If you have an airline frequent flier rewards card, you know they are worth less and less these days. You darn near have to spend a small fortune to fly anywhere -- like $30,000 to $40,000 to get an economy ticket from Chicago to London.
Do the airlines and credit card companies care? They sure care about how much you’re spending but are they concerned about how much you get in return? Probably not.
The situation chaps Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra so much that he and U.S. Secretary of Transportation Pete Buttigieg have taken a shot across the bow of airlines and their credit card partners.
Their concern is that “for many Americans, point balances are significant enough that they amount to part of our savings,” even though “the value of points in miles is completely up to the companies that issue them.”
At a recent public event in Washington, both Buttigieg and Chopra raised questions about the value of points accrued by passengers who enroll in frequent flier programs and who use airline-branded credit cards. Chopra expressed concern about a loophole in credit card agreements that could allow companies to switch terms during the contract, potentially devaluing points after they had been accrued.
“Many consumers, they’re saving up, whether it’s in their own bank account or their own points. And when all of a sudden they don’t even know what those points are worth anymore, I think that really can pose some real problems,” Chopra said.
Do the airlines have too much power?
“Delta has over 1% of GDP (gross domestic product) that is being spent on their AmEx Delta cards,” Morgan Harper, director of policy and advocacy at the American Economic Liberties Project, a nonprofit antitrust organization, said. “When you have that much money involved in the programs that you’re running, your whole calculation changes. You actually can’t afford to redeem all of those rewards.”
Buttigieg said smaller airlines, like Allegiant, have a hard time competing with the likes of Delta or United.
“One of our concerns, of course, is what role these programs may play in affecting the ability of other players, smaller players or newer players to compete,” he said.
“Air travel is not competitive. It’s dominated significantly by four major carriers,” Erin Witte, the Consumer Federation of America’s director of consumer protection,” complained.
In her view, “it really makes sense to zero in” on how larger airlines can get “more favorable terms with banks about these rewards programs and then not follow through on that promise to consumers.”
One Senator decides to pick a fight over this
A short time after the conference ended, Senator Dick Durbin (D-Ill.) introduced a bill – the Credit Card Competition Act. It would require more than just the Visa and Mastercard networks to process credit cards. “One of our important responsibilities in Congress is to protect American consumers,” he said.
The Electronic Payments Coalition, which admitted that the average value of rewards earned equaled 1.6 cents per dollar spent (in 2022), said the CFPB's own report shows that “the value of rewards programs have increased for consumers.” And United Airlines CEO Scott Kirby said that bill would, "kill rewards programs."
“Let me be very clear: this is false,” Durbin said. “Airlines make more money off the co-branded credit cards they issue than they do off their aviation programs. At the same time, there are troubling reports that airlines use their loyalty programs to engage in abusive, unfair, and sometimes deceptive practices."
This could take a while to completely shakeout, so keep racking up miles on that airline credit card of yours. You’re probably too close to spending the $25,000 it takes to get that toaster oven you’ve got your heart set on to quit now.