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Travel Tip: The Relationship Between Credit Card Companies and Airlines

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Here’s a little-known fact about the airline business.

More and more airlines make more money from frequent flyer programs than they do from selling seats.

The real cash cow for the airlines isn’t charging for bags or ticket change fees—although that’s a huge chunk of pure profit—it’s the credit card you use to collect those frequent flyer miles.

The credit card companies—CitiBank for American Airlines, Chase for United, and American Express for Delta, pay the airlines anywhere from 1.5 to 2.5 cents per mile.

The airlines then credit passengers when items are charged to those cards, usually at one mile per dollar spent.

We’re talking about billions of dollars given to the airlines by the credit card companies.

It’s become a high margin business for the airlines.

In fact, airline miles now account for more than half of all profits at American Airlines.

So, one could argue that the airlines may not be in the transportation business, but in the mileage selling business.

Where does this leave you?

Whatever you do, don’t hoard your miles. Use them as early and as often as you can.

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