A little-known fact is that Chase, Citibank, and American Express pay the airlines anywhere from 1.5 cents to 2.5 cents per mile, which they then give to their customers.
They do this knowing that most of these miles will never be redeemed. In many cases, this is because the airlines make fewer and fewer award seats available to frequent flyers.
This is a win-win for the banks as well as the airlines.
Because of the addictive nature of frequent flyer programs, they tend to keep you as customers, and the cost to administer these programs is significantly less than actually flying the planes.
As a result, airlines like American, which is now the largest U.S. carrier, are earning upwards of 50 percent of their income from these banks.
To learn more about frequent flyer and reward programs, check out:
- Why This is a Good Time to Use Your Frequent Flyer Miles
- Survey Finds the Best Rewards Programs for Hotels
- Changes for Frequent Flyer Miles Affect Stopover Flights
Keep reading for more travel tips.