The Delta Platinum American Express annual fee is going up because it has always been too low

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You may have heard that for Delta Platinum American Express applications received after May 1, 2014, the card will carry a $195 annual fee, rather than the current $150 annual fee. I'm not going to tell you that's some kind of good thing, but it's obvious why it's happening: under the right conditions, the card offers one of the best value propositions in the miles and points space.

For this analysis, I will assume the cardholder spends exactly $25,000 or $50,000 on the card, since those are the spend thresholds that unlock this card's real value.

Companion Ticket

Each year you renew the card, you'll earn a domestic companion ticket. According to the terms and conditions, redeeming the ticket costs "from $22.00 to $68.00 for itineraries with two to four flight segments" for taxes, fees, surcharges and so on.

The companion ticket is non-mileage-earning, but if it's redeemed for a flight that costs over $300 or $400, this benefit alone easily pays for the card's annual fee, whether it's $150 or $195.

Nothing's Free

I got into a discussion with a colleague yesterday about the Southwest Companion Pass. I said that I was glad I'd found a gas station that was willing to play along, so I could get a 75%+ discount on paid airfare by using my US Bank Flexperks Travel Rewards card. He replied that he wasn't interested, since he doesn't pay for his airfare, by which he meant that he manufactures spend on his Chase Southwest Visa cards, then redeems his points for travel using his Southwest Companion Pass.

I had to break it to him that while he was enjoying a very healthy discount on his travel, it wasn't free: every dollar he spent on his Southwest Visa cards could be spent on a 2% or 2.22% cash back card. That foregone cash back was the price he was paying for his family's travel: $110,000 in spend would earn $2,200 – $2,442 in cash back or Barclaycard Arrival travel redemptions.

Let's apply the same logic to the Delta Platinum American Express. After spending $50,000 on the card, a cardholder will have foregone $1,000 – $1,110 in cash back or Arrival redemptions, plus either the annual fee (vs. a $0 annual fee, 2% cash back card) or the difference in annual fees (vs. the $89 annual fee, 2.22% Barclaycard Arrival). That brings the total cost to $1,195 – $1,216. We can call that $1,200.

What does that $1,200 buy you?

Bonus Skymiles

First of all, you'll receive 70,000 redeemable Skymiles, which (as an American Express cardholder) can be redeemed for $700 in Delta airfare (non-mileage-earning in Economy class, mileage-earning in First, Business and BusinessElite classes). Obviously the points can be redeemed for more value than that on premium cabin international travel, but that's the minimum value of the miles.

Bonus Medallion Qualification Miles

At this point the cardholder will still be $500 in the hole. However, at the same $50,000 spend threshold, they'll also have earned 20,000 Medallion Qualification Miles (and be exempt from Medallion Qualification Dollar requirements); they'll pay 2.5 cents per Medallion Qualification Mile.

Is it worth it?

2.5 cents per elite qualifying mile can be absurdly cheap or absurdly expensive: it depends on your travel goals.

I believe the two situations where it's absurdly cheap are if you need the Medallion Qualification Miles to reach Platinum or Diamond Medallion status, or plan to roll over extra Medallion Qualification Miles in order to achieve Platinum or Diamond in a future program year.

While there is one big benefit of reaching Gold Medallion instead of Silver Medallion (100% bonus Skymiles instead of 25% on paid flights), if you're not going to reach Platinum Medallion you shouldn't be crediting your flights to Delta in the first place: you should be crediting them to Alaska's Mileage Plan, where you can redeem your miles for Delta and American Airlines flights.

That's because only at the Platinum Medallion level can you change and redeposit awards for free, which is absolutely essential to redeeming your Skymiles for "Saver" level awards.

Finally, the Platinum and Diamond Medallion Choice Benefits are each worth $200 or more, which strengthens the value proposition of this card — if and only if it helps you make it to Platinum or Diamond Medallion.

Weekend roundup: "the things I do for you" edition

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Here's my weekend roundup of random stuff that's been building up in my RSS feed:

It's always sunny on the train to Philadelphia

I'll be blogging and tweeting all day tomorrow since I'll be spending 11 hours on Amtrak down to Philadelphia and back, in order to get my hands on a Momentum prepaid debit card. I've been meaning to do this for literally months, but you may have heard that the weather on the East coast has not been particularly cooperative lately.

Expect a full report in the coming weeks.

What do PreCash (Evolve Money)'s patents claim?

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Ever since my conversation with Alex last week, I've been pondering one thing he said in particular:

"We’ve built out our system in a way that allows us to deliver bill payments cheaper than absolutely any other person, any other company, in this country. And we have patents around that process, so we’re the only ones who can do those things. It allows us, where other companies and banks, it costs them, so the bank will usually pay somewhere between $50 and $60 a year per every customer who uses their online bill pay service, on average, for us the cost is significantly less."

What patents, and what process?

Believe it or not, in a former life I was an aspiring lawyer and have always loved digging into the minutiae of these things, so I visited the US Patent and Trademark Office's website to see what I could see. By searching for "precash," Evolve Money's parent company, I found 6 patents which are registered to Mssrs. Randy Templeton, Matt Callanan, and David Resnick:

"David Resnick (Resnick) was the founder of PreNet (previously known as PreCash) and a member of its board of directors. In 2001, to recapitalize PreNet, Resnick sold his PreNet stock to KCI for $3.165 million. KCI distributed the stock to investors."

As I dug into the 6 patents, my first reactions was, "these guys are jokers." It appears that the inventors were claiming to have invented the storage of value. There was a lot of language like this:

"With this approach, the end-user stores value on the end-user's account and the end-user account is decremented when the end-user actually purchases or uses the particular good or service."

In other words they were claiming to have invented "currency:" the end user has a thing of value they exchange for goods and services at the time of purchase or use.

Then when I got to the 5th patent I was blown away. It appears to me that the process patented by PreCash is something like the process used by Square Cash, whereby a charge to one debit card is treated as a refund to another debit card. As patent #8086530 states:

"The present invention leverages the existing financial network that is used around the world for credit card transactions, but it uses that existing system "backwards" in that payments are received, rather than credit extended, at the merchant point-of-sale. Interfacing to the existing world-wide network, e.g. VisaNet or another card association network, in this new way allows payments to be received at any of literally millions of merchant locations that are coupled to the network, thus providing extraordinary convenience for the end-user. The payments are posted to an intermediary account maintained on the centralized payment system."

Patent trolls have been in the news a lot lately, but if, and it's a big "if," these folks actually were the first ones to realize that merchant payment terminals could be used to route payments backwards through the payment network, then they're heroes.

Alternatively, they might just be patent trolls. What say you?

[updated] Two Santander products you should know about

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[update 2/14/14, 5:55 pm: I just called into Santander to ask what a "Santander Select checking account" is, since the terms and conditions of the Bravo card say such an account is necessary to get the annual fee waived. The Rhode Island-based representative explained that there's no such thing. It's a product that's going to be launched later this year. In the meantime, if you apply for the Bravo card before March 31, 2014, the first year's annual fee is waived. Now you know everything I know.]

Over a year ago, I opened checking and savings accounts with the then-Sovereign Bank, the American division of the Spanish banking giant Santander. They were offering an enrollment bonus of $100 or $150, and I needed a convenient place to dump money orders I'd purchased with PIN-based debit cards at Walmart without undue risk to my primary checking account.

In the last few months, three big changes came out of Sovereign: they rebranded their US branches to Santander; they introduced an oddly lucrative banking product; and they launched a competitive cash back credit card.

extra20 Checking

The banking product Santander rolled out is called "extra20," and it works like this:

  • you hold linked checking and savings accounts with Santander that are registered for extra20;
  • if you receive $1,500 in "direct deposits" to the checking account each month, Santander will deposit $10 into the linked savings account;
  • if you, in addition, make 2 online bill payments using Santander's bill pay system, Santander will deposit an additional $10 into the linked savings account.

Note a few things:

  • If you don't receive the $1,500 in direct deposits, you won't receive either $10 bonus — and you'll pay a $10 monthly fee;
  • If you do receive the $1,500 in direct deposits, but don't make the 2 online bill payments, you'll still have the $10 monthly fee waived and receive $10;
  • I'm not up to speed on what kinds of transactions Santander considers "direct deposits;" it's very likely withdrawals from PayPal, Bluebird, and Venmo accounts will count, but I can't guarantee that.

Fortunately, my employer has an extremely flexible online payroll system that allows me to divvy up my paycheck among accounts however I like, so it's not a problem for me to receive exactly $1,500 in "real" direct deposits each month.

Santander Bravo MasterCard

This second Santander product is only worth considering if you also sign up for extra20, since the card's $49 annual fee is waived for cardmembers with Santander checking accounts.

With the Santander Bravo MasterCard, you earn 3 points per dollar spent at gas stations, grocery stores, and restaurants, on up to $5,000 in cumulative purchases in all three categories each calendar quarter. After spending $5,000 in those categories, and on all non-bonused purchases, you'll earn 1 point per dollar.

But what's a point worth? While the promotional material says that they can be redeemed for "cash back," if you visit Santander's rewards center the only options listed under "cash back" are prepaid MasterCards. It's not a problem to liquidate prepaid MasterCards, but it's not exactly the same as cash back.

So, first the good news: the Santander Bravo has a much higher limit on bonused earnings at gas stations than the Bank of America Cash Rewards Signature Visa, which also gives 3% cash back, but only on the first $1,500 (vs. $5,000) in eligible spending each calendar quarter. If you're deciding between the two, you should obviously go for the Bravo, together with an extra20 package that waives the card's annual fee.

The problem with the Bravo MasterCard is that it's not entirely clear what the card's competitive advantage is over other, well-known credit cards. Assuming you can still purchase Vanilla Reload Network reload cards, PayPal My Cash cards, or prepaid PIN-based debit cards at gas stations, there are already a number of insanely lucrative options to choose from:

  • US Bank Flexperks Travel ($49 annual fee): 2 points per dollar at gas stations, worth 3-4% in paid (mileage-earning) travel redemptions, plus triple points on transactions coded as "charity;"
  • Chase Ink Bold/Plus ($95 annual fee): 2 flexible Ultimate Rewards points per dollar, worth 2.5% in paid travel redemptions, plus opening up other lucrative earning opportunities and partner transfers.
  • Even the American Express Hilton HHonors Surpass card ($75 annual fee), which gives automatic HHonors Gold status and 6 HHonors points per dollar spent at gas stations, plus Diamond status after spending $40,000 within a calendar year, is arguably more valuable than 3% cash back.

Conclusion

It's a tough call for me to pass judgment on the Bravo card, because Santander is basically doing everything right: a waived annual fee for checking account holders; high quarterly limits on bonused spend; and the ability to redeem points at 1 cent each for prepaid MasterCards (compare Citi's ThankYou products, which punish you for choosing to redeem your ThankYou points for cash).

On the other hand, gas stations, grocery stores, and restaurants are extremely competitive bonus categories, and the market is pretty saturated with outstanding cards as it is — although those cards do often come with substantial annual fees.

In short, I think the Bravo card is a pretty good card for a beginner who's interested in earning some extra cash and learning the ropes, but isn't willing to commit to some of the more elaborate techniques we engage in. In that way, it's a great complement to the 2% cash back Fidelity Investment Rewards American Express, especially since you can use it at merchants that don't accept American Express.

American and US Airways award discounts

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As I've mentioned, in January I was approved for both the Citi Platinum Select / AAdvantage World MasterCard and Barclaycard US Airways MasterCard. Having met the minimum spending requirements for both cards, I paid them off and stuck them in a drawer.

Of course, now I've got all those miles on my hands! Since I have an expensive domestic roundtrip coming up in March, I thought I'd check out what kind of award availability the airlines had on the dates I needed (hint: not much!).

That got me to wondering about the award discounts offered by the two airlines to their co-branded credit card holders. I found it intensely confusing, so I thought I'd throw up a quick summary in case any of my readers recently signed up for the same cards.

American Airlines: 10% mileage rebate & reduced mileage awards

There are two kinds of discounts you get as a Citi / AAdvantage cardholder. First, there's a 10% mileage rebate on all the miles you redeem out of your account each calendar month, up to 10,000 total miles (on 100,000 in mileage redemptions). Second, there are "reduced mileage awards" which are offered to a changing list of (domestic) destinations throughout the year. That program is clearly decided to be as difficult to take advantage of as possible: you need to look up the eligible cities for each month, copy down the code, and input it when making your award reservation.

Oddly, the terms and conditions of the 10% rebate program don't even require these redemptions to be for flights, so if you find a good redemption for hotels or car rentals, or if you redeem your miles for an Admiral Club membership, you should receive the rebate on those redemptions as well (I don't know how this works in practice).

Finally, for bookings made through February 27 for flights through April 4, there's another active promotion whereby non-stop MileSAAver economy award flights between Los Angeles and cities in the continental United States, and all MileSAAver economy award trips between Las Vegas and cities in the continental United States cost 10,000 AAdvantage miles each way, instead of 12,500. The 10% mileage rebate should apply to the final (post-discount) cost of each flight.

US Airways: 5,000 mile award discount

When you're a Barclaycard US Airways cardholder in good standing, you are designated "Dividend Miles Select." As far as I can tell the only benefit of that "status" is that you receive a flat, 5,000 Dividend Mile discount on all US Airways-operated flights.

I'm not going to lie, I've been messing around on US Airways' website for the last hour and I cannot for the life of me get the 5,000 mile discount to apply to any award tickets. Presumably if I actually wanted to book an award I could call in and have a phone agent apply the discount.

Analysis

The added wrinkle in all this is that starting a few weeks ago, you've been able to use American miles to make award reservations on US Airways, and vice versa. That means that it's possible to receive a 10% discount on US Airways award reservations by making the reservation through your American AAdvantage account. So when deciding which account to make a reservation through, you need to ask yourself the following questions:

  • Have I already received 10,000 miles through the AAdvantage rebate program this calendar year? If so, you won't receive any additional discount this calendar year.
  • Is this award ticket operated entirely on US Airways aircraft? If not, it's not eligible for the 5,000 mile discount.
  • If it is operated entirely by US Airways, is it more or fewer than 50,000 Dividend Miles? If it's more, you'll be better off using AAdvantage miles. If it's fewer, use your 5,000 Dividend Mile discount and save your rebate headroom for a more expensive redemption.

Finally, consider checked bag fees. The US Airways MasterCard famously does not include free checked bags, while the AAdvantage card does. American's website currently has the following helpful information:

"Q: Do the First Bag Checked Free Waiver and Group 1 Boarding (or Priority Boarding) benefits on select Citi®/AAdvantage® cards apply to US Airways flights?

"A: Not at this time. These benefits will not be available for travel on any US Airways flights, including any codeshare flights."

That means that if you're deciding specifically between American-operated and US-operated flights, booking the American flight with a 10% discount may be more economical than booking the US Airways flight with a 5,000 mile discount; it depends on whether the difference in miles is worth more or less than the $50 you'll pay roundtrip per first checked bag and $70 per second checked bag on US Airways.

Confused yet? Me too. Let me know in the comments if I'm missing anything obvious.

Preliminary reflections on Evolve Money

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To close out a couple pretty epic weeks of reporting on Evolve Money, I want to offer a few reflections on where I see them in the firmament of travel hacking as it currently stands, and how I'll be covering them in the future.

Paying real bills & displacing Bluebird bill payments

There are a number of monthly bills I currently pay using my Bluebird account.

I agree – in principle – with arguments (like Frequent Miler's and Saverocity's) that paying bills with Bluebird doesn't have any advantage over withdrawing the money to a checking account, since you earn your miles and points when you load the account, not when you unload it.

However, there have, historically, been bills that can't be paid for free using credit or debit cards, and I've always considered it worth paying those bills using Bluebird in order to maintain a pattern of "normal" usage (although I don't know how normal it is to spend exactly $6,000 each and every month).

Meanwhile, I've never been terribly interested in gift card churning, since every gift card I load to Bluebird takes up valuable load space in which I could be using Vanilla Reload Network reload cards (bought at 2%, 2.22%, or 5% cash back).

Evolve Money changes that calculation, since now every bill in Evolve Money can be paid at a discount of 2-10% using gift cards (see the comments to this post). That's your house, your student loans, your store-brand credit cards, and it's an incredible opportunity for as long as it lasts.

(Un)fortunately, thanks to the additional recent development that it's no longer possible to make Walmart bill payments to American Express cards, I'll now be using my Bluebird account to pay off my Delta Platinum Business American Express and Blue Cash cards, as well as my Fidelity Investment Rewards American Express. For my Visa and MasterCard credit cards, I'll continue to use my Bank of America Alaska Airlines debit card for Walmart bill payments.

Additional opportunities

There will also continue to exist opportunities to manufacture spend by making payments to specific billers within Evolve Money. In keeping with my general philosophy here on the blog, I won't be writing about those opportunities in any detail. If you dig into the comments to my existing posts, the relevant thread on FlyerTalk, and follow me on Twitter, you'll quickly see the kinds of opportunities that continue to exist. Knowing that the relevant parties read my blog, I'm simply not going to write about them explicitly to make sure they last as long as possible for as many people as possible.

PayPal cash back

Following up on the suggestion of regular reader Ben, I submitted an e-mail through PayPal's clunky customer service center and asked for the cash back I earned for my roughly $40 in Evolve Money payments. 21 minutes later I received a response from a PayPal representative saying:

I reversed a fee for you to cover the cash back rewards that were not issued. I apologize for the inconvenience, our system automatically calculates the cash back rewards. Thank you for letting me know so that I can get this issue resolved for you.

So it seems that they're aware of the problem and happy to help resolve it, although I imagine it would get pretty old, pretty fast, if you were to have to submit such a request for $4,000, or more, in bill payments each month.

The sooner PayPal resolves this issue so that cash back posts automatically, the better!

Future developments

On Friday, Alex told me about several coming initiatives at Evolve Money, including scheduled payments, recurring payments, and credit card payments, and over at FlyerTalk he also mentioned introducing higher limits to facilitate mortgage payments.

Stayed tuned for more of the news and analysis you know to expect from this site.

Update: holiday Flexpoints posting

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Back in October I wrote about one of US Bank's periodic, targeted promotions giving bonus Flexpoints after spending a certain amount on the Flexperks Travel Rewards Signature Visa. My offer was for 2,500 bonus Flexpoints – worth up to $50 in paid airfare – after spending $2,000 between November 1 and December 31, 2013.

As is typical for these promotions, the points take many weeks to post, to allow time for returns and chargebacks. So I was pleased to see a few days ago that the 2,500 Flexpoints appeared on my February statement.

If you participated in the holiday Flexpoints promotion, check your February statement for your bonus points.

Interview with Alex at Evolve Money

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After posting Thursday about my conversation with Bill at Upromise Investments, I received an e-mail from Alex, a Vice President at Evolve Money, who wrote that he was reaching out "to chat with you regarding our product and why we think it is the perfect solution for your readers.”

How could I turn down an offer like that? We spoke for about 40 minutes Friday morning, and Alex shared some interesting information about Upromise Investments, Evolve Money, Evolve's parent company PreCash, and what seem like some pretty exciting developments currently in the pipeline.

I wasn't able to get this post up in time (CRJ, no leg room, etc.) and Alex himself scooped me, posting some of the same information in the FlyerTalk thread about Evolve Money. See that thread for ongoing developments.

Alex is a marketer, so our interview has been heavily edited for length and repetition. Also, Alex is a marketer so don't take anything here or elsewhere as gospel; this is what a highly-placed employee of Evolve Money wants us to believe, nothing more and nothing less.

Finally, the interview is still very long, and it's gonna take up a lot of space on the front page of the blog until it rolls off in a week or two. My apologies in advance.

FQF: I saw you were contacting me after I wrote about my conversation with Upromise Investments. Before we got to talking about anything else, I’d like to know what your reaction was when you saw that this company was targeting your customers just because they were doing business with you?

Alex: Actually it’s not as negative a view as you would think. We have actually been talking to Upromise now for a few days as well. We as a company are trying to enable our customers to make as many payments as they can to all of the bills they want to pay with whatever source of funds they want to use. That’s sort of our philosophy. We want to make bill pay simple. Simple not just from the app or the online solution being simple, but also in terms of, you know, you’ve got a couple gift cards in your drawer, use those, you’ve got a debit card, use that one, etc. and I can talk about that in a minute.

So obviously when we started seeing this behavior around churning 529’s, we actually have quite a few legitimate customers that are paying into their 529’s like they would through their bank account. It’s usually once, twice a month, and they’re completely legitimate. I don’t mean legitimate like it’s illegal to put so much in and pull it out, but from our perspective they were using it as the service was intended.

Obviously Upromise reached out to us and we’re in the middle of – I mean I can’t share too much – but we’re in the middle of talking to them about sort of figuring out a way for us to make this work so our customers can continue to pay their bills. Our goal is not to shut all this down. Our goal is to educate our customers and let them know that churning dollars through 529 accounts is honestly not something they want to be doing. We’re actually in the middle of writing a blog post about it and getting tax advice because it actually has massive tax implications in certain states and so we really want to educate our customers, that’s really not something they should be doing, it’s not good for them, it’s not good for us, it’s not good for companies like Upromise.

And by the way, one of my colleagues talked to Bill at Upromise and they’re a great organization. Personally I’ve participated in Upromise for years now as well, they’re a great organization doing great things. They just ended up with a new headache and they’re trying to find a way to get rid of it or not get rid of it but make sure that it’s not something that’s causing any major concerns in terms of their business model, our business model, and obviously anything related to regulatory.

FQF: I agree that Bill is a very charming guy. I guess my next question is what responsibilities you think you have to your customers if you know that it’s precisely your customers who are making precisely these payments who are being targeted by Upromise, what do they need to know up front before you process one of these payments for them?

Alex: At the end of the day if somebody has a 529 account and they want to pay through Evolve Money to put money in the 529 account, that’s perfectly fine with us. If they want to use their debit rewards card, great, if they want to use cash, fine, if they have a couple gift cards lying around, great. We have absolutely no problem with that model at all, and I want to talk to you about that in a little bit because I know, I’ve seen especially on your blog and others a lot of people sort of worry that we’re gonna shut them off because they’re using gift cards and we’re not going to do that, that’s exactly against what we’re trying to build.

But we do have to make sure we’re not allowing our own customers to put themselves in a position where either we or another institution like Upromise has to report them to some sort of agency, right? It’s only in very rare cases that happens, and then you end up with frozen accounts, and all sorts of not-pleasant stuff.

From our point of view we’re gonna try to educate our customers, so part of me talking to you is exactly that, is trying to reach out through different avenues. We use our blog a lot, we are building out our social media presence but we’ll be using that as well

FQF: I saw that you created a Twitter account but you haven’t posted any tweets yet.

Alex: We haven’t, and honestly even though PreCash, the parent company of Evolve Money, has been around for 15+ years, Evolve Money itself, which is our consumer wing of our business, has only been around since November. We were in a sort of Beta in October and September but really it’s been November since we’ve been actively marketing and acquiring customers. 

Ultimately you’re gonna see us put a few more controls in place around paying things like 529’s. We want you to pay it. If you need to pay it 4 times a month because you’re trying to make installment payments every week, that’s great, we have no problem with that, but if you’re paying 20 times a day soon enough the system’s gonna tell you, “mmm, you can’t really do that.”

FQF: Ok, so we’ve talked about the Upromise situation, let’s pull out a little bit and talk about Evolve Money and PreCash in a little more general terms. You mentioned the use of multiple gift cards, that’s something a lot of people are concerned about, I have seen reports of people who have been locked out of their Evolve Money accounts, they weren’t sure why, so I can’t say it was because they were using multiple gift cards, but could you say just a little bit more about that, about people who are trying to drain gift cards or prepaid cards just to get rid of the balances?

Alex: Yeah absolutely. Let me actually tell you a little more about how we do payments. A lot of people ask, “how do you make money?” Well, we’ve been at the bill pay game for a while. We are actually a company driven by technology and innovation. We’ve built out our system in a way that allows us to deliver bill payments cheaper than absolutely any other person, any other company, in this country. And we have patents around that process, so we’re the only ones who can do those things. It allows us, where other companies and banks, it costs them, so the bank will usually pay somewhere between $50 and $60 a year per every customer who uses their online bill pay service, on average, for us the cost is significantly less. And so our model really is predicated around the ability of us to build our same-day express payments, that as you know are $1.50. It’s also predicated around the fact that as we gain customers we will have [unintelligible] monetization effort.

I want to be very clear about what I perceive as monetization. It’s not advertising. It is value-added services where we give our customers something of benefit. We may be giving them the ability to switch their cable company and save money, or we may be giving them the ability to get a better mortgage rate.

FQF: So "right now you’re paying Cox Communications, but you could be paying less if you were paying your Verizon bill instead,” something like that?

Alex: Yeah, something like that. That’s not a new model, companies like Mint use the exact same model. The difference for us is that we’re focused on bill pay. We’re laser-focused on bill pay. We want to be the absolute fastest, easiest, most convenient way to pay your bills. Period. Part of that philosophy includes the fact that we want to let you pay your bills whichever way you want. We’re the only solution out there that allows you to pay 10,000 bills with cash.

When you talk about other companies that say “oh, we’re seeing a lot of people using gift cards to pay,” they have a cost model around bill payment. Bill payment to them isn’t really their acquisition method. They’re trying to get you because you are a good paying customer, there’s some other behavior you’re doing as a customer that they want.

We want you to pay bills. For you to do that with a gift card, sure, it’s a little more costly to me, but that doesn’t matter, it’s perfectly within our model. So, the same thing with debit rewards cards. Actually, it’s funny because I was just reading your blog yesterday and I noticed that you were saying that PayPal wasn’t honoring your rewards.

FQF: That’s right.

Alex: But it wasn’t necessarily telling you whether you were or not…all of our transactions are absolutely signature payment transactions and they are meant to generate rewards. We are actually set up specifically so that debit rewards cards will work.

FQF: My suspicion is that PayPal has manually coded those transactions, because they know you exist, I’m sure.

Alex: Yeah they do. They’ve known of us for a while now. PreCash in general. The payments space is a very small space. We’ll reach out to those guys, if I remember correctly the PayPal MasterCard is run by Netspend which is another payments company, so we’ll reach out to those guys and try to figure it out a little bit. [editor's note: Alex appears to be talking about the PayPal Prepaid Debit MasterCard, which is run by Netspend]

Our goal really is if you can go get a debit rewards card, that you should be able to get your points for it. We have employees at our company that have, I’ll give you an example, we have a person who works on my team, their parent is a teacher and they’re a part of a teacher’s credit union that gives reward points. They’re using that card, and they’re happy doing it, and they get points back. Honestly the credit unions don’t mind it at all because bill payment is a cost for them. And whenever you use their card to do a signature transaction they make money.

FQF: Well pass my blog along to your team member, I’m sure they’ll find all sorts of interesting information there!

Alex: Believe me, I think everybody in our company has read every single post you’ve made by this point.

Ultimately my goal today was to chat with you about what we’re doing and why. I don’t want anybody out there to start worrying about, “oh, you know what, I just used my Chase card to buy a gift card because I get points on my Chase card, and now I’m using my gift card to pay my utility bill on Evolve Money.” Honestly, I prefer not to know all the details about that, but there’s nothing wrong with that from our perspective.

FQF: Let me change the subject just slightly because you have said that this is the new, consumer-facing product and it’s just rolled out in November. So I have 2 questions you can answer in either order, or neither of them, but the first question is are you guys getting the consumer-facing website into the shape that it needs to be in? Right now the search function in particular is something that is not a 21st century search function, the fact that it’s a linear list, that you can’t click on the next page of links, that you can’t narrow your search in any way, it’s very primitive search function.

Alex: Yeah, I agree with you, and that’s actually a part of my job. Sometime in May, you’re going to see a completely redesigned site. Some of the areas we’re going to be addressing, I’ll give you a perfect example: today if you wanna pay your AT&T wireless bill “standard,” we have a lot of “standard” payments that are tomorrow, that are next-day, which is faster than any bank, but we still call them “standard” and they’re still free, so if you want to pay your AT&T bill “standard” which is tomorrow, you add your AT&T “standard.” If you want to pay your AT&T “express,” which means today, you add your AT&T “express,” so there’s really 2 different accounts you have to add, and that’s redundant.

So in May you’re going to see a whole new release that allows you to just add your AT&T wireless account and at the point you are going to go pay it you can decide if you need to pay it today or if you can pay it tomorrow, and if you want to pay it today you’ll add the extra $1.50. So things like that are gonna get cleaned up.

The search is a little bit harder. The issue we have is that we have over 10,000 different billers, and the problem there is that a lot of times you have billers that are in our system appear under one name and consumers may know them as another. So I’ll give you an example. In Colorado Excel Energy is one of the major companies, however they bought out a Colorado energy company so the most part of the marketing is still in that old company’s name but in our databases of accounts that doesn’t show up.

So we’re in the middle of addressing that. There are gonna be two changes you’re going to see: in the near term you’re gonna see a design change that’s gonna be a lot more aligned with iOS 7, a lot cleaner look. And then in May you’re gonna see a lot of new functionality.

In May there’s gonna be the ability to schedule your payments.

The search is harder for us. We’re going through a project to categorize billers by region so that when you first go to search the ideal thing is it recommends the top 10 in the area you’re in.

FQF: Well literally any change is gonna be an improvement to the text list that the site spits out now.

Alex: We’re with you. We are iterating as fast as we can.

FQF: My final question, and then you can share anything else you want to share with me, is that I am terribly curious about the process of selecting which billers are in your system. I’ve heard a lot of reports of people just e-mailing in and saying “my biller isn’t in your system, can you add them?” and then you very promptly reply and add them, but I’m wondering is it a technical problem or you’re just waiting for people to suggest new billers to add. The subquestion to that is obviously, everyone want to see credit card companies added to the list, so we’re wondering what the logistical or legal or technical problems would be with doing that?

Alex: Those are great questions and I anticipated both of them. Let me answer the first piece of that, which is how we deal with billers. We have access to over 10,000 billers. Some of them are directly, so we have a lot of relationships with the billers. Some of them are indirect, so we have a relationship with another group that has a relationship with the biller. That’s very much how bill pay works. If you pay your bill pay at your bank, there’s probably 3 or 4 hands in that cookie jar. And we obviously are trying to simplify that, that’s one way we make payments cheaper by taking a lot of those hands out of the cookie jar.

The truth of the matter is that 6 or 7 out of every 10 requests to add a biller that we get, is really a biller we already have, but somebody knows it under a different name. What we do is when we identify that, we have a group of product researchers that identify that, and then they figure that out, and they basically add the same biller with another name.

So on our back end you may have 3 or 4 companies that just get sent to the same place, in terms of bill payments, but they operate under 3 or 4 or 5 different names. Comcast for example is really bad that way. There’s 255 entities that are considered Comcast.

In the next week you’re gonna see us announce a lot of top-up billers. Topping up your AT&T GoPhone, you’re gonna see a lot of those guys, the wireless top-ups. Towards the end of the month or early in March you’re gonna see us announce 550 new billers that we’re gonna add.

The exception, and it’s because of regulatory reasons, is that if you want to pay someone else, kind of like the banks let you do where you can designate somebody just adding their address and the bank basically cuts a check to them, that is a functionality that we will never really have, because we allow you to move money with cash, we allow you to put cash into our system, that is something that from a regulatory perspective can’t be supported.

Let me move on to your second question, and it’s definitely a lot more what the users are looking for. The good news is that yes, we are going to be adding the ability to pay your credit card. The not-so-good news for your readers, although I still actually think it’s good news, and it’s probably just a handful of your readers that aren’t going to like it as much, is that we are going to have to limit what sources of payment – that’s the only type of bill where we’re gonna have to limit what sources of payment you use. Gift cards are gonna be off the table for that.

But if you want to pay your credit card with your debit rewards card, you’ll be able to do that. If you want to pay with your standard debit card, you’ll be able to do that. We are still not sure about prepaid debit cards; we’re still looking into that. In terms of using gift cards to pay credit cards, the concern there is that there would be too much churning of that. Unfortunately for us, we have very good relationships with all the credit card companies and that’s just not something that as a company we’re able to enable.

The easy answer is ‘yes,’ that’s going to be added sometime in the middle of the year. It will be limited though in how you can pay those.

FQF: Let me tell you that is terrific news. I don’t think anyone is going to be terribly surprised by that restriction. You’re gonna earn a lot of customers and a lot of good will that way.

Alex: That has always been our plan. To be honest, we would have probably done it sooner, but we are absolutely taking our time with this because we need to make sure that everything we do has 17 layers of security. Our CTO would say 50 layers of security. The moment you take credit cards for payment you’re taking a credit card number, and as our friends at Target learned that’s a scary thing to do. So the reason you’re not seeing it until the middle of the year is more because we are doing and testing every check and balance possible to make sure that that information is secure and safe.

Not that information isn’t today, but just that credit card numbers are gonna be under additional lock and key.

FQF: I do think that the redesign of the site can’t come soon enough, for precisely that reason, that people come to the website and it’s not 100% clear that there’s 17 layers of security around your account numbers.

Alex: That’s part of us in terms of marketing as well. At the end of the day we actually process payments across all our business lines, not directly to the consumer but across all our business lines for over 3 million customers on a monthly basis, we move about $3 billion worth of bill payment every year. We’ve been in this space, we’re pretty big in it, we’re pretty secure as a company.

Evolve Money is our consumer brand, we want to make sure it has its own life, that it doesn’t get necessarily completely tied into PreCash as a brand, because the name PreCash doesn’t really tie into what we trying to do with Evolve Money, but we make reference to PreCash and we make reference to the security, and part of our marketing is actually to beef up what we say about it.

We really feel that your readers are the type of customers that are really our best customers, at the end of the day most of them - a few of them are grabbing their 529’s and just throwing a lot of money through them - but most of your readers are just paying their mortgage, they’re paying their gas, their electricity, their water, their cars, their wireless phones, their cable, etc., which are all exactly what we want, we want people to pay every bill they can with us.

The last thing I wanted to sort of leave with you is one more future roadmap, and I wish I could give you a date on this, but I can’t, but one thing we’re going to add in the future, is the ability for you to use your credit card to make payments. Unfortunately, we’re gonna charge for using a credit card.

We’re gonna be extremely aggressive about how low we try to keep that fee. We’re not gonna make money from that, we’re just gonna make sure we can cover our costs.

FQF: Exciting stuff. A lot of my readers thought that if you knew what was going on, then the gig would be up. I’m glad that we spoke and that I can pass along this information.

Alex: That’s exactly why I wanted to reach out to you. We have kept semi-quiet, because there’s been no reason to reach out to anybody, because we’re not seeing anything wrong. But after you talked to Bill I decided it was a good idea to get the word out, “the gig’s not up,” we like what you guys are doing.

I would leave you with the parting shot that Bill left you with, which is, “this is great, just try not to abuse the system. 20 payments to a 529 every day or finding other ways to sort of churn money and manufacturing spend aren’t beneficial to anybody, even the people who are actually doing it to get points, at the end of the day, if they do it too much, whether it’s through us or through the institution that they’re doing it with, they’re gonna end up on a list somewhere.”

We tend to give people the benefit of the doubt but I can’t say the same for the banks and credit unions and 529 accounts in terms of submitting that information to federal agencies.

FQF: Let me leave you with a note as well, as you’re rolling out your social media team, on FlyerTalk there’s a very lively discussion of your company and I think it would benefit from having a company rep chime in every once in a while and share your take on things, just because right now there is a sort of persecuted, siege mentality over there and I think it might cut through some of that tension if someone were to pop on and tell everybody not to worry, if you told them the same things you’ve told me.

Alex: Absolutely. We plan to. Honestly, we have a lot of good guys here who have done a lot of consumer marketing and, you know, our first step was always to sort of look at the ecosystem and figure out what people do with the information they have, and what their thoughts are and we wanted to make sure that people felt like they could share without feeling like we were watching. So your comment about the search for example is repeated over and over and over and we have actually taken that from the blogs and posts and have prioritized addressing it.

We’re sort of keeping an eye on it mostly because we want to learn more about how people interact with our product without us sort of sticking a finger in the fishbowl and swirling the water. So now that I think we’ve done a lot of that and we’ve learned a tremendous amount and I completely agree with you and I think you’ll see in the next week or so that our social media team is gonna start being more active both on Facebook and Twitter and start engaging with this community.

FQF: It’s funny you say you want to see how people engage with the product because as you can see from the forum, how people engage with the product is typing in slight variations of their biller over and over again trying to get it to show up on the first page.

Alex: It’s one of the things that sort of backfired a little bit. The technology behind our search is an intelligent search algorithm. It takes into consideration the billers that are used the most and if you’re writing something close to that biller it tends to return that biller because it has weight.

If you had a biller that was “commercial lending” and you write “com,” you’re gonna get Comcast every single time. Because 99% of the time people type “com” they’re looking for Comcast.

At the end of the day I think it’s backfired a little bit in that everybody can find Comcast, and people aren’t having issues finding Comcast, or any of the national guys, DirectTV, Sprint, those guys, but we’re seeing people have issues with their water company. All the little guys that are in our system somewhere but aren’t showing up on that first page of results.

We are absolutely reengineering how that works and splitting it into “here’s an alphabetical list you can sort through” and “here are our recommended ones based on the fact that when you type ‘com’ these are the top 10 that people usually pick.” That’s an approach we’re gonna take with it.

In May along with scheduled payments you’re gonna see recurring payments.

FQF: People have really appreciated the mortgage companies that are in the system, that has been a real godsend for a lot of people who have been writing checks every month.

Alex: For us that’s one of the key elements. At the end of the day, to be honest with you, mortgages are expensive for us to process, but we think that offering them is how we get customers. Most people, the first payment they think of is their mortgage, and if you can offer that then they’ll come and give you the rest of their payments. So far that’s proved true for us. We are excited about that. We’re continuously looking for more and more companies we can pay.

FQF: Thanks for reaching out to me, if there are any final thoughts you’d like to share with my readers, I’ll give you the same chance I gave Bill.

Alex: I won’t even go down the path of “please don’t abuse us” because I think I got that point across. I’ll just say, “everybody’s welcome." We built this for people like your readers, and we want to hear more. We have feedback forms on our website, we have feedback forms in the app, if they think of anything that they think should be different, the search we know about, but if they think they have a way they think the search should look, please tell them to reach out to us. Either directly through the feedback forms on our app or our website or even through our Twitter feed or Facebook page, or even e-mailing us directly at our Customer Service.

Upromise Investments: "not in the 529 plans, please!"

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I just got off the phone with Bill in the compliance department at Upromise Investments. Upromise Investments, as you have no reason to know, is an investment management and record-keeping firm that's used by various states to either manage 529 College Savings Plans directly, or provide record-keeping and payment processing services to investment management firms (did I get that more or less right, Bill?).

We had a long, interesting conversation, the highlights of which I'll try to capture.

Upromise Investments is aggressively engaged with Evolve Money and Evolve's payments processor

I didn't really understand this part of the conversation, but I think Bill and his colleagues decided that the easiest way to shut down so-called "inappropriate use" of 529 plans would be to cut off contributions to them. Consequently, I believe they are seeking to remove the 529 plans they are connected with from Evolve Money's list of payees, or attempting to stop Evolve's payments processor from handling those transactions (which would have the same effect).

Upromise Investments is handling this relatively calmly - so far

If you've opened a 529 plan in the last few days in a state where you're not a resident and where Upromise Investments manages the account, and if you've made a contribution through Evolve Money, Upromise Investments knows about you. If you're using the 529 plan to save for you or your relative's education, you still have nothing to worry about; that's what the plans are for (although see above: you may no longer be able to contribute through Evolve Money).

However, if you are planning on immediately making a non-qualified withdrawal, expect a call from Bill, who may very politely tell you he's closing your account and sending you your account balance.

Bill made very clear that this was a temporary courtesy he was extending to us, and that if undesirable behavior continued he would make the process much more unpleasant for future users.

Upromise Investments manages a lot of 529 plans

I've updated the 529 Reference Project with all the information Bill provided me on plans that Upromise Investments manages. I had already put some of this information on the Master List, which I had pulled from this 2011 map Upromise Investments has on their college savings website, 529.com.

Consider your own state's plan first

Bill helpfully suggested that most people would be best served by signing up for their own state's plan, in order to capture any relevant tax benefits their state offers.

The College Savings Plan Network has been informed

Upromise Investments participates in an umbrella organization called the College Savings Plan Network. Bill has made his contacts there aware of the situation. The "communications," he said, "are well underway."

Final Thoughts From Bill

Before I got off the phone with Bill, I asked him if he had any final thoughts he'd like to share with my readers. Here's what he said:

"Not in the 529 plans, please! We have state mandates to make sure they’re used appropriately which we vigorously enforce to the best of our abilities."

And now you know everything I know.