Airline credit cards: Sky money

Swiping for the skies
In May, the Biden administration honed in on an unlikely piece of plastic: the airline credit card. The Consumer Financial Protection Bureau held a hearing that put airline credit cards on blast, with federal officials accusing carriers of using deceptive practices to lure customers.
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“We’ve seen credit card rewards taking center stage in the industry’s marketing campaigns, particularly in the form of frequent flyer miles and other proprietary points programs,” CFPB Director Rohit Chopra said at the time. “The largest and most dominant airlines play a massive role in this market,” she added, a role that the CFPB argues can be bait-and-switchy, anticompetitive, and terrible for people’s credit and debt.
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The thing is, that sentiment isn’t shared with the people choosing to get them. Airline credit cards are incredibly popular: In the U.S., some 30 million people have them, according to Airlines for America, the airline industry’s trade group. That’s one in every four U.S. households. Many users stockpile rewards on the cards to put toward free travel and lodging. But the problem is that airlines determine how much those credits are worth, and that could change at inopportune times. More on that below.
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By the digits
80%: Share of American Airlines’ revenue that comes from travelers who are part of its frequent-flyer program
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$6.9 billion: Amount Delta Air Lines got from its credit card partners in 2023
5: Number of people United Airlines will let pool their frequent-flyer points together, allowing parents to borrow miles from their kids if they’d like
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2.8 cents: The value of each airline mile for Japan’s All Nippon Airways, making it one of the most valuable programs
39,000 square feet: Size of Delta’s new luxury lounge at New York’s John F. Kennedy International Airport
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Explain it to me like I’m 5!
Money for nothing and flights for free
Airline credit cards first came about in the 1930s when American Airlines introduced its Air Travel Card. Since then, they’ve grown into a highly competitive system as airlines try to entice travelers to only fly on their planes and keep their money inside of their ecosystems.
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At their most basic level, airline miles are a form of currency. In that way, airlines sort of operate like a bank: They give their loyalty customers miles that can be used to purchase flights, book hotels, and buy other rewards. Travelers can pick up miles by flying, but also — and increasingly more so — by using an airline credit card to buy things.
The value system of miles varies by carrier and isn’t a hard and fast conversion. It’s also not without controversy. Emirates miles are among the least valuable of major airlines, coming in at a measly 0.6 cent per mile. Spirit Airlines isn’t much better at 0.8 cent per mile. But other airlines, including Southwest Airlines and American Airlines, are nearly double those amounts, meaning you can get further for your buck.
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Quotable
“Like the federal reserve, airlines issue currency — points — out of thin air. They also get to decide how much that currency is worth and what it can be spent on. This helps explain why the points system feels so opaque and, often, unfair.” — Ganesh Sitaraman in a 2023 Atlantic article about how airlines operate in much the same way as a bank would
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🎧 Listen up!
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From Dubai to Dublin to Dallas and back, air carriers are cashing in on credit cards.
Why did airlines build out a business line through these little scraps of plastic? What’s the history of these co-branded cards? How did credit rewards come to make sky-high profits?
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Rocio Fabbro, the host of season 8 of the Quartz Obsession podcast, asks these questions to Brian Kelly, the Founder of The Points Guy, in episode four — Airline credit cards: The high-flying loyalty game.
Listen on: Apple Podcasts | Spotify | Pandora
Or, read the transcript.
Pop quiz
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How much debt did Americans have in the first quarter of this year?
A. $900 million
B. $1 trillion
C. $10.2 trillion
D. $17.7 trillion
Swipe to the bottom to find the answer.
Brief history
~2,000 B.C.: Traders in Mesopotamia use clay tablets to complete transactions with their Harappan neighbors, the first recorded instance of a modern credit system.
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1850: American Express is formed.
1928: Pan Am, the world’s top international airline, begins flying.
1934: American Airlines debuts its Air Travel Card, the industry’s first travel credit card.
1978: The airline industry is deregulated in the U.S., allowing carriers to set their own ticket prices and routes.
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1980s: Merger mania sweeps the airline industry post-deregulation, and several carriers are dissolved or go under.
1991: Pan Am stops flying.
Fun fact
Approximately 1% of the entire U.S. economy is spent on Delta’s credit cards, according to the airline’s CEO Ed Bastian.
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Watch this!
What’s the best way to earn miles and use them? Marc Ramos, a video producer at The Points Guy, explains how the system works and why airlines, hotels, and credit card companies are so intertwined.
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Take me down this 🐰 hole
There is a frequent flyer who tops them all: Tom Stuker. He has flown more than 23 million miles with United Airlines. Stuker bought an unlimited flight pass with the airline in 1990 for $290,000 (these aren’t around anymore). In 2019, he flew 373 times, and that would have cost him $2.5 million, so it seems to have been a sound investment.
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Poll
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Are you racking up miles on an airline credit card?
Yeah, I live at the airport.
No, I stay on the ground.
Can I get an ice cream shop credit card instead?
Tell us in our poll!
💬 Let’s talk!
In last week’s poll on Formula 1, 55% of you said you’re F1 fanatics, 35% of you aren’t really into it, and 10% of you are now fans after reading our Obsession.
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🐤 X this!
🤔 What did you think of today’s email?
💡 What should we obsess over next?
Today’s email was written and produced by Morgan Haefner (is a frequent flyer to her local ice cream shop).
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The correct answer to the pop quiz is D., $17.7 trillion, according to the latest data from the Federal Reserve Bank of New York.