Yes because they are required to charge non reward customers the same amount and competitive markets forced prices down.
Suppose the reward is 2% so someone is paying 98% of the listed price. Now if everyone was a rewards customer the price just moves to 102.04$ from 100$, in effect nothing changes. However not everyone uses a rewards card, and the prices stay the same.
Net result with an even split would be that 98% discount applies to 101$ and Bob an unrelated customer is stuck paying the extra 1% to give the reward customer their 1% savings.
However, it’s not split 50/50 so rewards cards sometimes have more victims funding their rewards and other times few victims and it’s effectively just a marketing gimmick.
It’s much more nuanced than that. True a 2% cash back card costs the company 2%.
But a 4% card that gives you credit card points doesn’t cost the card issuer 4%.
If you transfer 4 Amex points for 4 Delta Skymiles. Amex isn’t paying Delta 1 cents per Skymile.
On the other hand, you can then replace a $1 you would spend on Delta with 0.86 Skymiles (ie 1 Skymile is worth 1.4 cents). It’s also not costing Delta 1.4 cents to fly you.
If you use your credit card points to buy on a credit card run travel portal, the credit card company is getting a kickback from airlines and hotels.
Yes because they are required to charge non reward customers the same amount and competitive markets forced prices down.
Suppose the reward is 2% so someone is paying 98% of the listed price. Now if everyone was a rewards customer the price just moves to 102.04$ from 100$, in effect nothing changes. However not everyone uses a rewards card, and the prices stay the same.
Net result with an even split would be that 98% discount applies to 101$ and Bob an unrelated customer is stuck paying the extra 1% to give the reward customer their 1% savings.
However, it’s not split 50/50 so rewards cards sometimes have more victims funding their rewards and other times few victims and it’s effectively just a marketing gimmick.
It’s much more nuanced than that. True a 2% cash back card costs the company 2%.
But a 4% card that gives you credit card points doesn’t cost the card issuer 4%.
If you transfer 4 Amex points for 4 Delta Skymiles. Amex isn’t paying Delta 1 cents per Skymile.
On the other hand, you can then replace a $1 you would spend on Delta with 0.86 Skymiles (ie 1 Skymile is worth 1.4 cents). It’s also not costing Delta 1.4 cents to fly you.
If you use your credit card points to buy on a credit card run travel portal, the credit card company is getting a kickback from airlines and hotels.
It’s turtles all of the way down.
> a 4% card that gives you credit card points…
Sure, plenty of cars just lie about how valuable the rewards are. That’s a completely different game.
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