I read the ToS and much to the side, I have 550k stockpiled frequent flyer points that I more or less legitimately earned and am nor using, so no, I am not looking for actual how-to advice on a possibly queasy (not illegal, AFAICT) ploy: but –
what happens if I buy a three carat ring at Tiffany’s on my brand new Visa, pay the card right away, book the 300,000 earned flyer points, schedule a first class flight to oh hey Sydney, take said flight, then return the ring within the 45 day refund period?
I mean, I am sure the card company would cancel me. But what do I care?
You raise an important point in that, one would never chance this with a card to which one regularly billed or had a positive balance. The theory would be to get a new card, do this, and then burn it. Any card with which you had existing miles – most certainly, they would debit against your balance. But if no history – could they really legally justify charging a cash debit against you for your abuse of an “awards” program? Maybe. Don’t know.
If I’m understanding it correctly, the difference is that you’re legally obligated to pay the debt you incur by charging purchases on your credit card. But frequent flyer points are not a purchase - they’re essentially a promotional bonus given out for making purchases. This is the equivalent of ordering a magazine subscription in order to get a free cellphone and then cancelling the subscription - the ads usually claim that the gift is yours to keep anyway. Unethical but not illegal. The only legal recorse for the company I could see being possible would be for them to try to make a case that you already planned to return the jewelry at the time you bought it, in which case they might be able to argue your intent was fraudulent.