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4 Credit Card Lessons From the Fyre Festival Fiasco

Feb. 06, 2019
7 min read
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If you haven't seen one of the recent documentaries on Hulu or Netflix about the failed Fyre festival, then you've probably at least heard some of the buzz. Both films offer a fascinating perspective on Billy McFarland's disastrous attempt to hold a music festival in the Bahamas in 2017, and touch on his Magnises "credit card" that preceded it.

There are so many lessons to be learned here, including "don't trust erstwhile entrepreneur and event producer Billy McFarland," and "never try to hold a massive event on an island with no existing infrastructure and in an unreasonable timeframe."

However, there are also some broader lessons from these documentaries that we can heed as credit card users.

MONTAUK, NY - JULY 26: Aisha Atkins, Ja Rule and Billy McFarland attend Magnises Summer Bash at Gurney's Inn on July 26, 2014 in Montauk, NY. (Photo by Patrick McMullan/Patrick McMullan via Getty Images)
MONTAUK, NY - JULY 26: Aisha Atkins, Ja Rule and Billy McFarland attend Magnises Summer Bash at Gurney's Inn on July 26, 2014 in Montauk, NY. (Photo by Patrick McMullan/Patrick McMullan via Getty Images)

1. Don't finance your employer's business with your personal credit card. 

According to the Netflix documentary, McFarland's employees were charging tens of thousands of dollars of normal operating expenses to their personal credit cards. And when McFarland failed to reimburse them, employees were left with massive amounts of debt.

There are many people who enjoy the chance to earn additional rewards by charging their work expenses to their personal credit cards. For example, you could charge your work travel, your company meals and even some office supplies to your credit card as a convenient way to make purchases on behalf of your company. It seems likely that Billy McFarland's employees also thought that they could earn points and miles by charging Fyre Festival expenses to their personal credit cards.

The problem here is that you're always personally responsible for the repayment of your credit card bills, whenever you're a primary or joint account holder. This is true even when you're making a purchase on behalf of your employer. Even if your employer fails to reimburse you, you're still responsible for repayment of your personal credit card. If you're an authorized user of your employer's personal, small business or corporate card, on the other hand, you aren't responsible for repayment of charges.

You should never use your personal credit card to pay for company expenses unless you always avoid interest charges by paying your statement balances in full. And if you're ever asked to pay for your employer's regular operating expenses — not just your personal travel, meals or small purchases of office supplies — with your personal credit card card, you should decline.

You should also avoid using your personal credit card if you ever have even the slightest feeling that your employer's finances are troubled in any way. Finally, you should avoid using your personal credit card for company purchases if your employer isn't able to consistently reimburse you in a timely fashion.

2. Use your credit card for the purchase protection, among other things.

When Fyre Festival concertgoers learned that they'd been cheated, it might have seemed that there was very little recourse for them. Incredibly, the Fyre Festival website still has a link to a "Refund Application and Free Ticket Request Form," but reports indicate that no one ever received any refund from the festival itself.

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But those who were smart enough to use their credit card to pay for their tickets were able to receive a complete refund with just a quick phone call. The Fair Credit Billing Act of 1974 is a federal law that prohibits credit card issuers from billing customers for goods and services not received, or those that are not delivered as described. This robust protection is unique to credit cards — you can't expect it when using checks, cash, debit cards or electronic funds transfers.

According to this Reddit thread from a Fyre Festival concertgoer, all it took was a simple phone call to have the charges reversed. In fact, the Fyre Festival anticipated that customers would request a refund through their credit card issuer, called a chargeback, and it sent them an email containing a bogus warning that chargebacks would result in legal action. But like so many things related to the Fyre Festival, the threats of legal action never materialized. You have a federal right to a chargeback when you don't get what you paid for with your credit card, and no half-baked legal threat can take that away.

Using a credit card is always the best method of payment when you have to prepay for travel services such as airfare, hotels, cruises, tours or rental cars. If the travel provider subsequently goes out of business, or fails to deliver for some other reason, you're virtually guaranteed to receive a refund if you have to request a chargeback. Credit cards should also be your preferred method of payment when purchasing goods to be shipped to you, services to be performed in the future and, of course, event tickets.

3. Know the difference between a credit card and a membership card. 

Before perpetrating the Fyre Festival fraud, Billy McFarland came out with something called the Magnises card in 2015. Like the later Fyre Festival, the Magnises card was nearly all hype and very little substance. It was promoted as a membership card that would get you into all sorts of celebrity-studded events. Needless to say, many of the events never occurred, and some customers were even given phony tickets to actual events.

But at the same time, there was also a physical Magnises card that you could use for purchases. The trick was that you were given a metal card with a duplicate of your own credit card's magnetic strip. McFarland's idea was to combine both a membership club along with a cool-looking metal card, that was really just your pre-existing credit card with some fancy packaging.

Today, there are several other companies that offer a similar way to convert your pedestrian credit or debit card, into a beautiful metal piece of art, albeit for a hefty price. There's also the FoundersCard, which is strictly a membership card with no pretense of being a credit card. Feel free to take advantage of either service, but just know its benefits and limitations ahead of time.

4. Trust experts, not influencers. 

Part of the appeal of the Fyre Festival was all of the media influencers who were endorsing the event, such as Kendall Jenner, Emily Ratajkowski and Bella Hadid. In retrospect, these people are largely famous for being famous, and were hardly in any position to vouch for the prospects of the festival being held successfully.

This is a good thing to keep in mind when evaluating a credit card. At TPG, we offer a lot of good advice from people who study the credit card and award travel industries for a living and are true experts. These are the kind of people you should listen to, not just those with an attractive face and few million followers.