, of points or codes or accounts in any way. All booked flight passengers had the same surname. Family was able to fly internationally between account freezing and account closure.

  2. AA sold miles to Citi. Citi distributed miles to credit card applicants. AA takes those miles away. It’s obscene and there will be legal challenges to it.

      • “The irony of our talk right here is that I don’t even know if my accounts are locked. Your list of activities which might lead to lock/shutdown? I’m guilty of all of them (Sold miles, mailer funny business, booked tickets for others, and of course the ever famous fake account for my dog). Wow reading this back now has me a bit worried about my account.”

        See above.

    • Jake: that’s a fantastic question. One that someone who plays poker could probably better answer than I can. There’s a possibility that AA is bluffing and wont go through with closing all accounts. There’s another possibility they’ll close any and all accounts. What’s lost if they close and what’s gained if they don’t?

      That’s super general and probably pretty unhelpful. One thing to remember is what we’re actually out here. Not the value of all those miles for international premium cabin teavel–unless you bought them you’re likely out the cost to hit the min spend on each card….maybe $100ish per sign up?

      Looking at it that way is the $X00 worth risking for a potential gain of the international travel? Only you can say, but maybe that’s a different way to look at it at least?

  3. I am trying to decide if I should cash out all accts in the household and try and buy some gift cards to get something. Wire’s acct is locked, but 3 others still alive – 2 for me and 1 other she has.

    Her locked one has about 280, and her other about 80. Mine at 320 and 80.

    What u all think? Will they eventually group the address and cut them all?

    • It’s really impossible for me to say, or to advise. I always say do what helps you sleep best at night.

      Could you update us with what ends up happening?

      Best of luck to you and the wife.

  4. Tried to book a flight for April a couple weeks ago. Booking went into “Request” status. 4 days later, it didn’t ticket. I canceled the booking. I know I did 2 mailers last year, that’s all. Most of the miles were from Citi and Barclay purchases. I was still using the Barclay card while the Citi sat in the sock drawer. I have a few purchases from last month on my Barclay card, I’ll have to see if those miles post.

    If they shut me down, drain all my miles I’ll be a little pissed. I’m now only looking at CC’s that have flexibility with their points.

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