Airline or cash-back cards: What is the industry saying to customers?


I had the opportunity last week to sit in on an industry conference focused on loyalty programs, points and consumer behavior. Not surprisingly, a decent amount of the conversations were around credit cards and how they are shifting (or have already shifted) the market. One of the sessions offered a comparison of airline versus bank rewards cards and the results were, to some extent, surprising to me. Here are a couple of the results they showed:

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Of course, the numbers are based on certain assumptions, and those assumptions are based on averages, not the extremes. And even the average numbers they’re using are flawed, I believe (assumes $18K annual CC activity). But the overall concept is still interesting. The general conclusion reached is that the cash-back cards are more valuable than points-based cards when the end goal is domestic leisure travel. And, quite frankly, I cannot argue that conclusion.

The real differentiation point, in my view, is what the customer is actually looking to get out of their travel rewards spending. That aspect of the equation is often overlooked in these sorts of reports. Analysis which starts given a certain set of assumptions will invariably reach those conclusions. This report starts with the assumption that only domestic seats bookable online are desired by customers and, unsurprisingly, gets to the result that the co-branded cards from airlines are pretty bad at providing that benefit. Ironically, the airlines can (at least in theory) provide the benefits at a lower cost given their control of inventory and the ability to offer only distressed inventory towards award redemption.

On the plus side, the analysis is pretty good at showing the disparity between year one and subsequent years. That’s as good a way as any to remind consumers that their loyalty is being bought, and that they should consider being sold on a regular basis. Somewhat ironic that they are so up-front about this when at the same time the airline folks at the event were saying things like, “Loyalty has to be a two way street; otherwise it is just bribery and that’s not sustainable.”

If you want to read the full report it can be found here.

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, LinkedIn and .

3 Comments

  1. This is nothing new to me. I have always espoused my preference for cash rebate credit cards versus airline frequent flier loyalty program credit cards for a variety of reasons:
    http://www.flyertalk.com/the-gate/blog/12492-bigcrumbs-site-wide-sale-my-musings-about-free-rebates-and-cash-earning-credit-cards.html
    …and with the perceived negative changes to frequent flier loyalty programs in general which have been implemented this year alone, it only bolsters the argument for a cash rebate credit card as a preference, in my opinion.

  2. I have to agree with this. Personally, I’m currently sitting on over $400k FF miles across different programs, and I am never able to use them for two reasons:
    1) It’s hard to find award availability in advance nowadays, and I tend to need to book leisure travel a few months ago; and
    2) I’m still playing the elite game on AA, so usually I NEED the elite qualifying miles
    I’m strictly using either hotel co-branded cards or straight up cash back cards these days.

  3. Very interesting and informative…….it is interesting that no mention is made of the Chase BA card……….thanks for posting……..

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