Comment by scarface_74
2 years ago
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.
I’m not saying it’s a lie. 4 Amex Membership Rewards points are worth around 6% if I transfer them to Delta instead of spending cash on the same ticket.
If I transfer those same points to Flying Blue/KLM (a Netherlands airline), since they are a partner with Delta, I can buy a domestic round trip flight in the US on Delta through them where the cash price to fly into my parents small regional airport is $508.
The price in points is 17K. That makes those same 4 points worth 12% back per dollar.
This isn’t about “only the rich get value”. It’s about the well informed.
4 points per dollar is what you get back on the Amex Gold for groceries.
You could never buy points as cheaply as Amex. For all intents and purposes, credit card users are collectively buying miles in bulk
> This isn’t about “only the rich get value”. It’s about the well informed.
It’s about people who can pay off the card every month not the rich. These cars charge high interest rates which can very quickly offset any benefit unless you have the resources to never use them as debt. Ie the capacity to have a ~months worth of spending in unused credit.
> You could never buy points as cheaply as Amex. For all intents and purposes, credit card users are collectively buying miles in bulk.
Many customers get discounts on ticket prices that don’t apply when using air miles. It’s another form of price discrimination designed to maximize profits not specifically a discount for bulk purchase.
“Awards are subject to capacity controls. Awards may require higher prices depending on routing rules and restrictions. Exceptions to these rules may require additional mileage or taxes and fees. Travel to all destinations within region may not be available at lowest price. …
Award seats may be limited and not available on all Delta Connection flights.” etc https://www.delta.com/us/en/skymiles/how-to-use-miles/travel...
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