Losing at 3 Card Monte at 30,000 Feet


By Robert McGarvey


I grew up maybe 20 miles from Times Square and one thing I have always known is there is no gain in playing three card monte with a street hustler. Before I went to kindergarten at P.S. #4, I knew that.

And yet here I am with a Barclays AAdvantage Mastercard and a Chase MileagePlus Explorer card in my wallet.

Of course I am being played for a sucker and I am definitely the loser in this 21st century version of three card monte.

But now it’s not cards or peas – it’s airline miles.

Here’s the Bloomberg headline: “Airlines Make More Money Selling Miles Than Seats.”

Here’s the subhead: “The golden goose isn’t your ticket or bag fee—it’s the credit card you use to collect frequent flier miles.”

Why are airlines in the black? Miles just may have a lot to do with this.

The Bloomberg story goes on to say: “Each mile fetches an airline anywhere from 1.5 cents to 2.5 cents , and the big banks amass those miles by the billions, doling them out to cardholders each month.”

The story twists the knife: “For the banks, people who pay annual fees for those cards to accumulate miles are the closest thing to a sure bet. These consumers typically have higher-than-average incomes and spend more on their cards, which generates merchant fees for the banks. They also tend to maintain high credit scores, which means they pay their bills on time and banks experience fewer defaults.“

How many of those airline cards are in your wallet?

Remember, I have two – so I cannot point blaming fingers at you without a few fingers pointed back at me.

How has it comes that I am now playing three card monte with slick hustlers in the sky?

It’s time to think harder about our mileage addictions.

Honestly I have gotten many free plane trips over the years from cashing in miles.  I don’t recall ever cashing them in for anything except tickets and upgrades – definitely no merchandise or magazines.  

I have enjoyed those flights – to Rome, Paris, New York, and many more. I have savored flying upfront when I paid with miles.

But even so I have to accept I am being played for a sucker.

The thesis of the Bloomberg piece – very much worth a read – is that airlines aren’t really in the transportation business, they are in the loyalty/points business and when viewed as such they are wildly more successful (and undervalued by the market, apparently).

The hustle of course – especially looking only at the universe of miles for airfares – is that the seats airlines fill with miles cost them close to zero and they only fill the ones they want to fill. Thy most certainly do not bump paying business class fares to find room for a person cashing in miles.

What a beautiful business.  The miles cos essentially nothing. Even when redeemed they have few costs involved.  And airlines can mint as many miles as they want because they control the redemption marketplace.  

Don’t hotel rooms and iPads and other redemption items cost airlines something? Sure.  But experts still estimate that on average airlines sell miles for maybe three times what the miles cost the carriers.

Then too, at will, a carrier can devalue miles – which has happened numerous times – and all the frequent fliers can do is bellyache.  

By some estimates, too, 40% of miles are never redeemed for anything.  Not even magazine subscriptions.

New Bankrate data say that 31% of us have never redeemed credit card rewards points, by the way. Never.

It shouldn’t be a surprise that some analysts now say that maybe half of the typical airline’s profits come from selling miles and the related partnerships with big banks.

As long as we remain addicted to miles, the airlines are in the money.

It’s up to us to challenge the paradigm.

Personally I do not factor potential mileage earnings into purchases I make. In fact, to the extent I think about perks with purchases, I am more tempted by cashback offers and I particularly like many of the Discover programs.  Why? $100 in cash from Discover is worth a lot more to me than, say, 5,000 in miles.

And I try to use miles as quickly as I can. I keep a stash – around 250,000 at Amex – to use for family emergencies but as for the rest, I’ll spend ‘em as quickly as I can.

The biggest resolution: it’s time to stop playing three-card monte at 30,000.

I can’t win that game.

That means I just will try not to much think about or talk about miles – and in that direction lies a kind of freedom.


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