Who benefits from MS? Who loses?
Jan 4, 2014, 10:55 pm
#93
Join Date: Feb 2012
Location: Los Angles
Posts: 2,101
If you just look at Manufactured Spend in a vacuum, then the credit card companies are probably losing since, theoretically, a person would only MS in profitable situations.
However, in the big picture, the money lost by cc companies to MS is vastly outweighed by those who carry a balance and pay interest on their "awards" cc. To these banks, losing money to MS falls under the price of doing business and it is a very small price (relatively).
However, in the big picture, the money lost by cc companies to MS is vastly outweighed by those who carry a balance and pay interest on their "awards" cc. To these banks, losing money to MS falls under the price of doing business and it is a very small price (relatively).
Jan 5, 2014, 8:04 am
#95
Join Date: Dec 2009
Location: HNL
Programs: UA 1K; Marriott Plat; Hyatt Diamond; CCarlson Elite
Posts: 641
http://www.forbes.com/sites/grantmar...r-the-economy/
I am not quite sure I understand why the author feels MS is bad for the economy, he offers little evidence of such, nor do I believe he reaches a conclusion that is consistent with the sensationalist title. But a little concerning that the article is in such a mainstream publication.
I am not quite sure I understand why the author feels MS is bad for the economy, he offers little evidence of such, nor do I believe he reaches a conclusion that is consistent with the sensationalist title. But a little concerning that the article is in such a mainstream publication.
Jan 19, 2014, 12:57 pm
#96
Join Date: Nov 2013
Location: Midland
Posts: 55
If U were a program director, U will lose the job in a hurry....The points award seats availability is elastic depends on the traffic, there is buffer capacity (15%) for the future traffic growth. they always have few non-revenue seats which is valued at $'0' in their math, and its availability is at their discretion and not when U want to fly!
Jan 23, 2014, 10:12 pm
#97
Join Date: Aug 2009
Location: RDU
Programs: A few
Posts: 5,499
In my opinion, the party that loses the most is the issuing bank (Metabank or US Bank, usually). This system was designed so that all parties would benefit. CVS would collect a $5.95 fee per card, remit part of it to Incomm, and keep the rest. Metabank would collect interchange fees when the card was used, take advantage of the float until it was used, and keep any unused funds that customers forgot about.
Then, the feds came around and threw a wrench into the plan by requiring PINs. Suddenly the card issuer started getting a flat fee of a few cents when the card was used rather than a percentage. Suddenly people would drain the card the day after buying it, so there was no float. Suddenly it became possible to spend exactly the amount on the card, so no more unused funds.
I really doubt CVS, or any retailer, is paying the standard 2-3% interchange fee on $500 or higher gift cards. That just makes no sense for any store to do. Even the most clueless management should be able to see the problem with that.
Then, the feds came around and threw a wrench into the plan by requiring PINs. Suddenly the card issuer started getting a flat fee of a few cents when the card was used rather than a percentage. Suddenly people would drain the card the day after buying it, so there was no float. Suddenly it became possible to spend exactly the amount on the card, so no more unused funds.
I really doubt CVS, or any retailer, is paying the standard 2-3% interchange fee on $500 or higher gift cards. That just makes no sense for any store to do. Even the most clueless management should be able to see the problem with that.
But it's a great overall question. I am very curious about the complex money chain in all this. All I know is I am winning to the tune now of thousands of dollars a month, and that means somewhere down the chain someone is losing that amount.
Jan 23, 2014, 10:18 pm
#98
Join Date: Sep 2013
Posts: 829
Credit Card issuers are losing on the very small /so far/ community of the MS ppl.
They get their share probably 1000% more on the uneducated spenders, who pay monthly fees on the balances and so..
We are just little fishes. We take some food/$$$ from the big sharks. They don't mind as of now. They know we represent a very small segment of their customers.
Nobody loses. everybody wins. Except those poor souls..
They get their share probably 1000% more on the uneducated spenders, who pay monthly fees on the balances and so..
We are just little fishes. We take some food/$$$ from the big sharks. They don't mind as of now. They know we represent a very small segment of their customers.
Nobody loses. everybody wins. Except those poor souls..
Jan 24, 2014, 1:20 am
#99
Join Date: Dec 2009
Location: DEN
Posts: 502
Times have definitely changed. 5 years ago a lot of us had 7-8% APRs on credit cards earning 1% back at most. Now we have slightly better rewards but banks have prime customers at somewhere around 15% and everyone else at 20-25%.
Obviously, anyone who carries a balance these days is subsidizing everyone else more than well enough!
Obviously, anyone who carries a balance these days is subsidizing everyone else more than well enough!
Feb 26, 2014, 11:10 am
#100
Join Date: Oct 2013
Location: WAS
Programs: SPG Plat. Marriott Plat. Hilton Diamond. Hyatt Diamond. IHG Plat.
Posts: 2,580
A reliable source shared some information to me.
This information pertains to Wally World and OneVanilla Visa/MC.
$4.95 fee
74.70% of that is Wally World profit.
So Wally World is pocketing $3.69 per card.
But that doesn't include CC/Debit transaction fees etc.
This information pertains to Wally World and OneVanilla Visa/MC.
$4.95 fee
74.70% of that is Wally World profit.
So Wally World is pocketing $3.69 per card.
But that doesn't include CC/Debit transaction fees etc.
Feb 26, 2014, 11:20 am
#101
Join Date: May 2013
Location: AZ
Programs: AA, UA, US
Posts: 525
Feb 26, 2014, 12:37 pm
#102
Join Date: Feb 2014
Posts: 511
In my view, this is what occurs, given a $500 VR @ CVS paid for with CC:
CVS : Collects portion of activation fee (hypothetical guess $3.00). Pays small negotiated interchange fee on credit card (0.50% / $2.50). Net profit = $0.50 plus driving incidental business to store (I usually buy things along with my VR).
CC Company: Collects interchange fee (0.50% / $2.50). Pays airline 0.4cpm ($2.00 cost per VR on 1x earning CC). Probably a small profit share with airline as well for driving card activation/loyalty/usage ($0.50 per $500 spent). Net profit = $0.00. Any non MS spending on their card or if a balance is carried is where they make their profit.
Airline: Sells miles for 0.5cpm to CC company to fill what would otherwise hopefully be vacant/unused seats. Collects incidental fees on passengers (baggage fees/onboard sales) to make profit on carrying those passengers.
Product VR Loaded To (MVD, Bluebird, etc): Collects remaining portion of activation fee ($0.95). Probably pays a large portion of that to VR itself. Collects profit on float of funds and various useage fees.
----
It'd be silly to think in the end the businesses involved are losing. Businesses aren't stupid. If it wasn't profitable for them to be in the game they wouldn't be a part of it. The biggest loser is obviously MVD, Bluebird, etc. They rely almost soley on fees/float for profit, of which MSers provide little. Hence, shutdowns. Bluebird is a different case because it probably is viewed as a loss leader for Wal-Mart - Wal-Mart probably takes a loss on the program but is hoping that people with a Bluebird will end up coming to Wal-Mart more often out of necessity for loading the cart and building brand loyalty.
CVS : Collects portion of activation fee (hypothetical guess $3.00). Pays small negotiated interchange fee on credit card (0.50% / $2.50). Net profit = $0.50 plus driving incidental business to store (I usually buy things along with my VR).
CC Company: Collects interchange fee (0.50% / $2.50). Pays airline 0.4cpm ($2.00 cost per VR on 1x earning CC). Probably a small profit share with airline as well for driving card activation/loyalty/usage ($0.50 per $500 spent). Net profit = $0.00. Any non MS spending on their card or if a balance is carried is where they make their profit.
Airline: Sells miles for 0.5cpm to CC company to fill what would otherwise hopefully be vacant/unused seats. Collects incidental fees on passengers (baggage fees/onboard sales) to make profit on carrying those passengers.
Product VR Loaded To (MVD, Bluebird, etc): Collects remaining portion of activation fee ($0.95). Probably pays a large portion of that to VR itself. Collects profit on float of funds and various useage fees.
----
It'd be silly to think in the end the businesses involved are losing. Businesses aren't stupid. If it wasn't profitable for them to be in the game they wouldn't be a part of it. The biggest loser is obviously MVD, Bluebird, etc. They rely almost soley on fees/float for profit, of which MSers provide little. Hence, shutdowns. Bluebird is a different case because it probably is viewed as a loss leader for Wal-Mart - Wal-Mart probably takes a loss on the program but is hoping that people with a Bluebird will end up coming to Wal-Mart more often out of necessity for loading the cart and building brand loyalty.
Mar 26, 2014, 1:43 am
#103
Join Date: May 2009
Location: MSP
Programs: AA, DL, AS
Posts: 183
http://www.forbes.com/sites/grantmar...r-the-economy/
I am not quite sure I understand why the author feels MS is bad for the economy, he offers little evidence of such, nor do I believe he reaches a conclusion that is consistent with the sensationalist title. But a little concerning that the article is in such a mainstream publication.
I am not quite sure I understand why the author feels MS is bad for the economy, he offers little evidence of such, nor do I believe he reaches a conclusion that is consistent with the sensationalist title. But a little concerning that the article is in such a mainstream publication.
Mar 26, 2014, 2:59 am
#104
Join Date: May 2009
Location: MSP
Programs: AA, DL, AS
Posts: 183
So for now we are safe, because the card issuers are hoisted on their own petard of opacity.
Mar 26, 2014, 7:21 am
#105
Join Date: Nov 2013
Location: Houston, Texas
Posts: 90
Who benefits from MS? Who loses?
I believe there is more then to this then fees, most banks(and companies) are being recognized in two ways(on their quarterly statement to shareholders), one is amount of profit, second is amount of money flowing thru them.
Their profits come from regular people spending, AMEX gift cards-fees on transaction, Chase-Interest fees from non MS spenders and so on.
For the amount of money flowing we are easily helping them, AMEX gift cards-by number of people on this forum doing 100k per months, we easily flowing thru them several millions.
All leading banks are best friend to MS and my guess this will stay that way until we start eating their profits significantly or no more money flows from us.
Their profits come from regular people spending, AMEX gift cards-fees on transaction, Chase-Interest fees from non MS spenders and so on.
For the amount of money flowing we are easily helping them, AMEX gift cards-by number of people on this forum doing 100k per months, we easily flowing thru them several millions.
All leading banks are best friend to MS and my guess this will stay that way until we start eating their profits significantly or no more money flows from us.