3 ms·

Theres a net gain between credit card rewards and higher prices for reward card users?

Retric 3y ago
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.
- scarface_74 3y 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.
  - Retric 3y ago
    > 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.
    - scarface_74 3y ago
      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
      - Retric 3y ago
        > 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-with-miles#:~:text=And%20there%20are%20no%20blackout%20dates%20on%20any%20Delta%20Air%20Lines%20flight.&text=GET%20THE%20MOST%20OUT%20OF,partners%20(excluding%20Basic%20Economy%20fares) https://www.delta.com/us/en/skymiles/how-to-use-miles/travel...
        scarface_74 3y ago
        Amex charge cards encourage you to pay off your balance every month. But award bookings through partners have their own hoops. But I don’t have to “fly J to Bali” - a popular meme in r/awardtravel. I look for economy flights. The flight I was talking about to see my parents is to an airport with only three commercial flights a day inbound and two outbound. All to and from Atlanta. So of course it is over priced

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.

scarface_74 3y 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.
- Retric 3y ago
  > 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.
  - scarface_74 3y ago
    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
    - Retric 3y ago
      > 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-with-miles#:~:text=And%20there%20are%20no%20blackout%20dates%20on%20any%20Delta%20Air%20Lines%20flight.&text=GET%20THE%20MOST%20OUT%20OF,partners%20(excluding%20Basic%20Economy%20fares) https://www.delta.com/us/en/skymiles/how-to-use-miles/travel...
      - scarface_74 3y ago
        Amex charge cards encourage you to pay off your balance every month. But award bookings through partners have their own hoops. But I don’t have to “fly J to Bali” - a popular meme in r/awardtravel. I look for economy flights. The flight I was talking about to see my parents is to an airport with only three commercial flights a day inbound and two outbound. All to and from Atlanta. So of course it is over priced