How Can The Companies Afford This?

April 23rd, 2020

Banks, airlines, and hotels have run the numbers. They’re still making money on card users. How? Most award flights and hotel stays would have been unused inventory. The true cost to them is relatively small -- smaller than the advertising cost they used to pay to get new customers. On the flip side, they get 2% of every purchase you make with the card. They have a loyal customer for other purchases and future services.

They’re still making money on card users

Don’t believe us, check out this quote from Southwest’s President Tom Nealon 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, people sometimes take advantage of these introductory offers -- and it can become unprofitable for the bank. That’s why they put applications rules in place. For example, if you have received a Sapphire bonus within the last 48 months, you will not qualify for another bonus. The Points Navigator is built to help you navigate these rules >