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Hanged, Drawn, and Quartered: Signup Bonuses and the Fiscal Year Kirin July 16, 2020

Hanged, Drawn, and Quartered: Signup Bonuses and the Fiscal Year

It’s an open secret: in the Miles & Points community, the lifeblood which suckles our hobby is the credit card signup bonus. While there are other methods of garnering large quantities of points, such as having a top-tier professional job that grants you excessive travel (and hard-partying) allowances or conducting large-scale purchases through online shopping portals, these are not the primary focus of most enthusiasts around here. 

And yet, when it comes down to it, we points collectors are still at the mercy of the great tides of the market, buffeted along by the currents of finance and ever-subservient to the whims of that most mercurial of goddesses: the financial quarter. 

“But Kirin,” you write with great annoyance at my metaphor, “what the heck are you trying to tell me?” Read on, dear subscriber, because we are going to explore just why the financial quarter is of such relevance to signup bonuses, and why it can explain the generalized welcome bonus massacre we’ve observed the past couple of months.

What Is the Financial Quarter?

According to the 1985 Federal-Provincial Fiscal Arrangements Act, in Canada the financial year “means the period beginning on April 1 in one year and ending on March 31 in the next year.”

As someone only gifted enough to graduate with a BA in History, I translate this to mean that rather than functioning with the calendar year, business and finance are run instead on a slightly different annual calculation going from the beginning April of one year to the end of March in the next. 

So if I have six financial quarters, I have $1.50, right?

So if I have six financial quarters, I have $1.50, right?

Therefore, financial quarters are broken down by where they fall within the fiscal year. As the name would imply, they each last three months: Quarter 1 lasts from April 1 to June 30, Quarter 2 from July 1 to September 30, Quarter 3 from October 1 to December 31, and Quarter 4 from January 1 to March 31.

But what does this mean for us Miles & Points collectors?

We are in the business of getting paid, even if that payment is only in points. We must be aware of these financial quarters because companies, governments, and financial institutions are required to provide quarterly reports detailing their earnings, expenditures, and revenue, and our signup bonuses, referrals, and retention offers are all numbers on their bottom line. Thus, we represent what is known as an operating cost within the grand scheme of these organizations.

The Role of Miles & Points in the Marketplace

Now here’s where it gets tricky: generally speaking, when banks or financial institutions are doing well, they want to incentivize you to use their cards. This gets them paid the interchange rate, which allows them to make money. They also hope that you’ll retain the card and spend money on it habitually, thus making them more money in the long term as the interchange they reap will outweigh the short-term welcome bonus.

The flip side to this is that these bonuses are just red lines of costs on the ledgers of these businesses. When times are bad – such as, to use a completely random example, during an enormous global pandemic wherein commercial activities come to a grinding halt – do you think businesses want to be paying out large bonuses? No!

This is the state of our market, so don’t expect the bonuses to be very high for a while.

This is the state of our market, so don’t expect the bonuses to be very high for a while.

That being said, when times are going from bad to good, or have gone from economic recession to economic boom, banks become more open-handed. Indeed, a paper from the Federal Reserve Bank of Chicago published in 2009 and updated in 2010 noted that banks were paying out even more in points and cash back than during the boom of the early 2000s. And this was only a few years after the Great Recession of 2007–2008. 

Similarly, a Wall Street Journal report from 2019 noted that this trend had only increased over the preceding decade, breeding a degree of credit card fever and loyalty into the general populace.

What I am trying to make clear, dear reader, is that things in the world of welcome bonuses are going to get worse before they get better. But with the Great Recession of ‘07–08 behind us, we can identify that the historical trend thus far in the wake of generalized meltdown is to see bonuses get bigger during periods of upswing to stimulate economic recovery by incentivizing consumption.

The previous paragraph is a fancy way of saying: “Credit card companies who are stingy now will want you to buy a lot more stuff later when their confidence in the economy has been restored. This means they’ll offer to give you points for days when things get better.”

So, What Are My Immediate Tasks?

Revolutionary strategies may be necessary, even though you aren’t overthrowing the provisional government.

Revolutionary strategies may be necessary, even though you aren’t overthrowing the provisional government.

As Miles & Points enthusiasts, we are at the whim of every financial quarter. If it looks like a quarter is about to be deep in the red for a given company, they will do everything in their power to try and cut their losses. We have seen various data points coming from across all over the Canadian landscape, so let’s go through them in brief:

  • The American Express Platinum Card and Business Platinum Card saw their welcome bonuses devalued by roughly 45% in May 2020

  • TD welcome bonuses were cut by a full 50% in May 2020

  • Scotiabank has numerous data points of refusing any additional credit if they determine that an applicant has any significant other sources of credit, so as to minimize their loss

  • CIBC bonuses as of June 2020 have likewise been cut by around 45%

  • RBC has pulled the special offers on their Avion Visa Infinite, and there are numerous data points over the past quarter of much stricter approval criteria compared to before

(The HSBC World Elite and WestJet RBC World Elite have been a few rare exceptions, opting to keep their bonuses elevated throughout the summer to distinguish themselves from their cost-cutting peers left and right.)

To my eye, which is that of an interested amateur but not of a financial expert, this looks very much like companies trying to reduce expenses. Sadly, I do expect for things to get worse before they get better, especially if the effects of economic recession are long-lasting.

This means that for the upcoming quarter-end dates, which are when the bonuses for each type of credit card are released, we ought to reasonably expect either sustained low levels of welcome bonuses or even further devaluations.

Me upon reading this news

Me upon reading this news

But don’t be despondent, for I feel there is a glimmer of hope. As said above, during economic recoveries, banks are likely to act more open-handedly with their rewards to try and get you to buy more stuff with their products.

Moreover, the mentality of all of us in the Miles & Points community should not be one of hopelessness; indeed, when we see a ten-foot wall, we should be finding a shovel or an eleven-foot ladder by which to bypass it.

The immediate tasks all of us can and should have is to get the best deals possible, without waiting too long. As quarters get worse, bonuses will go down, so don’t dilly-dally about signing up if you’re eager for a certain offer (such as the aforementioned HSBC or WestJet holdouts). 

In these times, there’s one more thing to be aware of: your available-credit-to-income ratio. Many lenders are now rejecting applicants with lots of income, assets, and reserve funds because they are deemed to have too much credit. 

In other words, creditors are afraid that even some great potential clients might just “take the money and run”. When you’re applying for cards during the foreseeable future, always be cognizant of how much credit is available to you and maybe consider closing cards sitting in your drawer (or reducing the limits on them) if there’s a bonus you’re very attracted to.

Account Shutdowns: A Medieval Form of Execution

The title of this article is “Hanged, Drawn, and Quartered” for a reason. Now I won’t spell out exactly what that is for you, but suffice to say it was a horrendous medieval form of execution reserved for crimes such as high treason.

If you have ever seen the excellent (but wholly inaccurate) film Braveheart, then let me say that a version of this punishment was what Mel Gibson’s William Wallace had to endure in the final scene. Yikes.

They can take our points, but they will never take our FREEDOM!!

They can take our points, but they will never take our FREEDOM!!

And so we get to the crux of the matter: in April 2020, American Express had to release its most recent quarterly earnings report.

Remember, businesses report by the quarter, and their literal job is to return profits to their shareholders. And what, pray tell, kind of earning did American Express have to report?

A 76% year-on-year drop in profits.

That must have hurt. And so it comes as no surprise to me that immediately prior to this, some American Express cardholders had their accounts shut down because of usage of their card “for unintended purposes” – generally understood to be behaviour that’s unprofitable to American Express.

I can only speculate as to the timing, but I personally imagine the upcoming quarterly report had an enormous role to play.

Executives and accountants at Amex could see how much money some cardholders were losing them, and in the context of the COVID-19 pandemic, they opted to minimize their risk by declining to do continued business with select individuals in order to at least stanch some of the monetary hemorrhaging. 

There are also scattered reports of shutdowns continuing through the current quarter. I can only imagine that the analysts at American Express can see how much they are set to lose even prior to the next quarter’s results being published, and so are engaged in removing additional dead weight from their balance sheets. 

Conclusion

Adam Smith may have been onto something when he first coined the term of the invisible hand of the market guiding our actions. In the Miles & Points landscape, especially in the context of the current pandemic, I feel that it is the invisible hand of the quarterly earnings report that dictates our accumulation strategies. 

Things may be at a low point for the moment, but it is unlikely they will remain that way forever. If we can keep clear sight of the fact that bonuses come out each quarter, we can be on the lookout for the best options available and use our ever-valuable credit pulls and total available credit to strategically get the best products for our own travel goals.

Until next time, stay safe and may the odds be forever in your favour.

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44 Comments
  1. Avatar
    Renee

    I enjoyed the article. And I thank you for reminding me to transfer my Amex points out. LOL!

  2. Avatar
    jack liu

    Long time lurker here, first of all thanks to all the contribution to PoT, it’s one of my must read websites. I really enjoy Kirin’s style of writing as it gives me the contextual background in which the ‘relevant content’ is situated in. Perhaps sometimes we are in a rush to act upon a piece of information that how the idea came into being get tossed by the wayside. Imagine the utterly lifelessness of language if every piece of information were written in logical statements. Looking forward to the next article and keep up the good work.

  3. Avatar
    Parm

    Hey Kirin, hope you don’t take these comments too personally. Im sure some of us can learn from you on tips and tricks in the travel and card industry. I look forward to your future blogs. Good luck.

  4. Avatar
    Andrew

    My personal opinion is that part of the changes may be due to Covid-19 affecting consumer behavior, rather than business decisions related to quarterly results. I’d be interested to see how previous results affected business decisions in 2018 and 2019…

  5. Avatar
    Manu

    Read this thanks to its popularity (i am sure it generated some traffic thanks to the popcorn)

    Though not a fan of harsh comments, I am in someway aligned to the gist of the comments.

    1) The crux of the post is hardly 15 lines, rest is all fiction or say fluff.
    2) As another commenter noted, there is factual irregularities.
    3) 76% Drop in Profits is for a particular quarter (Q1) and is because Amex set aside 2.10B to counter against bad loans (primarily in SMB segment issued by Amex USA)

    What the author missed in his detailed analysis is the same issuer (Amex) had been giving generous retention offers and promos (be it shop small, Dell / Grocery credit) but only limiting or discouraging new Acquisitions (like other issuers). This is primarily because during conditions like this – the credit worthiness of an individual cannot be accurately assessed. Ie, John Doe can have a Salary stub or 2019 T4 which shows significant income – but that doesn’t guarantee that John Doe is still employed and financially stable. Usual KYC procedures are not 100% kosher in assessing credit worthiness during a recession like scenario and therefore the general strategy is to cut down on new acquisitions. This is key when moratoriums are declared for loans / mortgages / repayments and debt repayment terms are relaxed. When these happens, credit bureau report & routine KYC might not reflect the accurate financial stability of an individual – so the best way to keep your house shielded against bad debt is to reduce acquisition offers so that prospects are limited.

    Further, the author started with “Interchange” when describing ‘role of miles and points in marketplace’ but conveniently skipped the fact that almost every issuer is giving bonus multipliers (which at times surpass the interchange fee they make) for categories to incentivize the consumers to retain and use the card.

    Then the author went into ‘Shutdowns’ and then missed the fact that those shutdowns weren’t reported in the same proportion in the USA (as per /r/churning or FlyerTalk or Blogs) which is the primary market for American Express as a corporation especially with respect to its earnings / profits.

    In short, it’s a very long post with very little substance. Author is going to various tangents to kinda weave a simple one line summary but misses on analyzing each tangent to its totality. It would had been great if the author kept it short and cut the fluff or use those word count for a thorough analysis.

    At the end of article, like many others I too feel like it was mostly fluff with very little substance.

    1. Kirin
      Kirin

      Hello Manu, I certainly welcome and value a second opinion.

      I must state that I wrote this article on the path to help folks accumulate points – and the welcome bonus is the biggest thing that attracts Miles & Points enthusiasts. As good as retention multipliers are, they are not the bread and butter of what we do, nor are they the biggest black hole on a company’s spreadsheets. I therefore felt it was more important to address issues such as too much available credit or the generalized skewering of signup bonuses.

      When you refer to know your customer (KYC) legislation, that has more to do with internal banking processes than the trend of the market as a whole. I used Amex’s report more as an example of the whole.

      We can agree to disagree, and I thank you for your honesty!

      1. Avatar
        Frank

        "As good as retention multipliers are, they are not the bread and butter of what we do, nor are they the biggest black hole on a company’s spreadsheets. "

        Actually for Scotia their Gold Amex and Momentum Visa are loss leaders meaning they lose money on those products. Most people use those cards only for category spend and don’t put enough 1x spend for it to be offset.

        1. Avatar
          Anthony K

          "Actually for Scotia their Gold Amex and Momentum Visa are loss leaders meaning they lose money on those products. Most people use those cards only for category spend and don’t put enough 1x spend for it to be offset."

          *Citation required

    2. Avatar
      Carl

      It’s a very long comment with very little substance. It would had been great if commenter kept it short and cut.

      1. Avatar
        John

        Quoting Ricky

        “Those who don’t have constructive input to offer, on the other hand, should consider the revolutionary strategy of keeping it to themselves.“

        1. Avatar
          John

          My earlier comment was for @Carl

          Somehow the post reply puts everything under same thread

      2. Avatar
        Manu

        Ha ha, noted; I should learn from the OP or say alt account Carl

        1. Avatar
          Mike

          Manu thanks for providing a fresh comprehensive analysis on the shortcomings. Seems people cant take criticism these days

        2. Avatar
          MK

          Well put Manu. Agree with almost 100% of it. Carl obviously has a bias to the author.. any neutral feels bad for the comments – but at the end of the day it is true.. article was way to verbose, with very little content.

  6. Avatar
    PoopyChurner

    I have re-read this blog post again after reading so many harsh comments below. I think it is well written – just different from other writers. I only see the changes in sign-up bonuses as real-time adjustments, but it was an interest point of view to analyze them from quarterly reporting. Kirin – hope you didn’t take negative comments too personally, and I look forward to more blog posts from you!

  7. Avatar
    Ricky

    These comments have devolved into a bit of a farce. I know most readers leave feedback in good faith, which is appreciated and welcomed, and I’m sure Kirin will incorporate it into his future articles.

    Those who don’t have constructive input to offer, on the other hand, should consider the revolutionary strategy of keeping it to themselves.

    1. Avatar
      John

      Ricky, if there’s so much of bashing – there will be some truth.

      1. Avatar
        Ricky

        I don’t doubt that, I’d just expect everyone to keep it civil instead of resorting to playground insults.

    2. Avatar
      Ron

      There are multiple people that thought this post was useless and primarily fluff so dont think we are being unduly harsh.

      1. Avatar
        Tom S.

        Dear Ron, if that is your real name… it seems to me that Ricky was referring to YOU, not the other posters, or whoever WE is. You’ve commented bashing the article four different separate times. It’s very clear you either have a personal vendetta against Kirin, or you need to have a Snickers.

      2. Avatar
        Lane McMillan

        Don’t worry Ron, one day you’ll look back at this and think, "shucks, if only I did smarter"

      3. Avatar
        Jose

        Don’t worry Kirin, you are doing well, keep writing as no one can make everyone happy. I enjoy reading this article.

        Everyone has different opinions which is fine but to those losers need to know if people are keep poking them in their face then they will know how it feel. Those losers don’t pay to read this blog so just ignore their lousy comments.

  8. Avatar
    Just another Reader

    Can you please add a filter so that some of us can skip such fluff posts going forward? Like filter by author?

    No offence, but this was more like a glorified vomit.

    1. Avatar
      John

      Think that was a bit too harsh to call it vomit but I will agree that the post add no value

    2. Avatar
      Rhett

      "By Kirin". If you could actually read, you’d find this written at the top of the article. Do you also want a warning popup before each of that guys articles? Grow up

  9. Avatar
    Jose

    Ron, you are definitely an idiot and a loser. I repeat you are a lousy loser.

    1. Avatar
      Ron

      Well it seems others share my sentiments. I rest my case

  10. Avatar
    TJ

    I have to agree with the tone of the other comments. The humour is fine but it felt like only 20% of the article was actually relevant content and the rest was fluff. I like this blog because it is super informative and well presented but with so much filler and not as much content I feel like it loses a lot of integrity/value.

    1. Avatar
      John

      100%

      This post was nothing but mumbu jumbo

  11. Avatar
    Marcus

    Nicely written Kirin. I like the humorous approach to your writing and void info provided considering the harsh economic and travel times we live in currently.

  12. Avatar
    Eric

    This added nothing to my knowledge. And is poorly written.

    Dear reader: paraphrasing oneself is bad form. Please refer to the aforementioned above.

    1. Kirin
      Kirin

      Well I will definitely adapt some of my writing if folks feel it unentertaining. At the same time I’d invite you to consider that many within our hobby are brand new to the dual worlds of finance and business, both of which are fairly complex but also define how our hobby functions. No earnings report, no points program after all. We hobbyists, collectively, are another line on a balance sheet. That is a depressing way of addressing the complex issue, so I choose to explain with a bit more humour. I also like poking fun at myself as many a time have I engaged in less than optimal accumulation or redemption strategies. As for why I put memes, they are as much for my own entertainment as anyone else. And I would also note in every article where I post a meme or piece of Revolutionary literature there is always a hidden nod to something useful for miles & points enthusiasts 😉

      1. Avatar
        Eric

        I was too quick draw on the criticism. I apologize if I offended. I tried to soften it with my grammar jokes but I don’t think anyone got it. I read all of your posts. This one wasn’t your best but I’ve read many worse on similar topics. I encourage you to keep sharing your knowledge.

        I wasn’t able to figure out what was on the computer screen as it was too fuzzy. Nor was I able to figure out the immediate tasks reference. Damn. I’m weak that way lol.

    2. Avatar
      Mitchell McNall

      I had the exact same thoughts from reading this. Also, I don’t need to see memes that add no value and aren’t relevant while reading an article..

      1. Avatar
        Ron

        Agreed. There was a lot of filler and not a lot of content. Useless memes that arent even relevant.

        Ricky why did you give Kirin an outlet if he hasnt written anything useful regarding budget travel? At least Amy and Tiezheng can write something relevant and coherent.

        1. Avatar
          Ricky

          I think you’re being unduly harsh on Kirin here. As another reader put it, a discerning eye will help you spot the relevant parts among the crying cats.

      2. Avatar
        Eric

        Did ya see what I did there? 😉

  13. Avatar
    Ron

    Not gonna lie this is a terrible post/article. Not much value is being added here.

    1. Kirin
      Kirin

      I’m sorry you’ve felt that way. On the one hand, I want to do what Mitch here is pointing out and take a bit more of a "birds eye view" for our strategies. Ie, you may see what seem like a lame bonus now, but in the conditions of economic crisis, it will probably go down. So Billy Mays it and act now. But on the other hand, what would you have felt brings more value to your tactics when looking at the financial quarter.

    2. Avatar
      Mitch

      Because we’re exploring the valid philosophy and underlying emotions of our hobby? Plenty is being added here for the discerning churner, a collective sanity check consistent with the overall tone of the blog and its contributors. Maybe RFD is more your speed?

  14. Avatar
    Kunal

    Actually, the fiscal year for Canadian banks (not AmEx, HSBC) is from November 1st to October 31st so we’re nearing the end of their Q3.

    1. Kirin Tsang
      Kirin Tsang

      Thanks, I’ll make note of it for a correction or future articles. I was basing a lot of this off Amex as obviously they were of greatest concern to many recently due to the shutdowns.

      1. Avatar
        Ron

        So you write an article about Financial Quarter but don’t do the due diligence to note that the Big 5 Banks fiscal year ends on Oct 31st. Bravo!

        1. Avatar
          Pete

          You do sound like Kirin must have broken your heart somehow so you kept going after him. What a pity poor crying loser! LOL!

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