Flying for points v Spending for points

[albatross710]

I did some calculations on the weighting of the generic FF points and earning rates verses the rates achieved on spending on a credit card. Banks must really be onto something.

Rounding number for ease of use, for instance

A J round trip fare to BNE-LHR on SQ would cost the pax ~$10k airline margin of how much? perhaps $2,000-$3,000 earning ~25,000 kf pts,

Transaction $20,000 on a credit card would yield for the banking system $100-$400 in credit card surcharges but earn 20,000 kf pts.

When considered in terms of margins, the banks appear far more generous. Which I am sure they are not.

I guess the banks really work on people not paying the balance each month and then clocking up interest at 19.999% (or whatever)

Like all things with credit cards, buyer beware.

 

[JohnK]

Does that sort of example work for all scenarios.

I guess the banks really work on people not paying the balance each month and then clocking up interest at 19.999% (or whatever)

Try 21.49% and increasing every month. Let's not forget that the vast majority of people pay interest (some pay obscene amounts) on credit cards. The number of people who pay off the balance each month is negligible and is being largely subsidised by the people paying interest.

Wipe of a large proportion of the $40+ billion credit card debt and see if the deals you get from banks/credit card companies are as sweet as they are today.

 

[cove]

Paying in full on credit cards to earn points is the best way to draw out value from the credit card system for yourself.
Those not paying in full get hit up big time as you said with rates a bit short of what would have made SHYLOCK blush.
Banks do have to write off a lot but basically 6 or 7 good 21% payers cover one bad debt after allowing for operating expenses so as long as defaults remain modest it can be a winner.
Flying for points is a very slow process unless you are a road warrior flying every week.

 

[albatross710]

One observation I made one day was the ease with which I could determine the due date on the payable bills in front of me.

Brisbane City Rate : Big bold 45 pt text -DUE DATE
Origin : Big Bold - Due Date
Telstra : Big bold, top righthand side

Then the Westpac & NAB c'card statements - Courier 12 pt

With the credit cards they do like to increase limits until you get to your ability to finance it.