How Much Do Credit Card Companies Pay For Airline Miles?

Filed Under: Credit Cards
In the interest of full disclosure, OMAAT earns a referral bonus for anyone that’s approved through some of the below links. These are the best publicly available offers (terms apply) that we have found for each card. Opinions expressed here are the author's alone, not those of the bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities. Please check out my advertiser policy for further details about our partners, and thanks for your support!

I’m always fascinated by the business side of miles & points. Loyalty programs can be a huge profit center for airlines, and the more we know about the business side of these programs, the better we can understand the evolution of credit card rewards.

While airlines have SEC filings that reveal some information, for the most part we’ll never learn the real nitty-gritty of how much things cost. For example, a few years ago I published a story about how much airlines pay for partner award tickets. In other words, when you redeem United miles for an ANA first class ticket, how much is United paying ANA? For the most part these reimbursement rates were really low, though that doesn’t come as much of a surprise.

In this post I wanted to discuss a different topic that’s along similar lines. I don’t have any inside information here, but rather am sharing my thoughts based on a development we saw today. I’m sure I’m not the only one who has wondered how much the major credit card issuers pay when we convert one of their points currencies into airline miles or hotel points.

This is all speculation on my part, though I think it’s a fun topic to discuss.

Prices probably vary significantly

My guess is that the major card issuers negotiate these contracts individually with each loyalty program, and the costs vary significantly. This is probably based on a variety of factors, including how close a bank’s relationship is with that program, as this may very well be included as part of a larger contract. For example, we know Amex has a close relationship with Delta and Chase has a close relationship with United.

We also know the banks aren’t gong to be overpaying for miles. For example, Ultimate Rewards points convert at a 1:1 ratio to IHG and United, but one United mile is worth significantly more than one IHG point, so there are clearly different pay scales.

The cost has to be less than the rate at which airlines sell miles

I know this is fairly obvious, but the credit card companies are going to pay less for miles than the price at which the programs sell miles directly to consumers during sales. In other words, AAdvantage sometimes sells miles for 1.6 cents each, LifeMiles sometimes sells miles for 1.4 cents each, and MileagePlus sometimes sells miles for 1.8 cents each.

I think the pricing difference might not be quite as big as we expect (in other words, I don’t think they’re getting a 50% discount for volume), given that margins in the business of selling miles have decreased, as more programs have become competitive in this way.

I would guess that the credit card companies are definitely paying less than 1.8 cents for just about all points currencies. It could be significantly lower in some cases.

The rate has to be more than a penny per point

Nowadays we see cash back cards that offer 2% back with no annual fee, like the Citi® Double Cash Card. We still haven’t seen a credit card introduce true “no strings attached” double airline miles on all purchases. The closest to that is The Blue Business® Plus Credit Card from American Express, which offers 2x Membership Rewards points on the first $50,000 spent annually. It’s telling that this is the only card where that’s the case so far.

What this tells me is that credit card companies are paying an average of more than a penny per point, or else we’d see no strings attached double miles cards, given that we see cash back cards with the same value.

Here’s my guess

Today we saw the introduction of the Barclays Arrival Premier Card. The card offers double “miles,” with each mile being redeemable for a cent towards a travel purchase. What’s interesting is that the miles can be converted into airline miles, but not at a 1:1 ratio. Instead, I think the ratios paint a pretty clear picture of how much money banks are paying for airline miles. Here are the transfer ratios of Arrival miles to airline miles:

Arrival Premier Transfer PartnerTransfer Ratio
(Premier Points : Partner Points)
Air Canada Aeroplan1.7 : 1
Air France / KLM Flying Blue1.4 : 1
Aeromexico Club Premier 1.4 : 1
China Eastern Airlines Eastern Miles1.4 : 1
Etihad Guest1.4 : 1
EVA Air Infinity MileageLands1.4 : 1
JAL Mileage Bank1.7 : 1
Jet Airways JetPrivilege1.4 : 1
Malaysia Airlines Enrich1.4 : 1
Qantas Frequent Flyer1.4 : 1

As you can see, for most currencies it takes 1.4 Arrival miles for one airline mile. Given how exact Barclays got with their conversation rates, I suspect this is reflective of how much they’re paying for miles, given that the alternative is them paying one cent cash back.

This suggests that Barclays is paying somewhere around 1.4 cents per airline mile (clearly Japan Airlines wanted more, which isn’t surprising, since they have a good program). My guess is that this is pretty reflective of the average price paid by their competitors as well

Presumably the price varies by currency, though my guess is that for the most part card issuers are paying somewhere around ~1.3-1.5 cents per airline mile when those points are converted.

That general range makes sense when you consider some of the other cards in the market:

  • The Amex EveryDay® Preferred Credit Card from American Express offers 1.5x Membership Rewards points per dollar spent when you make 30 transactions per billing cycle, so if you assume that they’re paying 1.3-1.5 cents per airline mile, that means that they’re offering a return somewhere around 2%
  • If you have the Chase Sapphire Reserve® Card you can redeem points for 1.5 cents towards the cost of a travel purchase, or convert them into airline miles, which suggests to me they’re paying just slightly less than 1.5 cents per mile on average, since presumably they’re getting some sort of a commission when people redeem points for hotel stays and certain flights

Again, this is all speculation on my part, but if you average it all out, I’d guess that credit card companies pay an average somewhere around 1.3-1.5 cents per airline mile.  I’d bet there are also some outliers, and programs that charge just 1.2 cents, while others charge 1.6 cents.

I’m curious to hear what you guys think? Is this similar to what you’d expect, or do you have a different take?

Regarding Comments: The comments on this page have not been provided, reviewed, approved or otherwise endorsed by any advertiser, and it is not an advertiser's responsibility to ensure posts and/or questions are answered.
  1. Thanks for the analysis. And here is a related question I’m hoping someone can definitively answer.
    The credit card companies make their money to pay for all the benefits we get by charging merchants fees on each purchase. Does the fee the merchant pays on a given purchase depend just on the type of card used (Visa MC, AMEX), or does it depend upon the specific card itself — ie does Chase charge a higher fee for purchases made on its Reserve card as opposed to a card with little or no benefits.

  2. Based on American’s 2015 10-K AAdvantage sold miles at an average of ~ 1.23 cents per mile. The largest number of miles were sold to Citibank at a price less than that (since many buyers, including program members, paid a higher price and that’s an average). See

    That was before the latest deal with Citi and Barclays, a deal which raised the price that banks pay per mile (and unfortunately AA is less forthcoming in their filings than they used to be).

    Of course in co-brand deals what the banks pay a loyalty program isn’t only a cost per mile. They pay for instance for program benefits (eg checked bags), they pay for use of the program name, and they pay for access to the marketing channel. And these things are accounted for separately.

    Transferable points deals are a bit simpler. And we pretty much know based on information from United’s 10-K and from Chase on the growth of their Ultimate Rewards products, that any increase in revenue being reported by MileagePlus is pretty much accounted for by payments for Chase transfers. See

  3. @neil I believe each card company has various merchant fees. For example, I believe Visa Infinite cards (Ritz Carlton and CSR) have a higher fee than Visa Signature and regular Visa card. So in conclusion, I believe it is based on the card company and the card itself.

  4. @neil – interchange is higher on a Visa Signature than a plain vanilla Visa product, higher on a World Mastercard than a plain Mastercard, I think that’s what you are asking?

    That higher interchange does help pay for additional benefits. So does the fact that the premium cards will tend to get higher spend. in Chase’s case they pay Visa a flat fee (they ‘leased Visa’s network’), rather than giving up a % of each transaction, so they do keep more of the interchange on incremental dollars charged. Although in the case of Sapphire Reserve they’re clearly spending the entire interchange, any money they ultimately make has to come from revolve (APR), but there isn’t likely much revolve based on what they’ve revealed about customer demographics. (See

  5. I would wager, buying in bulk the way they do, they’re paying far less (especially when you consider how much points go unused, or very poorly used)…I would bet that Chase pays .8 cents per airline mile based on them being able to make a profit on spend and having to make money back on sign-up bonuses.

  6. @neil: I think it’s by type of card. If not, the merchants would have to make a lot of agreements to accept every different credit card available.

    @Jacob: The Visa Infinite may have higher annual fees for the cardholder, not for the merchant. If they charge more from the merchant, they could refuse to accept that card.

  7. I always kind of assumed that the banks paid 1 cent or maybe even less for at least some of the transferrable currencies, or else why would they be so happy to continue allowing generous use of those transfers?

    For example a while ago you reported on Chase looking at banning you from transferring points from other cards into the CSR and then redeeming at 1.5 cents per point, but it appears that they had no intention to limit transfers of points to other currencies. If transfers (to at least some partners) cost nearly as much as redeeming at 1.5 cents per point, why wouldn’t they have also been looking at limiting transfers? (Perhaps they were looking at redeeming transfers and it just wasn’t publicly obvious, but that didn’t seem to be the implication at the time.)

    Similarly Amex has a million ways to use Membership Rewards points for ~1 cent each, so why would they readily be allowing a much more expensive redemption option through transfers?

    Likewise though no card offers 2 miles per dollar on everything, lots of cards do offer 2 or more miles per dollar on *some* things, and it’s never been totally clear to me what the economics of those offers are — I guess the credit card companies just hope people will use any given card for all expenses and so bonuses will be evened out by non-bonus categories. But I also wouldn’t think they would take the risk of offering 2, 3, or more miles per dollar if those miles cost significantly more than 1 cent each? Merchant fees give issuers of high-end cards somewhere around 2.5-3 cents profit per dollar to work with before you really start to have to hope for the money to be made up somewhere else. (Of course, this theory doesn’t really explain the CSR offering a clear 4.5 cent return option.)

    All that said, your logic on Barclays does also make sense, but maybe Barclays has worse terms than Amex and Chase do given that they’re new to this game.

  8. I would imagine that estimate is pretty close. We know (cuz delta said so) that they upped the price amex pays for skymiles by 15% in the latest deal, and we can assume that the airlines all made similar deals and are charging similar prices. As Gary said, the last firm data we have showed AA getting ~1.2 cents on average. I imagine the cc issuers pay less than average, but they are also likely the vast majority of such sales, so it can’t be much below that average. Add on 15% and you get to the 1.3-1.4 cent range. The JAL card is quite stingy with miles, so they clearly price them higher.

  9. @Ra, I’ve heard from someone with some inside knowledge of one cobrand deal that they got a different rate on miles that were part of a signup bonus. However, no idea how prevalent that is.

  10. Rob at head for points is adamant than no one gets avios for less than 1p (gbp) a point; which also correlates to 1.3/1.4 cent a point

  11. Is this also the reason why there is no transferable points card to Alaska? Because Alaska wants an astronomical amount for their points (probably 3 cents minimum)?

  12. I also like looking at pointshound and rocketmiles. The points they pay out on a hotel booking vary depending on what airline currency you select, revealing that some airline miles cost them more than others. For example I tend to select Alaska over AA miles, since they pay slightly more Alaska miles per booking. This indicates to me that they can purchase Alaska miles cheaper than AA miles.

  13. @Ben

    You are right, I forgot about SPG. But then again, they might get gutted by Marriott.
    Then: nothing left for AS.

  14. Since they are buying miles in bulk and providing free advertising for the airline and their loyalty program, there’s no way they should be paying more than 1cpp.

    I’m also curious to see how the waived bag fee benefit on the airline cards works. Does the bank have to reimburse the airlines $X per time that benefit is used, do the airlines just write them off, or is there some divvying up of the AF between the bank and the airline?

  15. @neil – I believe the big money the card companies are earning are from those with unpaid balances which generate hefty interest each month. We here at OMAAT don’t fall into that category because we’re not carrying balances but many people, not necessarily the ones who sign up for these specific reward cards but rather other cards offered at the same banks, are paying full freight for the rest of us. I’m still trying to figure out how Chase worked the magic on their 100K point signup CSR last year.

    More to the point, I would love to be able to move my airline miles to my Chase account rather than the other way around. I have lots of small mileage accounts at several airlines which do me no good in the grand scheme of things.

  16. I would bet there is a significant amount of “barter” trades rather than monetary compensation.
    Advertising, “Brand” placements, the possibilities are endless in bartering

  17. If merchant fees re 2%, then how does Simon Mall make money off of their Visa Gift Cards? They take 0.79% off of $10k and get charged $200+ by the CC company? Or am I understanding this wrong?

  18. @Miles is correct that signup bonuses are often funded differently than ongoing miles for spend. That’s because the frequent flyer program has just as much incentive to see a new customer for the card as the bank does, that new customer represents a future revenue stream for both parties. The split on the signup bonus will vary tremendously from deal to deal.

  19. Given that most credit card companies seem eager for you to redeem their “miles” at a value of one cent per mile for merchandise or statement credits, I would guess that one cent is likely to be a floor for what they’re paying the airlines for miles.

  20. Great piece, Lucky. This got me thinking about how much the airlines revenue comes from selling points. I recall a report with estimates as high as 50%. It would be nice to know how these factors contribute to past award devaluations.

  21. I have a BOA travel rewards card which gives 1.5 points per dollar plus .75% bonus as a platinum which totals approx. 2.625% on every purchase, can you explain how the bank can afford such a hefty reward, I charge every single month over 100k on this card pay it off and charge again before the closing date so I get 12 rounds of 2625.00 every year, I don’t get it how the bank can afford to do that.

  22. Hi Lucky;

    The problem with your logic is a) two cents per dollar rebate on credit cards are extremely rare (how many are there?) and b) being willing to give a customer a penny isn’t equivalent to giving a third party a penny for a mile that goes to the customer , the mile would have to be significantly lower to cover the extra expense and hassle of involving a third party

    I’d be surprised if the big issuer’s are paying more than a penny a point now, I think they used to pay less

  23. TPG:

    I’m guessing Simon makes money two ways with their gift cards:
    1. Perhaps their tenants that accept the gift cards get less than 100% reimbursement
    2. Some % of gift cards are never redeemed.

  24. On a separate but somewhat related topic, I am starting to get pretty annoyed with earning so few miles for actually flying compared to all these partner promotions. I guess I should not be since it is easy to rack up many miles but there are some periods where I travel a lot and earn 10-20K miles for flying 30K miles in economy and then I pay for a $100 hotel room and earn 5K miles due to some random promotion.

  25. Varies significantly per airline and bank, but .8-1.7 of a range sounds about right. I believe LH JAL and OS had rates toward the end of that range.

  26. Very few understand the points even people with 300K i met a few . But what they want to do is Suck you in for the Late fees and !5 to 25% interest so u can get 1 free air .
    It’s a Game and like Vegas they usually win but for a few .


  27. A few years ago when hertz was offering 7500 delta miles per suv rental, the manager at the facility i was renting from let it slip that it was costing them $40 for those miles, so just over half a cent each. That was probably 10 years ago though. Was fun earning though as i was renting 20 cars at a time and not having to take them off the lot. $15 rentals at my local airport. Station manager said they had people flying in from all over the country to abuse the deal. Corporate shut it down after that.

  28. @M2 – the claim wasn’t 50% of revenue, it was half of profit. We don’t know what the margins are in these programs, but it’s better than 50% on billions in revenue for United/Delta/American.

  29. @Gary Leff’s comments are incredibly informative. I would just add one point to the discussion: At least American Express pays a higher rate for miles earned on a co-brand card than it does for miles transferred through its own Membership Rewards program. For example, if you earn 1,000 miles on your Delta card, they are paying probably the rate @Gary Leff mentions or even slight above it (say 1.3 cents per miles, maybe even a touch more). If you transfer 1,000 miles to Delta through Membership Rewards, they’ll pay much closer to a penny (maybe even a bit less than a penny at AmEx, believe it or not). AmEx will insist that Delta agree to be a Membership Rewards transfer partner as part of the overall co-brand relationship, and agree to a higher reimbursement rate for Delta co-brand miles because Delta is so crucial to the marketing for those miles.

    I’m not sure whether Chase or Citi have a similar differential in their payment. However, we shouldn’t assume that there is one overall rate. Also keep in mind that Chase, Citi, AmEx will all offer all kinds of incentives — many of which are costly — to land a co-brand relationship. Chase could offer favorable lines of credit, upfront payment for huge buckets of miles, and other incentives to land a cobrand relationship. It’s very competitive and obviously each relationship is bespoke and carefully negotiated. So cost per miles, as such, is just one piece of an overall relationship.

  30. @Leeza1 You’re wrong buddy. I own a bunch of retail stores and the merchant is indeed charged a higher rate for premium cards. As far as I know, we aren’t able to block Infinite cards. If we accept VISA, we have to accept all VISA cards.

    Further, I think it would be bad business to block premium cards because many of the higher spenders have premium cards. In no way would we want to discourage their patronage.

  31. Lucky’s post seems to offer a reasonable guesstimate of mileage valuations. However, Gary’s comment about ~ 1.23 cents per AAdvantage mile and the Chase Sapphire Preferred’s redemption rate of 1.25 cents per UR point inclines me to think credit card companies’ cost (per airline mileage point) is at or below that mark.

  32. Great Responses folks:
    I have a question:
    How much does OMAAT make when we click and sign up for these CC’s links?

    Would type of currency would that be? would it be the same for all banks??

  33. Any data from non-US cards, Ben?

    A correction you may like to make from conversation to conversion in this paragraph.

    “Given how exact Barclays got with their conversation (CONVERSION) rates, I suspect this is reflective of how much they’re paying for miles, given that the alternative is them paying one cent cash back.”

  34. @Anthony – Rob at HfP has always said BA still get around 1p per Avios for partner purchases of Avios, so seems roughly in line with the costs Ben is outlining above. Of course with 0.3% interchange fees (vs 2-3% in USA) you can see why the earning rates on spend are so different!

  35. “I have no idea what I’m talking about but I’m going to write an article about it anyways”

  36. @bob: If you say that’s how it is, so I can’t argue.
    However, it does not make sense. Because if those with premium card spend more, they can pay for the extra bonus, they don’t need to charge more from you. It’s a double win for them “We charge more fees from the card owner(annual) and the merchant(transaction)”. Well… now it makes sense.

Leave a Reply

Your email address will not be published. Required fields are marked *