The Credit Card Rewards Game: Who Wins and Who Loses?

The Profitability of Reward Credit Cards

• ✈️ Delta Airlines reportedly makes nearly 100% of its profit from its partnership with American Express for SkyMiles credit cards, receiving an estimated $10 billion annually.
• 🏦 Banks like Chase, American Express, and Citi heavily target individuals with high credit scores (above 740) and low credit utilization to sign them up for reward cards.
• 🐇 The allure of reward cards is compared to a rabbit at a dog track, with sign-up bonuses and ongoing rewards (e.g., 4% for certain charges) serving as incentives.

When Reward Cards Make Sense

• 💰 Mega chargers and mega travelers are the primary target audience for high-fee reward cards.
• 💳 Individuals who are willing to pay significant annual fees (e.g., $900 for Amex Platinum, $800 for Chase Sapphire Reserve) must have the discipline to maximize benefits and potentially discard cards after a year.
• 📈 Business owners often use these cards for significant monthly expenses, running tens of thousands of dollars through them.

The Downsides and Alternatives

• 📉 Devaluation of points is a real concern, making it important to harvest points before new devaluation cycles occur.
• 💸 For approximately 90% of people paying annual fees on points or mileage cards, a no-annual-fee 2% cashback card would be more efficient.
• 🎯 Gamifying the credit card rewards system to manage dozens of cards can become a time-consuming hobby, requiring dedication to track bonuses and redemptions effectively.