[AnthonyMouse]

In many cases they do actually offer the discount (or tack on the "hidden" fee for using a credit card). In some markets there are also sellers who only accept cash (often discount stores etc.) and correspondingly have lower prices, which is a slightly more inconvenient version of the same thing if you patronize them.

Moreover, we should encourage every retailer to offer this, because getting 2% back (or less) while paying 3% more is not just a net loss, it's also worse for privacy.

[satvikpendem]

Depends on your points usage, airline points can be much more valuable than the 3% fee.

[AnthonyMouse]

Airlines also sell "points" for cash and you can get them for essentially the same cost as the credit card companies do. They're just using the 2% cash back to buy them for you, so even if you want flights, getting a 3%+ discount and using the money to buy points puts you ahead. It also lets you time your purchase (there are sometimes temporary "deals" on points), collect interest on the cash until you exchange it for something, and not lock yourself in to getting only airline miles instead of any of the other things you can buy with money until you decide that instead of having it imposed you at the point you use that card.

[CPLX]

That's not really true on a practical level. For the most part, you can't just buy airline points at the one to two cent price that you effectively get them for in credit card transactions or the even lower price that the credit card companies themselves are likely paying.

[AnthonyMouse]

Airlines do regular promotions where you can buy miles for less than 2 cents per mile. If you get 2% cash back or pay with cash and get a 3% cash discount and can then buy miles for 1.2 cents/mile during the promotion, you're losing 0.8% or 1.8% respectively by using the card that gives you miles instead.

[handle584]

So do credit card companies run transfer bonuses. There are only a handful of airlines who sell pts < 2 cent per point during promo, like Avianca. Others, including the big three US carriers, seldom do this.

Also the big part of this game is sign up bonuses, like spending $5,000 and get 100,000 points instead of the 2% daily rate.

[satvikpendem]

Cash discounts only really exist for locally owned restaurants and other smaller retailers, not bigger ones like Macy's or Best Buy which have a flat price. So in most cases it is in fact the cash purchasers who are paying the 3% fee implicitly but getting no benefits back in the form of cash back or points.

[lxgr]

On average they’re worth much less. After all, why would airlines cross-subsidize a card on which they earn <3%?

[handle584]

On average yes, but for savvy people they are worth much more for biz/first class travel. There is even a whole industry built around mileage booking.

Why subsidize? There is no subsidize at all, an empty seat on a flight is an empty seat unsold, any money they can make back is extra profit. Airlines do not make money by flying people nowadays, but by selling miles in bulk to banks [0].

[0]: https://youtu.be/ggUduBmvQ_4

[lxgr]

> There is no subsidize at all, an empty seat on a flight is an empty seat unsold, any money they can make back is extra profit.

This completely disregards the opportunity cost of being able to sell the same seat. Even if the airline is absolutely unable to sell the empty seats cheaper, consider what consistently giving away seats for free would do to the remaining paid seats...

> Airlines do not make money by flying people nowadays, but by selling miles in bulk to banks

They certainly make some money from this, but definitely not the bulk, or even all of it. Don't believe everything you hear on the Internet, even (or maybe especially) if it's presented in a shiny, high production value video.

[handle584]

What you said is true, but it pertains to how to balance the game once it started, while I was giving a explanation why the game is started in the first place.

> consider what consistently giving away seats for free would do to the remaining paid seats

After all those years it is still fairly niche because few people knew about how it actually works, and it took quite a bit of learning, with dedicated forum [0] existing for decades. It shows even in this thread, and I would rank hn ppl very tech-savvy. Also the award seats are not given out free, since airlines got paid when they sold miles to banks.

> but definitely not the bulk

Even CNN thinks otherwise: Frequent flyer programs: The most profitable part of the airline industry [1]. If you think about it a bit, this is basically money printing under little oversight. What business can be more profitable than that?

I chose that video because it does explain why and is often quoted to newcomers in the community, hence its view count. I myself have been in this game for a couple years and my family almost travel solely on international award tickets now, so it is not just something heard over the Internet.

[0]: https://en.wikipedia.org/wiki/FlyerTalk

[1]: https://edition.cnn.com/2024/09/08/business/frequent-flyer-p...

[lxgr]

Oh, I don’t doubt that mile optimization/churning works or that it can be very lucrative.

I do however very much doubt that it’s somehow core to the economics of airlines. I think that the real power of rewards programs is that they exploit the principal-agent problem of business travel, with an added bonus of many people being very bad at redemptions and realizing how much they’re often overpaying for a few extra miles or status.