Sunday Success Story

September 4, 2011 - Rick

Florida Beach, photo by Andrew Ingersoll

Rick,

I thought I would share with you a quick success with getting bumped from flights.

I was traveling with my three daughters, ages eight, five and three, from New York to Florida. We had a 4:45 p.m. flight that was oversold and I volunteered verbally when I heard an announcement. However, they were only looking for two so we were out of luck.

We boarded the plane first and as the plane filled up, they announced that they had a need for three additional volunteers. We were seated toward the front of the plane so I rang the call button as the attendant walked by and asked about the offer. They again said they only needed three, but I told them if they took four, I was game. They discussed amongst themselves and said, “Gather your stuff.” By now the plane was full and we were applauded, to my daughter’s amazement, as we deplaned.

The deal was $400 each in travel vouchers and $12 each for meals as well as the next flight to Florida. The agent called another gate as there was trouble with passengers at a flight to Atlanta at 5 p.m. that we might be able to get on. We went to the gate with the agent and, after a few moments, we were not able to board the plane. But he told me we were on the next flight to Atlanta at 6 p.m. and then we were confirmed with four seats in first class from Atlanta to FLL. The girls were excited. He said we should grab a snack and see the gate agent to get our tickets.

We grabbed snacks and then headed over to the gate as the plane was boarding in about 15 minutes. The agent jokingly (it seemed to me) asked if we wanted to be bumped again. I said if hotel and transportation are included, as well as same amount of vouchers as before, we were in. They were.

So after all is said and done, here is where we stand:

Flight vouchers for first bump: $400 X 4 = $1,600

Food vouchers: $12 X 4 = $48 (basically enough for water in NYC)

Flight vouchers for second bump: $400 X 4 = $1,600

Food vouchers: $12 X 4 = $48 (more water, LOL!)

Hotel transportation: $15 value

Hotel: $179 value

Amount saved for room in Florida: $50 (Holiday Inn Express at the Entertainment Card rate)

Rental car saved: $50 for one day

Total value for about 15 hours of delay = $3,590

This doesn’t include that the tickets were originally free, courtesy of Grandma. Not a bad day I guess.

Update: We bumped again for a bride and her bride-mates for another $600 each ($2,400) plus vouchers for food and bags delivered to the house. Not bad for a total of about $2,600 plus the $3,590 from yesterday = $6,190. Thank You, Delta!

Best regards,

Jason

IMH

Not one of your finest suggestions, Rick, if you really think it through — because, in this case, the transaction would be a selfish one at the expense of a charity. The loan recipient in the developing country doesn't benefit from the churn. Kiva doesn't benefit from the churn — on the contrary, they have merchant fees to pay for no net increase in the funds available to be lent.

From everything I've heard, including here on your blog, Kiva is a pretty special charity that's worth supporting. So please don't advocate a scheme that will increase their administrative costs.
Charles Clarke

One obvious refinement if you already have enough extra cash for the minimum spend and just haven't found where to meet the minimum spend is to just start off with Kiva.
Ryan

Rick,

Thanks for the great idea!

Does the Paypal come with fees when transferring from a non-profit?

Ryan
Mark Lehman

A fine idea.

As a leader of a "charity" (I pastor a local church), we would be glad to receive a $1,000 donation at 97% than to hope for all the steps for a $1,000 check at 100% to arrive.
FrugalTravelGuy

IMH: I'm sure any charity that offers credit cards as a means of making a donation would be thrilled to get 96-98 cents on the dollar
IMH

Rick, Mark: I completely agree that there's nothing wrong with using a credit card to make a charitable donation. But unless I've misunderstood Rick's "churn" suggestion, that isn't what would be going on here: Kiva wouldn't be a penny better off but would (presumably) be paying a merchant fee.

Interesting to note, as a complete aside, that both Visa and Amex are Kiva sponsors.
FrugalTravelGuy

IMH: Kiva is not supposed to be any better off. A person in need of a loan is better off because we make them a loan with the risk on non repayment. Kiva is a nonprofit and plenty of people pay the 15% administration fee to cover fees coming in and out of the loan fund. I see nothing wrong with this play.
Anonymous

I'm not interested in helping random scammers.

But you can go right ahead.

Give me a microloan.
Anonymous

Hi, Frugal Travel Guy,

I wonder if you have other suggestions, because from what I have read Kiva is passing themselves off as a charity when what they really is is a scam high paid administrator non profit "charity"
doing usurous loan sharking loans to uneducated illiterate people in very poor countries. Correct me if I am wrong — I would be very happy to pay a several per cent administration donation as well as accept several points in unpaid loans and lack of interest, if I am truly helping people while getting free travel for myself. Alternatively, other ideas to meet short term spending requirements are always useful.
Anonymous

Hey rick! Great site! I visit frequently.
About this kiva: how do we know well get paid back? I mean these people could be scammers posing as entrepenours, no?
Charles Clarke

@IMH, etc. – From Kiva's Help center/FAQ:

When I pay through PayPal, is PayPal taking a fee?

Kiva is the first organization that PayPal has supported by providing free payment processing. This support saves Kiva up to one million dollars each year, which helps us to keep our operational expenses low and send 100% of your loan contributions to the field.

Lenders outside the United States may be charged a fee to convert their local currency into U.S. dollars, Kiva's working currency.
Chappy

Folks lets settle down and actually understand what we're talking about. To all the Anons I can't specifically reply to you one at a time, so here goes to everyone.

Kiva is an internationally known and renowned microfinance site that has helped thousands of people with hundreds of millions of dollars, and there is not "scam" involved. Go to their site and read some things on there and you will see.

IMH – the point of the loan is just that. You front the money and the entrepreneurs pay you back after 6 months. So if I need a $3k spend on my new Sapphire Preferred card, I can spend the 3k to support a lot of groups all over the world, pay the 3k out of my own savings account (which makes .1% interest…quite negligible), and go on my merry way. After 6 months (that is the shortest loan time), the entrepreneurs pay me back my initial loan amount (because they have used the money to start their business, further their business, etc. back to PayPal.

As Rick said, EVERYONE wins. There is no "scam" because the entrepreneurs are funded with your money, and after the loan period you are paid back.

If you're unsure about loan companies that are unknown, look at some world famous ones–Hope International for example works with Kiva (though you will probably find their name as Esperanza–hope in Spanish–because they work primarily in the Dominican Republic).

Don't make ignorant uninformed statement and do the research to realize that no one is being exploited, Anon #1, 2, and 3.
Anonymous

Thanks for the lecture, professor.

But when something smells like ****, looks like ****, it's **** to me, and I don't need to read the faq on the scammer's web site.

Just because a bunch of legitimate companies "do business" with Kiva doesn't make it legitimate, any more than as a marketing ploy for the companies involved.

Kind of like "fair trade" coffee or other goods, bunch of BS.

So go ahead, make your loans, if it makes you happy fine.

Research is not required when it smells like ****.

Cheers
Anonymous #2342342
Anonymous

Hi Rick,

If they are charging close to 40% to the desperate
lenders, that is highly questionable in my opinion. If Kiva administrators are earning 7 figure salaries, while you get free miles, I do not see how that is doing good, just as costing the
fed government millions of dollars to pretend to
circulate coins is good for you, but the world pays for your free lunch.
Chappy

Your comment continues to be ignorant Anon because you really have no idea what you're talking about. Provide some of your own facts to refute what I've said, instead of simply saying "oh it's bs."

2nd anon: The traditional loaning system was at 40% or so for those in need of a loan. Places like Hope charge a reasonable (and competitive in the developed world) rate of 8-12%. Where did you see Kiva admins making 7 figure salaries? I'd be interested in seeing that myself!
Anonymous

Sure Chappy,

From Charitynavigator.org we have 2009 income figures for their president and for their ceo,
premal shah and matthew flannery of 132.500, with the real compensation hidden in perks. They have stopped publicizing their compensation in 2010 and 2011.

New York Times (april 14, 2010) has them supplying erroneous figures of their interest rates, sometimes as high as 126% (while disclosed as 56%).

Rick describes this as interest free loans and a charity — the only thing interest free is lenders to kiva — we get paid in miles and get to lie to ourselves that we are philanthropists — when in fact we are practicing usury, with the victims being the poorest of the poor.
Charles Clarke

Looking at http://www.kiva.org/about/finances in the Form 990s, the highest salaries I see are $128,250 + benefits. Their total staff salaries are 7 figures. And they do seem to have high expenses for the amount of money they manage – which considering they are doing microloans probably makes sense. At least if I'm reading the report right. It is different than traditional lender's financials.

It seems like Kiva User Funds, which I'm assuming include the loans and money on deposit with Wells Fargo, had about $33M in assets at the end of 2010. Kiva, the non-profit, has about $10M in assets at the end of 2010. And their expenses were over $3M for the year, mostly salaries. Website development expenses were rather high. Though they are based in California, so that adds about 100% to all the costs. Hopefully they will be able to streamline the costs as they mature.

I was interested to see that they provide loans in North America also. Not sure if that is Mexico or parts of the U.S. and Canada also.
car loans

Credit cards are very helpful especially in cases of emergencies. It is important though to know your limitation. It is essential to spend within your spending limits.

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