Airline credit cards are a bad deal, Biden administration says

Delta SkyMiles card-branded coconut drinksPhoto: Craig Barritt/Getty Images for the Delta SkyMiles® American Express Card Portfolio (Getty Images)

That airline credit card in your wallet may not be as financially savvy as you think.

The Consumer Financial Protection Bureau held a hearing Thursday (accompanied by a blistering report) to call out what it said were deceptive practices behind the plastic. The criticism is part of the same push that has Biden cracking down on so-called “junk” credit card fees.

“More recently, we’ve seen credit card rewards taking center stage in the industry’s marketing campaigns, particularly in the form of frequent flyer miles and other proprietary points programs,” CFPB Director Rohit Chopra said in prepared remarks for the hearing. “The largest and most dominant airlines play a massive role in this market. Most of us have witnessed the blitz of advertising online, in our mailboxes, on television, and even while seated on an airplane, about airline-branded credit cards that make promises about frequent flyer mile sign-up bonuses, free roundtrips, and other travel perks.”

In March, American Airlines told investors that 80% of its revenue comes from customers who are members of its frequent-flyer program, AAdvantage. And the money isn’t just coming from rewards program members buying flights more often. The CFPB noted that credit card companies pay airlines directly in order to get their names into the captive speeches you may have heard a flight attendant make during a recent journey through the air.

“The share of revenue generated by loyalty programs for the biggest U.S. airlines increased from 12 percent in 2019 to 16 percent two years later, and the return on investment for frequent flyer programs was far higher than the profits on the core business of providing flights.”

Among the largest airlines in 2023, according to their latest annual reports:

In a statement circulated to media outlets like NBC News, the Airlines for America trade group downplayed the suggestion that they were taking advantage of their customers, claiming that “consumers have the power of choice when picking a carrier for air travel or a credit card for spending, with a wide range of options, to pick what best fits their need.”

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