How Can The Companies Afford This?

Banks, airlines, and hotels have run the numbers. They’re still making money on card users. But how?

Most award flights and hotel stays come from inventory that would otherwise go unused. In fact, Delta makes more money selling points to banks than it does selling airline tickets.

On the other side of the equation, banks earn roughly 2% on every purchase you make with a credit card, then pass only a portion of that revenue to airline and hotel loyalty programs.

Here's an example based on spending $10,000 on a credit card:

• The bank earns about $200 in fees to merchants.
• You earn between 10,000 and 20,000 loyalty points.
• The loyalty provider is paid roughly $100–$150 to fulfill those points with unused inventory.

Everyone comes out ahead.

Both sides also gain something even more valuable: a loyal customer who will make future purchases and use additional services. The true cost of points and miles is relatively small—often far smaller than what these companies would spend on advertising to acquire those new customers.

Don’t believe us? Here’s what Southwest President Tom Nealon said on a recent earnings call

“We’ve been acquiring customers and credit card holders for the past year very, very intentionally. And they just, as you said, are building their points up. And as Gary said, we don’t care. We would love to have that plane full of passengers. Whether it’s a cash passenger or a Rapid Reward passenger, I’m indifferent. They are good customers and we’re getting our financial piece out of that sale.”

Of course, some people (like us) take advantage of many large introductory bonuses, and eventually, the math can stop working for the bank. That’s why application rules exist. For example, if you’ve received a personal Chase Sapphire bonus in the past, you won’t qualify for another one.

Points Navigator is built to help you navigate these rules >