Airlines Make More Money Selling Miles Than Seats (expressnews.com)

An anonymous reader shares a report: Does your wallet contain an airline-branded credit card? If so, your daily Starbucks visits, iTunes selections and dining habits serve a critical role in keeping the U.S. airline industry fat and happy. For carriers such as American Airlines, riding Citigroup Inc. plastic, or Delta, on American Express Co., these programs are a cash cow, a golden goose -- or any other fiscal livestock you care to conjure. Each mile fetches an airline anywhere from 1.5 cents to 2.5 cents, and the big banks amass those miles by the billions (alternative source), doling them out to cardholders each month. For the banks, people who pay annual fees for those cards in order to accumulate miles are the closest thing to a sure bet. These consumers typically have higher-than-average incomes and spend more on their cards, generating merchant fees for the banks. They also tend to maintain high credit scores, which means they pay their bills on time and banks experience fewer defaults. The airline-miles business, formally known as loyalty programs, has become a high-margin enterprise that's grown in size and value amid airline consolidation, with carriers keen to expand credit card rolls and see loyalty members spend more.

Comments

Speaking of airlines

[Anonymous Coward]

@United overbook #flight3411 and decided to force random passengers off the plane. Here's how they did it:

https://twitter.com/JayseDavid/status/851223662976004096

Re:Speaking of airlines

[Anonymous Coward]

are you suggesting that's a new practice? That has been happening for decades.

Re:Speaking of airlines

[bugs2squash]

You're usually pretty safe from being bumped once you're actually on the plane though. Silly people, imagining that once they've paid for something they have any kind of rights.

Re:Speaking of airlines

[Anonymous Coward]

Although it has been happening for decades it could become more commonplace as the airlines may intentionally overbook flights and those that used their "miles" for their ticket might be the first to go. Capitalism at its finest.

Re: Speaking of airlines

[Anonymous Coward]

I just read that in the news. I see lawsuits. :)

Re:Speaking of airlines

[Anonymous Coward]

Beating people up to remove them from planes after boarding is standard practice in the US?

Re:Speaking of airlines

[Anonymous Coward]

That's fucking bullshit man. Retweeting.

Re:Speaking of airlines

[swillden]

You're usually pretty safe from being bumped once you're actually on the plane though.

"Pretty safe", yes, but you've never been completely safe. That said, the FAA has some well-defined requirements about how they have to treat people who've been involuntarily bumped, which includes a hefty cash payment (equal, I believe, to the full round-trip fare) plus a seat on the next available flight (on any airline, in any class at or above the class you paid for). I've flown over a million miles, and I've been involuntarily bumped exactly once. I got a $600 check and a first class seat on another flight, on another airline, 30 minutes later. The seat they bought me was on a direct flight, so I actually got home before I would have if I hadn't been bumped. Oh, and they still gave me mileage credit for the flight they bumped me off of. All in all, I was quite happy with the arrangement.

Silly people, imagining that once they've paid for something they have any kind of rights.

You do have rights, but they don't include the right to refuse to exit the plane when the airline tells you to. Whatever the reason, whether it's a good one or not, if the flight attendants or captain tell you to get off, you get off or the police will be dragging you off. If they kicked you off involuntarily, and not as a result of anything you did, you do have a right to compensation and transportation.

Re:Speaking of airlines

[Archangel Michael]

But ... I have more rights than you, because my life is eminently more important than yours! I DEMAND JUSTICE!!!!

Re:Speaking of airlines

[dgatwood]

"Pretty safe", yes, but you've never been completely safe. That said, the FAA has some well-defined requirements about how they have to treat people who've been involuntarily bumped, which includes a hefty cash payment (equal, I believe, to the full round-trip fare) plus a seat on the next available flight (on any airline, in any class at or above the class you paid for).

How the heck is it even possible to get involuntarily bumped? Either you have a boarding pass with a seat assignment or you don't. Once you do, you have a seat. So this means they had to have taken someone who didn't have a seat and given that person a seat while forcing somebody else who already had a seat to give up that seat. That's completely idiotic. Just reassign the person who didn't have a seat before. They didn't check in early enough to get a seat, which was their decision. Why should people who spent the extra effort to check in and get their seat assignment have to suffer so that people who couldn't be bothered can take their seats?

The only even semi-plausible situation that could explain this would be if the equipment changed to a smaller plane, but even then, they should have known about the reduction in seats prior to boarding.

Re:Speaking of airlines

[Raenex]

That's fucking bullshit man. Retweeting.

Good job, anonymous Twitteratee. You are such a hero.

Re:Speaking of airlines

[jittles]

"Pretty safe", yes, but you've never been completely safe. That said, the FAA has some well-defined requirements about how they have to treat people who've been involuntarily bumped, which includes a hefty cash payment (equal, I believe, to the full round-trip fare) plus a seat on the next available flight (on any airline, in any class at or above the class you paid for).

How the heck is it even possible to get involuntarily bumped? Either you have a boarding pass with a seat assignment or you don't. Once you do, you have a seat. So this means they had to have taken someone who didn't have a seat and given that person a seat while forcing somebody else who already had a seat to give up that seat. That's completely idiotic. Just reassign the person who didn't have a seat before. They didn't check in early enough to get a seat, which was their decision. Why should people who spent the extra effort to check in and get their seat assignment have to suffer so that people who couldn't be bothered can take their seats?

The only even semi-plausible situation that could explain this would be if the equipment changed to a smaller plane, but even then, they should have known about the reduction in seats prior to boarding.

Because of several reasons. First of all, federal law allows the airline to overbook. Secondly, the plane is property of the airline. Third, the airplane itself is on property that is typically covered by federal law. You're also incorrectly assuming that United assigns seats based upon check-in. You pick your seat assignment when you book the ticket, or the airline picks one for you. They followed Federal law. The passenger was told that he needed to deplane. He refused. Once he did that, he was in violation of local and federal laws (federal because it was at an airport). He's lucky that he was not thrown in jail for trespass. It does not matter that he paid for a seat. Once his permission to be aboard the flight was revoked, he was required by law to deplane. The law also requires the airline to compensate him. They would have cut him a check and, as the GP says, probably booked him on a competing airline for free and given him a mileage credit. I've flown hundreds of thousands of miles and have never seen someone act this way, or seen someone be involuntarily bumped. I have had a schedule change screw me over in a similar way as this particular passenger. In that case, I was not given cash, but I did receive a new flight on a different airline and mileage credit for a flight that I would not have normally received miles for (it was an award flight that I had purchased with miles). The airlines will take care of you, they're required to. And even if there were no other flights that day, the passenger could have driven to Louisville the same day if he absolutely required it. People have been making a big deal about him being a doctor and his patients needing him. Well, what if he didn't show up for work because of a weather delay? There is no difference. His patients would have had to see an on-call doctor either way. The man should not feel entitled to fly just because he thinks he is more important than every other passenger on the plane.

Re: Speaking of airlines

[jittles]

I just read that in the news. I see lawsuits. :)

Since the passenger was trespassing at an airport (he was told to deplane), I don't believe the passenger has any grounds to sue. The airline will likely compensate him anyway, but he should have gone to jail.

Re:Speaking of airlines

[Anonymous Coward]

Just be surprised the airline doesn't charge people to get beaten up and removed from planes. That'll change soon though.

Re:Speaking of airlines

[sabri]

It does not matter that he paid for a seat.The man should not feel entitled to fly just because he thinks he is more important than every other passenger on the plane.

You should go and read this again. A medical doctor, flying to a patient for surgery, with a paid ticket, an assigned seat, sitting in that assigned seat after boarding that aircraft, is not entitled to fly?

Congratulations, you just made my top 10 of /. dumbest posters.

Re:Speaking of airlines

[swillden]

How the heck is it even possible to get involuntarily bumped?

There are lots of possibilities. In my case, they had screwed up and assigned two passengers the same seat. Another thing that can happen is when they bump a "normal" passenger in favor of a high-status passenger. I was diamond medallion on Delta for a while, and one of the perks that comes with that status is that the airline guarantees that they will sell you a seat on any flight, even if it's already excessively overbooked, and (implicitly) even if that means they have to get someone else off. This usually works out fine, because the high-status last-minute purchaser is paying full fare for the ticket and there are plenty of people who are willing to be bought off the plane for significantly less than that. But in rare cases complying with their commitment to the high-status passenger could require them to involuntarily bump someone.

In the case currently getting so much press, there was apparently a crew for another flight that immediately needed to get to the destination to crew another aircraft, due to some other snafu, so the airline decided to take some passengers off to make room for them, rather than canceling or further delaying another flight. Apparently they were unable to buy anyone off -- or possibly with all the passengers on board there was just no time to go through that process -- so they picked some passengers at random. The only other option I can think of would have been to get on the PA and announce an increasing sequence of cash payments until they got their four volunteers. From a financial perspective there's no point in offering more than the FAA's regulations define for involuntarily bumped passengers, though, so if they were already sure they wouldn't get a volunteer without going above that level (which they could know if they'd already had to offer high paymetns to buy people off even before the emergency need for four more seats cropped up), then from a strictly financial point of view it was best just to pick four.

Given the national PR that ensued after a bumped passenger refused to debark and ended up having to be hauled off by the police, that was a bad decision, but that's hindsight. What usually happens is what happened in my case, nothing much.

Re:Speaking of airlines

[jittles]

It does not matter that he paid for a seat.The man should not feel entitled to fly just because he thinks he is more important than every other passenger on the plane.

You should go and read this again. A medical doctor, flying to a patient for surgery, with a paid ticket, an assigned seat, sitting in that assigned seat after boarding that aircraft, is not entitled to fly? Congratulations, you just made my top 10 of /. dumbest posters.

Why don't you try reading the federal laws regarding air transportation? And why don't you read property laws? The airline is allowed to ask him to disembark from a plane for any reason at any time it is safe for him to deplane. He was asked to deplane. He refused and was therefore trespassing. Had he been flying Delta that exact same weekend there is a high probability he would not have been able to fly either. So what would his patient(s) have done? If you have a problem with the booking practices of airlines then you need to complain to your federal representatives.

Re:Speaking of airlines

[slew]

"Pretty safe", yes, but you've never been completely safe. That said, the FAA has some well-defined requirements about how they have to treat people who've been involuntarily bumped, which includes a hefty cash payment (equal, I believe, to the full round-trip fare) plus a seat on the next available flight (on any airline, in any class at or above the class you paid for).

How the heck is it even possible to get involuntarily bumped? Either you have a boarding pass with a seat assignment or you don't. Once you do, you have a seat. So this means they had to have taken someone who didn't have a seat and given that person a seat while forcing somebody else who already had a seat to give up that seat. That's completely idiotic. Just reassign the person who didn't have a seat before. They didn't check in early enough to get a seat, which was their decision. Why should people who spent the extra effort to check in and get their seat assignment have to suffer so that people who couldn't be bothered can take their seats?

The only even semi-plausible situation that could explain this would be if the equipment changed to a smaller plane, but even then, they should have known about the reduction in seats prior to boarding.

AFAIK, you can legally be "bumped" for any reason (including if you have a boarding pass or are even on the plane). Airlines are allowed to make pretty much any decisions (takeoff-weight limitations, allowing frequent fliers or connecting passengers priority, or net revenue concerns) as long as they provide the legally obligated compensation to the person who was denied carriage. The FAA requires passengers follow crew member instructions at all times including disembarking the plane when requested.

As to whether any of this is "idiotic" or causes people to "suffer", or hurts PR, those are other questions, but the practice of arbitrary denied boarding is certainly legal.

Re:Speaking of airlines

[Anonymous Coward]

He/she did more than you, troll.

Re:Speaking of airlines

[slew]

Beating people up to remove them from planes after boarding is standard practice in the US?

Forcibly removing passengers from planes that don't comply with crew-member instructions is standard practice in the US (as with most countries)
Its just that for some reason, in US society we have more citizens who refuse to comply with crew-member instructions, and many crew-members aren't trained to de-escalate tense situations very well.

Re:Speaking of airlines

[rjune]

It could have been worse, suppose they thought he was a guitar:

https://www.youtube.com/watch?...

They broke the guitar's neck

Re:Speaking of airlines

[bugs2squash]

That all sounds very reasonable. What are the odds that they walked up to the guy and explained it like you wrote ?

Re:Speaking of airlines

[Anonymous Coward]

But were you forcibly removed, hit, had your face bloodied? Were you a doctor who had patients to see? Was the flight not 30 minute later, but instead the next day?

Re:Speaking of airlines

[swillden]

But were you forcibly removed, hit, had your face bloodied? Were you a doctor who had patients to see? Was the flight not 30 minute later, but instead the next day?

No, because I wasn't foolish enough to refuse the orders of the crew, which carry the weight of federal law.

Re:Speaking of airlines

[swillden]

That all sounds very reasonable. What are the odds that they walked up to the guy and explained it like you wrote ?

Impossible to say. There are a thousand ways it could have gone down, including the passenger beginning to foam at the mouth as soon as they said "Sir, we're going to need you to deplane", and the crewmember saying nothing but sending a cop to deliver a terse version of the message, backed up by force. I'm sure the actual event was somewhere in between.

Re:Speaking of airlines

[Anonymous Coward]

2008: united breaks guitars
2017: united breaks passengers

Re:Speaking of airlines

[Anonymous Coward]

This isn't about overbooking. The passenger had a boarding pass, not just a ticket. He was in his assigned seat. If they sell more tickets than there are seats, then that's overbooking. It is something else entirely if you assign someone a seat and let that someone board the plane, and then give that seat to someone else.

Re:Speaking of airlines

[Dorianny]

I say bravo to this brave guy for bringing to people's attention this completely OUTRAGES Federal law that forces Police officers to treat Airline customers like criminals at the Airlines whim. Everyone should contact their representatives to remind them that they still represent us (in theory at least)

Re:Speaking of airlines

[imidan]

this means they had to have taken someone who didn't have a seat and given that person a seat while forcing somebody else who already had a seat to give up that seat

Yes, that's exactly what they did. The people who didn't have seats were employees of United Airlines who needed to be on the flight so they could crew some other flight later. So they randomly chose four chumps to kick off the plane. If they'd taken care of this at the gate before boarding, we wouldn't be reading about it in the news. Someone really fucked up.

After this shitshow, they had to get everyone off the plane so they could sanitize all the surfaces that were exposed to the blood of the passenger they injured.

Re:Speaking of airlines

[jittles]

I say bravo to this brave guy for bringing to people's attention this completely OUTRAGES Federal law that forces Police officers to treat Airline customers like criminals at the Airlines whim. Everyone should contact their representatives to remind them that they still represent us (in theory at least)

You realize that this can literally happen anywhere, right? Including a hospital? You have no legal right to be on private property after being asked to leave. Period.

Re:Speaking of airlines

[AthanasiusKircher]

What usually happens is what happened in my case, nothing much.

Just to be clear on what the guidelines are, they're here. According to your description, since you actually arrived before you were supposed to, the airline technically didn't have to pay compensation at all.

As you can read in the guidelines, for involuntary bumping they aren't technically required to give you a big check UNLESS you won't arrive on-time (or within one hour of your scheduled arrival). Nor do they have to place you on the next available seat even if in a higher class or whatever -- though they face additionally harsh financial penalties if they get you to your destination even a couple hours late, so it's often worth their expense to bump you to a higher class and get you there as close to on-time as possible.

Re:Speaking of airlines

[MillionthMonkey]

If you have a problem with the booking practices of airlines then you need to complain to your federal representatives.

IOW, GFY.

Re:Speaking of airlines

[Anonymous Coward]

Exactly. Get off my plane is no different from get out of my car, get out of my house, etc. except that there's federal law to back up your ejection that wouldn't be available at your house. Even if there weren't federal rules governing exactly this situation, a passenger's remedy would be to sue for breach of contract, not to assume they can just stay where they are.

Re:Speaking of airlines

[swillden]

Interesting. Thanks!

Re:Speaking of airlines

[MillionthMonkey]

The man should not feel entitled to fly just because he thinks he is more important than every other passenger on the plane.

Um, I think he assumed he was as important as every other passenger, not more important.

The job market for Russian trolls must have slumped after the election, nice to see you're working again.

Re:Speaking of airlines

[ShanghaiBill]

Either you have a boarding pass with a seat assignment or you don't. Once you do, you have a seat.

No you don't.

So this means they had to have taken someone who didn't have a seat and given that person a seat while forcing somebody else who already had a seat to give up that seat.

There are situations where the airline is required by law to do this. For instance, a child under 12 must be seated with a responsible adult, and if the airline needs to reseat or bump someone to do that, then that is what they are required to do. This happens all the time.

Re:Speaking of airlines

[jittles]

The man should not feel entitled to fly just because he thinks he is more important than every other passenger on the plane.

Um, I think he assumed he was as important as every other passenger, not more important. The job market for Russian trolls must have slumped after the election, nice to see you're working again.

And yet he was the only one of the four people who were involuntarily asked to deplane that refused to do so. So clearly he felt more entitled than the other three. And like I've said countless times he was breaking the law by trespassing. It could quite literally happen in any setting, including a hospital. If you're asked to leave, you need to leave. If you feel like you're being asked to leave unfairly then you need to protest that AFTER you leave because the law clearly is not in your favor once you refuse to comply.

Re:Speaking of airlines

[Anonymous Coward]

There are a thousand ways it could have gone down, including the passenger beginning to foam at the mouth as soon as they said "Sir, we're going to need you to deplane"

Indeed. That shouldn't be an unexpected reaction such an atrocity of a word as "deplane".

Re:Speaking of airlines

[Anonymous Coward]

You guys are arguing about two different things:
jittles: If asked to leave an area you don't own, you're required to leave it.
sabri: Airlines should have enough policies in place that they shouldn't need to ask anyone to leave who is already in their assigned seat. The people who are unable to sit down should be the ones to not board the plane in the first place.

How about you both take a moment to understand each other's post before replying?

Airlines are now turning into auctions. Pay more than the guy before you and you'll kick him out even if he's already on the plane.

Re:Speaking of airlines

[Dorianny]

You realize that this can literally happen anywhere, right? Including a hospital? You have no legal right to be on private property after being asked to leave. Period.

You do realize that there is not Constitutional right to operating a business. Business is regulated and often requires a license, which can be revoked just as easily as permission to be on private property. If a business doesn't serve the interests of the community it should not operate. Period

Re: Speaking of airlines

[Anonymous Coward]

The people being boarded and thus bumping others off the plane were a flight crew for a departure flight from the destination airport. The four people that were bumped were offered compensation.

Why is this douche that screamed like a little girl more important than anyone else on that plane, and all the passengers on the next flight too?

What a sense of entitlement.

Re: Speaking of airlines

[Anonymous Coward]

they didnt, the manager came on board and said, curtly, 4 people get off or we choose 4 people. there was none of the friendly skies mumbo jumbo.

Re: Speaking of airlines

[Anonymous Coward]

There were four people that got bumped from the flight. Only one caused a shit fit and needed security to toss his ass off. Sounds a lot like his problem.

Re:Speaking of airlines

[jittles]

You do realize that there is not Constitutional right to operating a business. Business is regulated and often requires a license, which can be revoked just as easily as permission to be on private property. If a business doesn't serve the interests of the community it should not operate. Period

Like I said, had he complied with the law (and left the premises when requested) the airline WOULD have accommodated and compensated him. They're required to by law. I'm not saying that the airline handled this in the most appropriate way, but the guy broke the law. Everyone is giving United a bad time while neglecting the personal responsibility that this passenger had to obey the law himself. I have a problem with that. Both parties behaved inappropriately but ultimately it was the passenger who broke the law, not the airline.

Re:Speaking of airlines

[Shirley Marquez]

I was diamond medallion on Delta for a while, and one of the perks that comes with that status is that the airline guarantees that they will sell you a seat on any flight, even if it's already excessively overbooked, and (implicitly) even if that means they have to get someone else off. This usually works out fine, because the high-status last-minute purchaser is paying full fare for the ticket and there are plenty of people who are willing to be bought off the plane for significantly less than that. But in rare cases complying with their commitment to the high-status passenger could require them to involuntarily bump someone.

This is exactly the kind of problem that exists in the system: that some passengers are more equal than others. Thus the outrage. The "random" selection of passengers who were asked to deplane presumably did not include any of those more equal people.

Re:Speaking of airlines

[swillden]

I was diamond medallion on Delta for a while, and one of the perks that comes with that status is that the airline guarantees that they will sell you a seat on any flight, even if it's already excessively overbooked, and (implicitly) even if that means they have to get someone else off. This usually works out fine, because the high-status last-minute purchaser is paying full fare for the ticket and there are plenty of people who are willing to be bought off the plane for significantly less than that. But in rare cases complying with their commitment to the high-status passenger could require them to involuntarily bump someone.

This is exactly the kind of problem that exists in the system: that some passengers are more equal than others. Thus the outrage. The "random" selection of passengers who were asked to deplane presumably did not include any of those more equal people.

From the airline's point of view, some passengers *are* more equal than others. If you get in a situation where you have to pick someone to favor, it's much more important to serve a businessman who spends (well, whose employer spends) $100K per year on flights (many of them full-fare tickets) than a person who takes one deeply-discounted $200 bargain flight every three years. If you lose the latter's business, you haven't lost much. For that matter, the person with the deeply-discounted fare ranks below the person who isn't a frequent flier but bought a more expensive ticket. On many routes, airlines make basically all of their money from the repeat business travelers and they see the other travelers as just a way to avoid flying with unpaid seats. That's why those deep discount fares are often so ridiculously cheap.

I'd guess that if the random selection excluded high-status frequent flyers, it also excluded those who'd paid full fare. In practice, though, I doubt they excluded anyone from the selection pool. Heck, if I were in their shoes and had to pick, I'd pick exclusively people from the second-highest frequent flyer class. I'd want to pick experienced, regular travelers because they'll react much more calmly. That would make the highest frequent flyer class the ideal choices, except that they have that seat guarantee.

Re:Speaking of airlines

[david_thornley]

A doctor going to perform surgery on a patient may have very good reasons for wanting to stay on the flight he's on. Protesting after leaving the plane means leaving the plane and being delayed.

Re:Speaking of airlines

[david_thornley]

Forcibly removing a passenger isn't the same as beating a passenger up in the process of forcible removal. There might well have been excessive violence.

Re:Speaking of airlines

[jittles]

A doctor going to perform surgery on a patient may have very good reasons for wanting to stay on the flight he's on. Protesting after leaving the plane means leaving the plane and being delayed.

Is this some life saving surgery? Doubtful! No one would be flying in for that. They'd have someone on hand. And as I've said, they have on-call physicians that handle such a situation. Do you think he'd be the first doctor ever to miss a surgery because of travel problems, illness, or a myriad of other reasons?

Re:Speaking of airlines

[david_thornley]

Lots of things that have happened before that are undesirable to happen again. Personally, I've been just as happy to have the right people perform my surgeries.

Paywalled.

[6Yankee]

Can't RTFA.

Re:Paywalled.

[Anonymous Coward]

https://www.bloomberg.com/news/articles/2017-03-31/airlines-make-more-money-selling-miles-than-seats is a better link.

Re:Paywalled.

[6Yankee]

Thanks AC.

Re:Paywalled.

[6Yankee]

Which asshat modded that Troll?

I only use 'cash back' credit cards

[sodul]

With cash back I get a very concrete view of what I'm getting back with real dollars and there is no blackout period or any of that BS. I only take the plane when I really need to though, with the trip back to europe every other year to visit family, and do road trips for most vacations.

Re: I only use 'cash back' credit cards

[Anonymous Coward]

I get 1% on all purchases and I think 2% on gas. I've been trying to find better but I can't find one.

Re:I only use 'cash back' credit cards

[swb]

I gave up on a miles credit card when the only tickets I could get were on 3-layover flights to Omaha in February. The airlines took all the value out of the miles.

A switch to US Bank was a slight improvement -- their rewards points could buy tickets about 2/3rds of the value of the way it used to be with airline points, or you could buy stupid shit from the catalog.

Switching to the Costco card was the best deal ever -- the reward rates are great, and I get $400 in cash nearly every year.

Re:I only use 'cash back' credit cards

[dgatwood]

With cash back I get a very concrete view of what I'm getting back with real dollars and there is no blackout period or any of that BS. I only take the plane when I really need to though, with the trip back to europe every other year to visit family, and do road trips for most vacations.

That's really the only smart choice. Those airline cards were barely worth it when they were free. Once the airlines realized that there were enough suckers who would pay an annual fee for them, they became worthless junk.

With airline mileage cards, you get the equivalent of 1–1.5 cents per dollar spent. There are plenty of cash-back cards that pay that (and some that pay even more on various categories), and as you said, no blackout periods when paying with real dollars, so unless your travel plans are flexible, you'll probably find that you keep building up miles and aren't ever able to spend them. The only real benefit is that you get back 2% on airline travel. For that extra .5%, you pay $100 in annual fees. So for the airline mile cards to actually be worth more than you're spending in fees, you would have to spend a whopping $20,000 on airline travel every year. And if you make the kind of money where you can afford to spend that much money on airline flights, you don't care about getting cash back anyway.

Given how bad a deal the airline cards are, it is no real surprise, then, that the airlines are complaining about not enough people getting their cards. If they were free, they would be worth it for the extra half percent on airline ticket purchases. With a fee, they're a complete joke. (The high-end airline cards at least give you access to the airlines' special first-class lounge, which might be a benefit for some people if they would otherwise have done that, but the $99 cards are basically worthless.)

Right now, IMO, the best deal is Amazon's card. It pays 3% back on Amazon purchases (5% if you're a Prime member, which means your Prime membership becomes free at $5,000 in annual Amazon purchases), 2% on gas stations and supermarkets, and 1% everywhere else. For most people, this averages out to significantly more money than the airline cards, and there's no annual fee, so there's no downside if you find a better deal in a given month (e.g. when Citi or Chase gives 5% on one of those categories for a quarter).

Re: I only use 'cash back' credit cards

[SScorpio]

Citi Double Cash. No annual fee, 2% back on everything.

Store cards will give better deals, just only use each card at the store it's from.

Re: I only use 'cash back' credit cards

[Anonymous Coward]

Fidelity will do two percent cash back on their Visa card, but it has to go into a fidelity account

Re:I only use 'cash back' credit cards

[Anubis IV]

Likewise. People always point out that the miles are a cheaper way to fly than paying with money, but that presupposes you'll fly in the first place. If that's true for you, then great, that's money (maybe) saved. If not, then why not enjoy the fact that a trip not taken is cheaper than either using miles or using cash?

When we got married, my wife was big on points rewards cards that offered watches, tech toys, and other such things. She pointed to a few things she bought with her points over the course of several years. When I asked how many of those things she would have bought in cash, had they handed her the cash instead, she said she wouldn't have bought any of them. When I showed her the prices should would have paid had she bought those things herself, she realized she wasn't actually getting a great deal at all (e.g. she thought the Apple TV 3rd gen was $100+ at retail, when it was actually $69 at the time). When I pointed to the cash rewards I had gotten from my card over that same period of time, she immediately switched cards.

Cash is fungible. I can apply it however I want, I can change my mind about how I want to use it, and I can accrue interest on it too. Points? Not so much. Miles? Not so much. When using those systems I'm tied to those rewards, and my currency in those systems is out of my control and subject to capricious rules designed to ensure that I get as little benefit as possible.

Re: I only use 'cash back' credit cards

[Anonymous Coward]

An Amazon Visa card (through Citi) pays that (1%/2%), and 3% on purchases through Amazon. The catch is that it's not actually cash back, but Amazon credits (ie, cash you can only spend at Amazon). Still, if (like me) you buy a lot of stuff through Amazon, that's not a bad deal.

Re:I only use 'cash back' credit cards

[Anonymous Coward]

As if miles weren't the equivalent of cash back...

It's just simple math. Miles are worth real money, even for those with fear of flying, as you can convert them to pay for hotel rooms, wine, rental cars, and what not.

Sure, not all cards are good value. But some mileage program CCs as well as hotel-chain CCs are so valuable that some people do CC churning. (You manufacture CC spending to reach the required minimum spend that unlocks miles/points. E.g., buying gift cards which are easy to resell etc.

Re:I only use 'cash back' credit cards

[the_B0fh]

It can be useful. I just got 100k points on a chase card. I can get a return ticket from US to Asia for that. Typically $1000+ for that ticket.

Once I've claimed it and used it, I can just cancel the card, no harm, no foul.

Re:I only use 'cash back' credit cards

[Anubis IV]

Absolutely. I'm not saying that they're entirely devoid of merit. For people who are traveling regularly, they definitely can be well worth it. But I'd wager that most people view rewards miles as a way to afford a trip that they otherwise wouldn't have taken in the first place. For those people, the benefits are questionable.

Re:I only use 'cash back' credit cards

[piojo]

As if miles weren't the equivalent of cash back...

It's just simple math. Miles are worth real money, even for those with fear of flying, as you can convert them to pay for hotel rooms, wine, rental cars, and what not.

That's nuts. None of that other stuff is going to have good value for the dollar (purchased through deals your credit card company instead of the free market), and it has nearly zero value if you don't desire hotels/wine/cars at that moment. Hotels vouchers are not fungible with cash unless you can sell them.

If I could trade airline miles for power tools or single malt whisky, it would be another matter entirely.

Re: I only use 'cash back' credit cards

[SScorpio]

Not sure if it's different outside the US, but the Amazon Visa is through Chase not Citi. On Chase's site you can apply the cash as a credit against your statement, though I think you can also get a check if you really wanted to.

If you have Prime the Amazon Rewards, becomes an Amazon Prime Rewards card and gives you 5% back on Amazon purchases.

The recent changes to the card also make it the only no annual fee card that also doesn't charge a foreign transaction fee that I could find.

Article is paywalled.

[Anonymous Coward]

The article is paywalled. Was that intentional?

A question (from someone witout a credit card)

[Anonymous Coward]

Can you also get a credit card that doesn't dole out air miles, but is somehow cheaper in other ways?

Personally, I would prefer to choose my own consumption patterns.

Re:A question (from someone witout a credit card)

[raburton]

Cheaper? That seems to imply you're paying for them in the first place. In the UK credit cards are generally free. Sure there are a few offered for a fee, in return for something you probably don't want (like travel insurance that doesn't cover winter sports, or all the world, and costs more than a regular policy to upgrade it, or some other pointless benefits), but they aren't popular. In fact credit cards with cashback are pretty common here. I get 1% of everything back on my card. I don't know how that compares in value terms to airmiles, but they wouldn't be as popular here. I think people here fly less with big carriers that use airmiles. Most of the time when I fly it's not too far and I take a budget airline for £20-30 a flight.
Paying for banking services never really caught on in the UK. There have been an increase in paid current accounts in the UK in recent years, but they have had to offer perks that genuinely offset the fee to get people to take them, as cashback again. I do have a paid current account, I pay £5 a month and get I get back (for example, last month) £37 in much higher than normal rate of interest and cashback on my direct debits, as cash straight back into the account every month. It's a no-brainer, as you America's would say. But paying to collect points is not popular here.

Re: A question (from someone witout a credit card)

[orlanz]

There are plenty of options. Other point systems and even cash back. Some are 1-1.5% cash back. Depending on your situation and spending habits that's pretty much the equivalent range the points system provide... maybe up to 2% return on spending.

Many of these cards belong to business expenses such as hotel nights, dining points, and travel points. The benefits are gathered by business expenses and used for personal benefits. Outside that, unless you are a well planning spender the points systems are mainly a gimmick. Same with cash back but less so.

Most cards have no maintenance fees if paid off monthly. But all charge a lot if you carry a loan/balance.

Re:A question (from someone witout a credit card)

[Anonymous Coward]

Cheaper? That seems to imply you're paying for them in the first place.

It's ok that you didn't RTFA, but at least read the Slashdot summary! From the summary:

For the banks, people who pay annual fees for those cards in order to accumulate miles are the closest thing to a sure bet.

This is about the kind of people who are paying for their credit cards. AC poster is basically asking, "Can I stop being one of those people?" (Or more likely: if I want to stop being one of those people, what's the best deal out there?)

Sure there are a few offered for a fee, in return for something you probably don't want (like travel insurance that doesn't cover winter sports, or all the world, and costs more than a regular policy to upgrade it, or some other pointless benefits), but they aren't popular.

Or in USA, the thing you might not want: airline credits (and where you might be paying more for those credits than they're worth).

Paying for banking services never really caught on in the UK

This is in USA.

I think people here fly less with big carriers that use airmiles. Most of the time when I fly it's not too far and I take a budget airline for £20-30 a flight.

The other thing you guys have going on in that part of the world, is a way more competitive airline industry than in US. Your governments are slightly less corrupt and more into free markets, where there's lot of competition, whereas our representatives sell laws to our industries, intended to create barriers to entry into the market. Flying costs more. (But also: the distances are greater, too, so it's not quite apples-to-apples.)

Re: A question (from someone witout a credit card)

[AvitarX]

Citi does 1% on purchase then 1% on payment, so if you don't carry a balance, it's effectively 2% back, as cash (well as payment, but close enough).

Re:A question (from someone witout a credit card)

[hibiki_r]

It's not really about the kind of people that pay for the credit cards either: A CC company can make plenty of money if you pay everything in full: they only really lose if you don't pay.

In most cases, the one that pays for the miles is the merchant, in interchange rate fees. In practice, a bank can end up charging almost 2% for those, if the card is really good for the consumer. People that get rewards use their card more. You get your 1% in cash back/miles, and the rest is what the bank really makes. Cards are worse in Europe because those fees are limited, and thus the bank would lose money if they handed you the same perks American cards give. As a merchant, you build your fees into the pricing structure.

So who really loses? In practice, the person that pays cash without the rewards and doesn't get a discount.

Re:A question (from someone witout a credit card)

[AthanasiusKircher]

In the UK credit cards are generally free. Sure there are a few offered for a fee, in return for something you probably don't want

Just to be clear, in the US credit cards are generally "free" (i.e., with no annual fee) too, though airline cards tend to be one major exception. Airline cards almost always have an annual fee. Other cards with fees in the US generally serve two markets: (1) people with VERY poor or no credit, and (2) wealthier people who want cards with very specific "luxury" perks. Some cards also offer higher rates of cash back or whatever perks for an annual fee -- though often these higher rates tend to be capped in such a way that they're only worth it in certain circumstances.

So, to answer the GP's question -- at least in the U.S., it's often quite easy to find card options with no fees, unless your credit is really screwed up for some reason. (And yes, if you're older and don't yet have a credit card, and if you don't have another record of steady payments on a loan or something, that counts as having "screwed up credit" because the vast majority of people establish credit histories by the time they are in their mid-20s or so.)

Nothing to see here move along.

[Anonymous Coward]

There are several industries where credit makes comparable or more revenue for companies than their "main" focus. Film at 11! Err.., or more like never.

  Credit (usury) is evil. No? Wait until this "scheme" collapses, see what happens.

Not exactly

[Chewbacon]

A title discrepancy here. While they do make more money giving incentives for using their branded credit card, literally buying miles is for suckers, which most frequent fliers know and they do not buy them.

Re:Not exactly

[bluefoxlucid]

Frequent fliers are, by definition, flying frequently. The summary seems to suggest that frequent flier miles are a huge free hand-out to airlines; yet aren't the frequent fliers actually consuming those miles, rather than letting them default and thus paying for them (or, well, diffusing the price through consumable goods, thus having everyone pitch in a little to pay for them) and not using them?

Re:Not exactly

[Dayze!Confused]

Banks purchase these miles in bundles of billions, giving the airlines a nice fat line to pad their paperwork with. If miles expire, or otherwise go unused then that is money in the bank for the airlines. Not every person who has points is savvy with how to use them. You can get 3-4c/mi if you like international business class. Most aim for about a 2c/mi redemption rate.

I'm flying international business round trip on JAL to SE Asia for 140,000mi, or about $1400. A round trip economy ticket is about the same price, whereas the business ticket would run somewhere around $4000. I do have to be more flexible in my timing of vacations, but I'm willing to work with that to have 6ft of legroom and lay flat seating.

Re:Not exactly

[bluefoxlucid]

We spent $160,000 here over a few months to analyze the results of an upcoming event. We have some really smart people who determined who would buy what and how much they'd pay, and projected the most-likely outcomes so that we could position marketing and take actions which would cause outcomes worth several tens of millions versus just entering blind using a glance at historical data and some expert judgment.

Do you honestly think banks don't do that kind of simulation? It's short-term, multi-variable statistics calculating the probability ranges of a market, not long-term economic models trying to figure out what businesses or sectors will be strong or how the global market will grow across the next 20 years. Banks don't buy this shit in bundles and lose 40%; they purchase what their customers accrue, likely on a quarterly purchase, carrying over what's left from last quarter.

Customers might handle things less-well, and they pay for the privilege. On the other hand, I'm pretty sure that frequent fliers are actually getting frequent flier miles; they might not be using them in the most-efficient manner, but they're getting them and using them.

Re:Not exactly

[Anonymous Coward]

A title discrepancy here. While they do make more money giving incentives for using their branded credit card, literally buying miles is for suckers, which most frequent fliers know and they do not buy them.

This is not fliers buying miles (which is very rarely a good idea). This is about banks buying miles from airlines to give away as rewards for using credit cards. Personally, I prefer the banks just give me that cash. Miles are nearly impossible for me to use.

Paywall

[belgianpainter]

Here's the non-paywalled article from a week and a half ago https://www.bloomberg.com/news...

Really just a tax dodge

[lfp98]

What's the point of all these "loyalty" programs? Mostly to evade taxes. Highly paid management personnel might go on dozens of business trips a year, accumulating multiple free flights that they then typically use for personal travel. But of course they pay no income tax on the miles earned, even though by any reasonable definition it is compensation. The rest of us ordinary folks are just tagging along for the ride, and the airlines are increasingly finding ways to lock us out and restrict rewards to the high-rollers.

Re:Really just a tax dodge

[bluefoxlucid]

Actually it would seem the extra merchant fees are diffused through merchant pricing, as the customer doesn't pay extra to use his card. For example: if fees of 1.5%, 3.5%, and 2.2% show up, averaging 1.8% of all purchases (including cash transactions with no fee), then all goods sold by the merchant get marked-up by 1.8% to include those costs. That 1.8% pays for the frequent flier miles (3.5% fee on those cards).

Those miles are purchased with consumer after-tax money, and taxing them as additional income would be double-taxation of consumer income. QED. By the by, the 1.5% cash back you get on your card is also paid for by ... well, the rest of us who have lesser cards with lower rewards, or those paranoid schizophrenics who only use cash to keep their movements hidden from the gub'mint.

Re:Really just a tax dodge

[Balthisar]

"Evade" would mean that this is an intention maneuver to defraud the government, so I think you mean "avoid." But in any case, I think that the vast majority of people who participate in loyalty programs don't even consider the tax consequences. In effect, it might be a tax avoidance scheme, but in practice, it's de minimus, and no one gives great thought to is other than envious people who don't have the ability to participate.

I'll admit, I have a lot of hotel rewards from frequent business travel, yet I don't think of this in terms of taxes. It's just a perquisite from giving up so much of my own, private, personal time in exchange for business travel (despite popular perception, it's not glamorous and exciting, and it means time away from personal pursuits). Tax me on the value? Yeah, ok, I'll still take the perk.

I also get a lot of rewards from my credit card spend (the Sapphire Reserve in the first year is paying for my Easter vacation). I'm not sure how you could argue that this is tax avoidance; it's a reward for paying my annual fee and charging enough to make me profitable to my bank. Even my previous card spend made for the occasional hotel or plane ticket, on personal use.

Yeah, lots of people are subsidizing this, but that's simply the way the world works. Everyone who manages to pay their bills on time has an equal opportunity for the same benefits. I struggled through my 20's and 30's subsidizing better people than me, and I'm not ashamed to reap the rewards now. In a way, it's like Social Security.

Re:Really just a tax dodge

[GuB-42]

I'd even go further and say it is a mild form of embezzlement, corruption, or at least some kind of fraud.
Employees travel on their company's account and get miles on their personal account. It means they essentially get to use company's money for themselves. Companies are usually OK with it as it is essentially an undeclared perk, and we are back to tax evasion.
The reason it is corruption is that when employees get to plan travels for themselves, what airlines do is essentially pay these employees personally in order to influence the way they spend their company's money.

Huh?

[argStyopa]

Why would anyone be dumb enough to pay a premium for a card that gets miles?

Neither our personal credit card (US Bank Flexperks) nor our work card (HHonors Amex) costs ANY annual fee, and we get gobs of miles.

Re:Huh?

[Anonymous Coward]

I pay for AMEX Platinum and get 5x points on airfare. I am a consultant that flies first class weekly and this means I get nearly 10% of the value of the tickets my company pays for in my pocket, AND I get free lounge access as a perk

Colour me unsuprised.

[mjwx]

Risking a downmod but...

Being familiar with the financial services industry, this is hardly a shock to me. Those addled to credit cards always balk when I ask "Who is paying for your bonuses/rewards/cashback" and then act with utter denial when I say "You are". They refuse to believe that banks (and other FS institutions) simply dont give things out for free, because there is no overt fee, they think no fee exists.

Well let me screw your tiny little minds.

Long ago, banks figured out fees turned customers off. So they took the fees off the card user and put them onto the merchants who accept the cards. Then some bright spark came up with the idea of adding in rewards to get you to use your credit card more. Because of this, merchants are at a competitive disadvantage if they dont accept credit cards and a financial disadvantage if they do, damned if you do and damned if you dont.

So here's how it works.
1. Bank encourages you to use your card.
2. Bank charges merchant to accept card (or the merchant doesn't get paid).
3. Merchant has to take it sans lube and raises prices to compensate.
4. Bank passes on a pittance of what they took from the merchant back to the user.
5. Card user thinks they're winning because they never saw steps 2 and 3.

Your average rewards programme sees up to 3% returned to the user, usually less than half a percent. Meanwhile they're taking 3-6% from the merchant, the more "reward" you get, the more you're paying for it via price increases. Visa and Mastercard take up to 3 or 4%, premium cards like AMEX and higher end Visa/Mastercards take 5 or 6%

Its a negative feedback loop, however some will defend it to the death because they dont see its coming out of their pockets. I almost have to admire the Machiavellian brilliance of getting people to defend being ripped off.

"Points" cards are the golden goose of this rip-off system as points dont have to have any real monetary value, redemption values can be arbitrarily changed and they can be expired.

Now here in the UK, the EU imposed a maximum limit that banks can charge merchants... so rewards programmes are hard to come by over here, however it means we're only paying 1-2% extra for credit card purchases.

Re:Colour me unsuprised.

[phantomfive]

For an individual consumer, the best strategy is *still* to try to maximize whatever reward payback from the cards.

Re:Colour me unsuprised.

[mjwx]

I probably should state that I'm not anti-credit.

Yes I have a credit card.

However credit cards need to be treated like the sugar of personal finances. Its OK to have a little, but using it every chance you get is very bad for you.

Credit cards are useful for deposits (I.E. hotel or rental car) and for building a credit history to make other forms of credit easier to get (everything from a phone contract to home loan), however depending on one for day to day purchases is foolhardy and reckless. It only takes one unforeseen event to turn that into thousands of quid/bucks of bad debt.

Re:Colour me unsuprised.

[Kohath]

Shorter version: you should spend your days worrying that someone is making a few cents off your credit card transactions and all you're getting in return is easy transactions and airline miles. Because making money on transactions is bad or wrong or something.

Re:Colour me unsuprised.

[Anonymous Coward]

Aye, but here's the rub: #3 -- prices don't vary between with and without card. Where they do vary, the Card user can calculate just how much those "rewards" are worth. Card user doesn't need to think they're winning; they're just losing less than if they paid directly.

With points programs, it's even more fun, because every major player routinely devalues the currency.

Re:Colour me unsuprised.

[Anonymous Coward]

In the US you can have visa/mc processors that charge a sub 2% rate. Anyone can also sign up for a square account which gives you a flat 2.7% for all cards. Far cry from the rates you're describing

Re:Colour me unsuprised.

[bluefoxlucid]

The cardholder doesn't pay; everyone pays. The cardholder with the highest-merchant-fee card is not paying that merchant fee; it's averaged across all transactions, including cash (0% fee) transactions. That means cash holders pay the largest mark-up and get nothing; while high-merchant-fee rewards cards with no cardholder fees pay the same mark-up (read: no additional cost over just paying cash) and get the maximum return (read: what's purchased by those merchant fees is paid for mostly by all other consumers).

Everyone pays into the system. The guy with the best rewards comes out ahead; the guy with cash comes out behind; and the guy closest to the average-fee rewards card essentially gets a wash.

Re:Colour me unsuprised.

[nedlohs]

But if you're shopping somewhere that doesn't charge less for cash transactions than they do for cards, you'd be silly to not use a card that doesn't cost you anything directly (no fee and always paying it off before interest accrues) but gives you some tiny bit back. Might as well get a tiny slice of that action.

The extra cost is already baked in the prices, you as one individual not using a card with some sort of cashback type thing isn't going to change anything.

> Its a negative feedback loop, however some will defend it to the death because they dont see its coming out of their pockets. I almost have to admire the Machiavellian brilliance of getting people to defend being ripped off.

For those who want the convenience (and protection against loss) of a credit card having a system which charges some of the cost of that system to others, say those using cash and thus not having any CC benefits but still paying higher prices due to the CC fees being baked into normal prices, seems like they are on the good side of some of that ripping off.

> Now here in the UK, the EU imposed a maximum limit that banks can charge merchants..

You'll be free of that oppression in a couple of years, right? :)

Re:Colour me unsuprised.

[Anonymous Coward]

Stores raises their prices on their products to make up for these fees they are being charged. So basically if you don't take advantage of a reward credit card you are losing out.

Re:Colour me unsuprised.

[Anonymous Coward]

I've seen #3 in the form of:

• additional surcharge if it is less than $X; or
• offer X% discount or sales tax included if pay by cash

This usually gives me enough incentive not to use my card at these merchants.

Re:Colour me unsuprised.

[Anonymous Coward]

Risking a downmod but...

Risking a downmod but...

Why would you assume you would get downmodded for your post? Persecution complex?

Re:Colour me unsuprised.

[esperto]

no, for an individual consumer, the best strategy is to, whenever possible, ask for a discount at least equivalent to the fees charged by the card to pay in cash, this way you recoup all the fees and not only the peanuts the bank throws back at you.

Re:Colour me unsuprised.

[Anonymous Coward]

I wonder how long that limit will last once Brexit happens.

Re:Colour me unsuprised.

[phantomfive]

Rare that you'll get that kind of discount unless you're buying something big.

Re:Colour me unsuprised.

[Anonymous Coward]

Risking a downmod but...

Being familiar with the financial services industry, this is hardly a shock to me. Those addled to credit cards always balk when I ask "Who is paying for your bonuses/rewards/cashback" and then act with utter denial when I say "You are". They refuse to believe that banks (and other FS institutions) simply dont give things out for free, because there is no overt fee, they think no fee exists.

Well let me screw your tiny little minds.

Long ago, banks figured out fees turned customers off. So they took the fees off the card user and put them onto the merchants who accept the cards. Then some bright spark came up with the idea of adding in rewards to get you to use your credit card more. Because of this, merchants are at a competitive disadvantage if they dont accept credit cards and a financial disadvantage if they do, damned if you do and damned if you dont.

So here's how it works.

1. Bank encourages you to use your card.

2. Bank charges merchant to accept card (or the merchant doesn't get paid).

3. Merchant has to take it sans lube and raises prices to compensate.

4. Bank passes on a pittance of what they took from the merchant back to the user.

5. Card user thinks they're winning because they never saw steps 2 and 3.

Your average rewards programme sees up to 3% returned to the user, usually less than half a percent. Meanwhile they're taking 3-6% from the merchant, the more "reward" you get, the more you're paying for it via price increases. Visa and Mastercard take up to 3 or 4%, premium cards like AMEX and higher end Visa/Mastercards take 5 or 6%

Its a negative feedback loop, however some will defend it to the death because they dont see its coming out of their pockets. I almost have to admire the Machiavellian brilliance of getting people to defend being ripped off.

"Points" cards are the golden goose of this rip-off system as points dont have to have any real monetary value, redemption values can be arbitrarily changed and they can be expired.

Now here in the UK, the EU imposed a maximum limit that banks can charge merchants... so rewards programmes are hard to come by over here, however it means we're only paying 1-2% extra for credit card purchases.

As the merchant charges the same regardless of whether I pay with a card, I'm still better off using the card and getting the pittance back than not.

Re:Colour me unsuprised.

[Anonymous Coward]

Good god. You are really suggesting I ask for a 5% discount on my bread and bubblegum purchase, cocktails at the bar, gasoline, power bill, etc.? On 75%+ of purchases the mere act of having a conversation immediately negates the entire benefit of the discount because I value my time. Add in some denials and its a negative sum game.

Not saying the OP's point isn't valid but on all but the largest purchases it is currently in the consumer's best interest to maximize their individual outcomes which means using the best card.

Re:Colour me unsuprised.

[Anonymous Coward]

You do know you can use a credit card while having savings in the bank to cover such purchases. I buy everything with a credit card and then pay it off. I have plenty in the bank to pay it off at any given time so there is no risk of some sort of event to affect my ability to pay. Additionally, if I had not used credit my cash balance would be reduce the same so its not like there is some sort of inefficiency to having that cash sitting around as compared to debt / cash payment.

Plus I get the rewards and purchase protections I wouldn't get otherwise.

Re:Colour me unsuprised.

[Anonymous Coward]

Now here in the UK, the EU imposed a maximum limit that banks can charge merchants... so rewards programmes are hard to come by over here

In Germany we have points reward programmes, too. They're just not being run by banks but by stores (usually alliances of various bigger chains).

Re:Colour me unsuprised.

[swillden]

no, for an individual consumer, the best strategy is to, whenever possible, ask for a discount at least equivalent to the fees charged by the card to pay in cash, this way you recoup all the fees and not only the peanuts the bank throws back at you.

Yeah, walk up to the cashier in your local grocery store and ask for a cash discount. Good luck with that.

In places where you're talking to the owner, or at least a very empowered (and smart) manager or employee, you might be able to get them to knock 3-5% off for a cash payment, but it's rare. Everywhere else... get the best rewards card you can, and use it as much as possible.

I actually had the "cash discount" discussion last month when I bought a car (actually bought out my leased car). The dealership's policy is to accept plastic for purchases up $4K, so I offered to pay $4K with the card and the remaining thousand or so with cash. Once they said okay, I offered to pay cash if they knocked an additional $150 off the price, since that is about what they were going to pay in card fees. They refused. They also refused to knock $100 off. So, I paid with the card and got my 2% (a little under $80) discount that way. Unfortunately I noticed later that there was a promotion on my Discover card that I could have used to get 5% back, so I could have gotten $200 back (and they'd have undoubtedly been soaked for a bit more than that).

Re:Colour me unsuprised.

[Anonymous Coward]

Wait a minute. Assuming you've got everything exactly right, then the people who are currently the most hurt by this are those who DON'T have rewards cards. If you have a rewards card then you make some back from the amount that the merchant had to raise their prices. If you don't have a rewards card then you make nothing back from the amount that the merchant had to raise the prices, despite not having been involved in the reason for the price increase at all. Merchants cannot charge checkout fees (at least for Visa and Mastercard credit cards) to compensate for the fees specific to the card they are processing. Therefore, any price increase to compensate for those fees must be across the board.

Until merchants no longer have to raise prices due to bank fees caused by rewards programs, it doesn't matter whether you use the rewards programs or not - you're going to end up paying more from merchants. The two optimal solutions are to either do away with rewards programs and the increase in merchant fees caused by them (unlikely) or to take advantage of the system to recoup as much of the cost as you can. This is a pretty classic Prisoner's Dilemma situation where everyone playing nice and saying "no" to rewards cards might be best, but the people who choose to get one are going to spoil it because it helps them more.

Re:Colour me unsuprised.

[religionofpeas]

I have a credit card, but all charges are automatically paid off at the end of the month. I get the convenience without the interest.

Re:Colour me unsuprised.

[Gilgaron]

If I'm buying from a farmer's market or the local butcher, maybe, the local grocery store doesn't have the capability to do that with their POS system.

Re:Colour me unsuprised.

[WrongMonkey]

Yes, the price of merchandise includes fess to credit card company and yes it is the fees that pay for these rewards.

But as a customer, you pay the merchant the same price whether or not you pay with cash or a credit card. The customers that are really getting ripped off are the ones paying the inflated price, but not getting an rewards back.

Re:Colour me unsuprised.

[slew]

Not quite. In fact it isn't some vague "system" that pays, it's generally the *merchant* and the *poor* that pays the differential.

* cash transaction - merchant has to pay bank cash deposit fees (yes, merchants have to pay to deposit cash into banks ~0.3%), best for merchant
* standard credit card - merchant pays a small merchant fee to payment processor (~1-2%) , second best for merchant
* rewards credit card - merchant pays a premium "rewards" merchant fee (~2-3%) to the payment processor who gives that money to the issuer (to buy crap like airline miles), worst for merchant

The more "rewards" cards the merchant sees, the more the merchant has to pay in fees. The way the card-issuers and payment processors sell this scam to merchants is that people who hold rewards cards tend to spend more money (which is a load of crap). The payment processors that charged "fixed" fees for any type of card mostly just charge some amount more and pocket the difference between what they have to forward to standard card issuers vs rewards issuers, so it's hard for a merchant to simply avoid this problem by picking a fixed fee payments processor.

Oh yeah, on top of the merchant fee difference that is charged to merchants, card issuers also cost-shift and take part of the finance charges received from standard cards and use them to supplement the rewards card holders (basically stealing from the "poor" to give to the "rich"). It's all a big scam that rewards cards holders are complicit in.

But, yes, the guy with the best rewards card comes out ahead, coming out of the hide of the merchants and the people that pay credit card finance charges. Sleep well at night, it's the system and you didn't design it and probably can't do anything about it but sit back and reap the rewards...

Re:Colour me unsuprised.

[mjtaylor24601]

I've heard anecdotally that many payment processors put language in their merchant agreements that explicitly prohibits charging a different price for card users specifically to prevent the merchant from discouraging card payments.

Re:Colour me unsuprised.

[bluefoxlucid]

It's the poor who are most-impacted. The general middle-class are less-impacted, and some are frequent fliers; the upper-class may or may not be frequent fliers, and don't spend all their time on airlines. The very-rich have private jets. Everyone at every level tries to optimize for their particular case, but may have a less-expensive option (e.g. 1.5% cash back is worth 1.5%; 2.2% frequent flier miles are worth 2.2%).

As well, the upper class are fewer and gain less by spending on consumer goods. They buy more in luxuries, and besides have limited purchasing: even if Warren Buffet shops at Giant with his AirMiles card, he's only buying Warren Buffet's groceries; there are a ton of people with lower-fee cards shopping at Giant, and so the average is impacted almost not-at-all. Meanwhile, Elon Musk might buy some fantastically-expensive diamonds at a jeweler on his card for some hot girlfriend of his, which might have some sort of impact on the price of diamond necklaces poor people can't afford.

Most of Elon's money isn't going through his personal credit card; it's going through his business ventures. Warren Buffet's money is mostly in brokerage transactions, buying and selling securities, so he's essentially using his money to suck your money out of your 401(k) (yeah, you put your money in funds without being as good a trader as Buffet, this is what happens; you should have had a plan, or just bought the 3% guaranteed interest option instead of dreaming of possible 14% returns on high-risk bonds in the "Aggressive Growth" fund). The money to pay these people still flows up from the bottom; the impact isn't catastrophic.

It becomes a vague system when you realize it's non-homogeneous and still works that way. The practical impact is essentially that the group of people shopping at the same merchants transfers money between themselves based on that distribution, which means the cost of stuff at the Save-a-Lot is probably not terribly impacted in the sense that the poor are bringing poor-people spending habits and poor-people rewards (which they also pay for) and getting little to no advantage/disadvantage (a wash). The stuff at the upper-end jeweler whose cheapest ring costs $80,000 is probably more broadly-distributed across various tiers of rewards--and the jeweler probably only accepts credit because rich folks expect to have credit cards accepted, and will pay the mark-up for merchant fees (you try to buy a motorcycle, the dealer will let you put $2,000 down on a credit card--the rest must be cash)--and it's all rich people one-upping each other on who has the best rewards structure. The common intersection is mostly middle-class and poor, and most of us think we're getting something (mostly, we're evading the penalty for participating by getting a 4.5% discount on gasoline, 2.8% discount on groceries, and 1.5% cash-back on everything else--which we pay for whether we collect or not).

It's almost-correct to say that the rewards programs essentially cost nearly nothing to anyone, except that there are people who don't participate optimally and there's still a spread between people whose optimal behavior brings higher versus lower merchant fees to the merchants involved. In truth, it's partitioned in odd ways, and participation engages multiple partitions to varying degrees, resulting in optimal behaviors which are not necessarily optimal in monetary return. Basically, you don't have a choice how it impacts you, aside from whether or not you play along to minimize the cost to yourself.

Re:Colour me unsuprised.

[Anonymous Coward]

Except it's not just a few cents. Payment processing has become a ridiculous chain of middlement who all charge "just a few %".

Let's say you go to some site and buy something. That site uses Global Collect or some other provider (which you don't even notice most of the time). Of course that provider charges you. You then pick Paypal as a payment method. Paypal charges you for that, too. You then pay Paypal with your credit card. Which means your card company charges you to take money out of your bank account for which your bank charges you.

Re:Colour me unsuprised.

[AthanasiusKircher]

In places where you're talking to the owner, or at least a very empowered (and smart) manager or employee, you might be able to get them to knock 3-5% off for a cash payment, but it's rare.

It's also important to note that handling cash is not free. Let me say that again: handling cash is NOT free.

Somehow, I think all the pro-cash anti-card people think that every business magically ends up with just the right set of bills every day to pay its employees and start the next with a full cash register set to give change, etc.

In the real world, most businesses have to deal with banks a lot to process cash: they need to stock enough cash for change for customers, they need to transport cash back and forth from the bank (which might have security implications, perhaps even armored transport or security services for large-volume businesses), they might need to pay for extra security (electronic systems, safes, even actual guards on-site), etc., etc.

So, while a business may pay a 2-3% processing fee for card purchases, handling cash frequently costs ~1% of their transactions too (sometimes significantly more if additional security is required). Cards are still usually pricier, particularly for small transactions and for smaller businesses, but if you go in expecting a major discount for paying in cash, it might not actually be worth their while.

All-in-all, if you're getting a couple percent back from all (or most) purchases from your card, everything probably roughly balances out for customers who use cards -- with you pocketing a tiny percentage, and the credit card company getting the other percentage point or whatever that would likely be lost in the cost of handling cash. The main place where "cash only" businesses actually carries a BIG difference for an owner is where there's tax cheating going on.

(Actually, I'd imagine right now that a lot of small businesses hate having to deal with both -- it would probably be a lot easier to only offer one or the other, but right now they still have the costs associated with both, unless they want to alienate customers.)

Re:Colour me unsuprised.

[AthanasiusKircher]

Everyone pays into the system. The guy with the best rewards comes out ahead; the guy with cash comes out behind; and the guy closest to the average-fee rewards card essentially gets a wash.

Well, you're of course assuming a case where a card user NEVER carries a balance and pays off immediately every month. It's always important to remember that more than 1/3 of American households carry credit card debt from month-to-month. (After the recession, it was closer to 45%.) And of those households who have credit card debt, the average debt is over $15,000. At the average interest rate for credit cards, that translates to over $2500 just IN INTEREST every year.

So, for a lot of people, the guy with the reward card is never going to make enough money in rewards even to pay off the amount of interest he'll get charged. Even if you only carry a balance "during emergencies" for a few months here and there, the interest and fees can really add up.

So yeah, if you have the discipline basically to NEVER carry a balance on your cards, then your description is true. For a significant percentage of Americans, they'd likely be better off not dealing with the temptation of credit cards at all.

Re:Colour me unsuprised.

[swillden]

In places where you're talking to the owner, or at least a very empowered (and smart) manager or employee, you might be able to get them to knock 3-5% off for a cash payment, but it's rare.

It's also important to note that handling cash is not free. Let me say that again: handling cash is NOT free.

Very true.

Many years ago I designed a cash management system for a large grocery store chain. "Designed" because we didn't get the contract to build it (I don't recall why). It included counting machines that shrink-wrapped and barcoded stacks of cash, barcode readers at counting stations, safes, and in armored cars as well as at point of sale stations (where they already existed), a centralized cash-tracking system that knew where every bundle was and was integrated with the employee management system so we could identify every employee that touched a given bundle or group of bundles, or opened a safe, etc., and with the point of sale system so it could automatically check expected drawer contents against automated count results. It was also integrated with a network of CCTV cameras that oversaw cash-handling areas, so the handling of any bundle could be looked up and with the banks' cash ordering/pickup systems, to automate delivery of new cash and pickup of old cash.

The total cost of the system for a thousand stores was going to be on the order of $150M, plus another $10M or so in annual operational and maintenance costs... and it was expected to pay for itself easily. In two years, IIRC. The combined cost of all the man-hours that would be saved on counting and handling cash, and all of the savings from reducing "shrinkage" was huge.

Re:Colour me unsuprised.

[bluefoxlucid]

Balance on the card is a separate issue. Cardholder rewards generally come from merchant fees; the interest on the card is interest on a loan from your bank.

Without cardholder rewards, merchant fees would be relatively-flat due to competition being entirely based on merchant fees. More merchants accept Visa than Mastercard nowadays.

Re:Colour me unsuprised.

[wisnoskij]

If businesses did not like credit cards they would offer better cash payment options. But the only businesses that have any special rules for cash payments that i have heard of restrict the use of large denominations for in cash. I do not imagine businesses get coned out of goods with fake credit cards, but fake cash is a real issue, and the mint is not going to reimburse them.

Re:Colour me unsuprised.

[sootman]

Fabulous points, all. But in the end, you should go ahead and take advantage of a rewards program because they're too popular to stop and you're already paying for it anyway.

It's like when phones used to be on subsidized two-year contracts -- your bill was going to stay the same in the 25th month, so if you didn't get a phone each time you were eligible, you were just leaving money on the table.

Re:Colour me unsuprised.

[david_thornley]

Pay it off in full each month and you won't pay interest. If you have no annual fee (and I have no problem getting such a card), you're paying nothing besides what you charge. In exchange for that, I get discounts and about a 1.5 month float if I need it (which I don't), and some additional protection.

I can't be rendered incapable of paying my card without something drastic, since I've got savings and liquid assets far in excess of my credit limits, and if I have to declare bankruptcy I won't have credit card debt anyway.

Some people have problems in that they don't feel like paying with a card is still paying, and they need to limit their card use. Similarly, if someone has trouble with budgeting, they may benefit from the discipline forced by spending only what they have at the moment. They should never carry their cards.

Seinfeld knew it - but it was tuna sandwiches...

[itsme1234]

...instead of credit cards!

https://www.youtube.com/watch?...

Where am I?

[Anonymous Coward]

Is this Consumer Reports or did Slashdot just go full-on stupid?

the announcements make it very clear

[nimbius]

flight attendants: "for those of you in economy class, please step forward and use the bone saw to remove your legs at the knee for storage in the overhead compartment. Pretzel dust and warm pepsi will be provided once in flight, along with the entertainment of a partially eaten magazine about our CEO's latest hunting trip in the alps. Those of you in our platinum, rhodium, saphire card club, or other rare and exotic metals often associated with conflict mining, please proceed to the front of the aircraft and take your seat stolen from the lobby of an upscale motel. You will be permitted to eat with a real fork, provided you've prostrated yourself accordingly to the TSA and said your daily supplication to the holy terror alert list. "

Read the flyertalk.com thread

[Anonymous Coward]

If you want to know real inside angles on that even, read the flyertalk.com thread.

That thread is almost certainly being monitored by United Airlines. Back when I was flying on United a whole lot, they started an internet ad campaign that featured stylized persons that were supposed to be waving to a bunch of planes flying off. I posted that it looked like a bunch of Nazis giving the "Heil Hitler" salute to the Luftwaffe on its way to bomb London (and it did look just like that...), and within thirty minutes that internet ad campaign disappeared.

All tools have a purpose

[SuperKendall]

Why would anyone be dumb enough to pay a premium for a card that gets miles?

I got two premium cards (one personal, one business) for Southwest Airlines that essentially got me a companion pass for $200.

That meant my wife could fly with me for free, anywhere, for the next two years...

I assure you I got WAY more than $200 of value from that perk. Not to mention I had, just for obtaining the cards, over 100k miles to use for toking flights as well.

It's not like you have to keep the cards and pay the annual fee. You can cancel after the first year.

The cards make a lot of sense if you pay attention

[SuperKendall]

If you just pay careful attention to benefits, you can get a ton of value from these milage cards.

Yes you have to pay an annual fee. But you can usually quite a lot of bonuses that can mean a huge savings on travel.

The thing to do is to have some specific purpose in mind before you get one of these awards cards, so you have something you know you will use the benefits for that gains you a lot more than any fees you are paying.

You can always cancel the cards before the annual fee comes up...

These cards are a win / win

[mtmiller100]

I have been using a "rewards" card for a few years now. I pay $89 a year for the privilege. I use this card for just about everything, from groceries to monthly bills. I pay my balance in-full every month, so with the 3-week grace period, I'm only paying a couple dollars interest each month. The bank makes money off of it. I get much more than the $89 + a few bucks interest out of it. I usually rack up about $800 in rewards every year, plus I am insulated from fraudulent purchases (twice last year, "my card" was used in the Cayman Islands to buy gas). So, they're paying me about $650 a year (in rewards, which I can use against my balance) to use their card, AND I get fraud protection. If they're making some money too, I'm fine with that.

So rich fly cheaper

[Anonymous Coward]

So if you fly lots and have higher than average income to support such practices... you get flights cheaper meaning rich pay less for flying...

Baggage Fees

[crow]

I've twice signed up for airline credit cards when traveling with my family because they offer to waive the baggage fee (at least for the first bag per ticket). Even if I hadn't canceled the card before having to pay the annual fee after one year, I still would have come out ahead.

Though the last time we flew, I went to Walmart and bought some carry-on bags that were cheaper than the checked baggage fee. Still, when flying with a family with connecting flights, checking baggage is nice.

Re:Baggage Fees

[Anonymous Coward]

I only fly airlines that don't charge to check baggage, although whenever possible I don't check bags anyway.

Having had a suitcase chase me one airport behind on a trip through Europe and Asia was enough, thanks. (It finally caught up to me in time for the last leg home.)

Why do people use miles cards?

[Presence Eternal]

I can't really figure out the value miles cards. They obfuscate the value of the miles to the extent I assume they're nearly worthless. On the other hand there's numerous easy to understand cash back cards:

Amazon has two store cards that are 5% back on everything. (if you have prime, otherwise it's 3%)

Several 6% back on gas cards exist if you join an easy to enter credit union.

Fidelity and I think a few others have a card that's 2% back on everything everywhere into an investment account.

Amex has a 6% on all groceries card for $75 a year.

Near as I can tell miles cards don't even compete well with cash back cards on travel! There's TONS of cards that give big percentages back on travel expenses.

Exactly: People ... use their card more.

[Anonymous Coward]

Exactly: People that get rewards use their card more.

I would bet dollars to donuts that a rigorous study would find that just about everyone who has "cash-back" cards spends more than they need to, and definitely more than is wise.

Yes, yes, I know YOU are the one smart person who games the system perfectly.

However cash-back, like other rewards and gambling "comp" cards and so on are simply ways to convince you to spend more money. And most people spending are not saving enough (many studies show this, especially in terms of retirement funds.)

There is a very good chance the whole financial system will come crashing down with all the bubbles popping up.

Come to think of it, that is a good reason to spend it all now and simply off oneself once the crash happens.