Cash, Check, Credit Card or …

The second thing I love about my job (the first thing of course is the daily exchange with frequent travelers) is the job requirement to snoop around. I’m always looking for either the next best thing, or at least its junior. At the recent FinovateFall show, which is a demo-focused conference in financial and banking technology, there was plenty of gee whiz things to make spending and even earning money seem exciting. But the single item that caught my immediate attention was something demoed by a company called Dynamics that specializes in next-generation payment devices. In this case, the demo was of a payment device known as a credit card. But not just any credit card as you’ll read below.

Their Redemption device (a.k.a. credit card) lets consumers redeem reward points with the push of a button at the time of checkout in a store. Okay, another interesting idea with nowhere to go? Well, besides the technology, it was the announcement of a partnership with Citi that cemented my interest. With the ever present idea that miles and points are a currency and the current industry trend to allow more and more opportunities for members to pay with miles/points, it is a natural leap to think that with the right technology in the not-so-distant future, we just may be asked at the checkout counter if that will be cash, check, credit card or reward points.

This month, Citi is rolling out a pilot program with this credit card capability in its Citi PremierPass and CitiDividend cards, allowing members to redeem points for items at checkout. This seems to bode well for members of the American AAdvantage travel rewards program since no doubt Citi spent a great deal of effort on changing their backend processing systems to accommodate this payment option.

Your question might very well be the same as mine–how the heck would this work? Well, apparently there are two buttons on the new generation credit card enrolled in this program. The actual credit card option will work at any merchant where a magnetic stripe reader is used. Essentially, you choose before swiping your card, which method of payment you prefer and push the appropriate button on the card. A small light will indicate which option you chose and then you swipe away. Obviously, you’ll know in advance the exchange rate between your points and cash. For instance, let’s say that you have 100,000 points in your PremierPass program. And in this example, your current rate of exchange is a penny a point. In essence you actually have a value of $1,000 in your point balance and whatever credit limit you might have with your credit side of the card. Makes for an interesting argument of when to use points and when to pay with money–and I can just see the line forming behind those of my readers who are mentally calculating the various reasons for use of points vs. money.

I’m still amazed at how the card does this and I’m told that when you push the button on the card, only then does the magnetic stripe get formatted for the card swipe–an electronic swipe if you will.

I know what you are thinking … who the heck would ever use the card to pay with points when the value of a point is only one cent? That’s not the point here, the point is that we may very well be much closer to the idea that miles and points are a real global currency, and if this pilot goes well, I can see AAdvantage members having something that many of us might want to have, just for the show-off factor alone. It leaves me with only a single question. Will having your credit card declined be as painful with points as it is for credit?

And on to a similar topic … I’m intrigued by the change to the United Mileage Plus Shopping Mall. This online mall of more than 500 merchants where members can earn bonus miles upon purchase recently announced that they were copying something similar to their dining program where you register your credit cards to become eligible to earn bonus miles when you aren’t shopping online at mileageplusshopping.com. I’ve already registered the same cards I have with Mileage Plus Dining and while I have started to look at the list, albeit a small list, of merchants from which I can earn bonus miles from in-store purchases, I can see the day when miles just magically appear on my mileage statement and I have absolutely no idea where they came from. Can’t get much easier than this.