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Old Apr 22, 10, 7:48 am   #3
mia
FlyerTalk Evangelist, Moderator: American Express, Diners Club
 
Join Date: Jun 2003
Location: Miami & London
Programs: AA 2MM Perpetual Platinum; HH & SPG Gold
Posts: 20,297
Cashback is a flawed rewards paradigm because there is no arbitrage. Money is worth the same to the card issuer as it is to the cardholder. No card issuer can rebate 2% and be profitable unless they attract customers who will generate finance charges or other fees. Schwab tried this with the predictable result.

Airline miles and hotel points are fundamentally different because they represent capacity which would otherwise remain unsold. This allows the card issuer to buy at wholesale prices and award to consumers who must pay retail prices. The difference between the cost and the redemption value of miles/points allows the card issuer to reward the cardholder with far more than 2% even though their cost is less.

Cashback is the best choice for those who do not wish to travel or who are interested primarily in domestic economy class flights on competitive routes. Otherwise, I think miles provide more value. It doesn't make sense (to me) to dilute the value of your rewards through dispersal. You will end up with some Membership Rewards points, some airline miles, some HHonors points and a trivial amount of cash. I predict you will obtain more satisfaction by coordinating your earnings such that they can be combined to obtain expensive awards.

Naturally, this unsolicited opinion is worth just about what you paid for it .
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