There's a rumbling in the community of credit card churners, folks who apply for new cards to nab attractive sign-up bonuses before moving on to the next piece of plastic. American Airlines (NASDAQ: AAL) has been locking down and in some cases terminating AAdvantage accounts this month of folks who acquired too many loyalty miles through Citigroup (NYSE: C) mailers, in some cases stranding travelers by canceling their awards-based flights.

This is a story that has more turns than you'd probably think in trying to sort out the good guys from the bad. It's quite possible there are no clean hands in this mess as the airline giant tries to sift out the unprofitable accounts churning away in the gray areas of sign-up-bonus eligibility. The "fasten your seat belts" light is on, so buckle up as we size up the turbulence.

Image source: American Airlines.

Flying the unfriendly skies

Issuing credit cards is a big business, and the competition is fierce to stand out. The end result of the one-upmanship is good news for consumers, with great offers to top lists of the best credit cards for 2020. It's in this operating climate that Citigroup has been aggressively promoting its family of American Airlines-branded cards that reward purchases with AAdvantage miles over points or cash-back opportunities.

Approved cardholders for Citi can earn as many as 75,000 AAdvantage miles after spending as much as $5,000 in the first few months of ownership, a hefty bounty that can cover the cost of a few low-priced trips. These cards typically include the boilerplate language that these bonuses can be earned only by folks who haven't received the sign-up bonus miles in the past 24 months, limiting the payouts to every two years. However, Citigroup has also been aggressively putting out mailers and online offers for years, and until recently those promotional pitches didn't include the 24-month language.

Sniffing out a loophole, churners were limited solely by Citi's velocity cap that OKs just two new approvals roughly every two months. Folks began to create bogus accounts to generate more of these promotional mailings without the 24-month sign-up-bonus limitation, and since there was often no language making the mailers non-transferable, there quickly emerged a marketplace for churners to buy or trade for these potentially lucrative deals.

It's easy to point the finger at the churners who were clearly sidestepping the intention of the miles-earning program. Creating multiple AAdvantage accounts for pets or fictional people to drum up the volume of mailers is against the loyalty plan's terms, and a marketplace for these offers won't pass any reasonable person's sniff test of ethics. However, Citigroup and American didn't do themselves any favors by omitting the 24-month language from the promotional mailings and email offers for years. Unlike other banks that tie new card offers exclusively to the promotion's named recipients, Citi's online approval process allowed anyone to change the name and often let several people apply using the same unique code.

There's a lot to unpack here. Churners aren't innocent, but they can counter that loopholes and back doors left unchecked for years were baiting them. On the other hand, Citi isn't the only bank with an AAdvantage-branded credit card, but its peers have checks in place to make sure that only real intended recipients are the one applying for new plastic.

American Airlines may think it's in the right to cancel flights and zero out accounts that also include legitimately earned AAdvantage miles, but as the hunt widens and the media stories covering the situation expand, the roles of heroes and villains -- and winners and losers -- may become interchangeable. American Airlines and Citigroup have more to lose than just churners.

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Rick Munarriz owns shares of American Airlines Group. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.