CC Reward points - how does the system work

[swilk]

Can anyone explain to me how the credit card flight reward point system works. ie what is in it for the CC company, what is in it for the bank and what does the airline get out of it?

Thanks,

Steve

 

[NM]

Can anyone explain to me how the credit card flight reward point system works. ie what is in it for the CC company, what is in it for the bank and what does the airline get out of it?

Thanks,

Steve

Its all about making money. Each time you use your credit card, the merchant from whom you purchase goods/services pays a percentage of the transaction amount to the CC provider (Amex, Visa mastercard etc) who in turn provides some of that fee to the bank that provides the branded credit card facility. So they earn money by encouraging you to use your card more (playing on your greed for free flights, points etc).

The bank then either uses that money to purchase a flight for you from the airline, or to purchase FF points from the airline. The difference between what they pay the airline for the FF points for for the flight and what they earn from the merchants at each transaction is their profit.

The airlines make money by selling FF points or by selling flight tickets directly to the banks.