In that case, though, the "value" you think you're getting isn't 8¢/mile any more. It's half of that to begin with. Then factor in fees and taxes you have to pay in cash, and the miles you'd earn with a paid ticket (with class-of-service bonus) but won't earn on an award - the end result is probably 2.5¢ to 3¢ per mile. That's much closer to the amount of money AmEx, etc., paid for those miles. It's also close to, perhaps even more than, what big companies with good corporate discount deals would pay for the seat.

That depends. Some carriers, such as CO, no longer make their "rule buster" awards eligible for last seat inventory to non-elites.

Also, most airlines these days have assigned some dollar value to their points. If they think that the "revenue" that a point redemption will generate is greater than the revenue that they will realize by holding the seat for sale they make it available for reward redemption. And for the ones who do enable last-seat availability they feel that the cost in miles of those rewards is sufficient to cover the potential lost revenue. On DL and CO, for example, the last seat availability for premium long-haul seats is actually more than double the base redemption level.

Depends on the carrier. While the 330-day window used to be a sure thing for redemption not all airlines still do that. There are a few that generally do not, including CO.
It is closer, but still not really close at all. The airlines generally sell the points to 3rd parties for less than a penny each.

Do you have any sources for how much airlines charge for miles?

Like previous poster said, I have heard that it costs about a penny each, but have never seen a source for that. Do you have one?

While I really love the idea of getting 8c/mile, I really, really doubt that's even close to the case, as many previous posters have pointed out.

Here are some reasons:

-As previous posters have mentioned, the quote fares are really just ballpark numbers put out there, in part to make those seats seem like a tempting way to use miles instead. Ask yourself, do you know anyone who has actually paid $12K for the first class round trip from NYC to Paris? Even most business travelers can't get away with that. While I'm sure some tickets are sold at that price, I have no doubt that the vast majority of those seats were not sold that way.

-You paid Amex a transfer fee for the miles, and then the first FF site a fee to book on the other airline, right? Those do add up.

-You aren't getting miles for the flight, so that reduces the cost of flight in comparison. If the flight were $12K as in my example above, you would likely be getting 6,000 base miles, and maybe triple miles, all in, plus qualifying miles. Since you aren't getting that, you aren't really getting the full value of the ticket.

I do use Amex MR a lot and I like the flexibility of it, but for my current charges, I've been going the Schwab 2% route. That's a true 2% and I get miles if I fly.

Back to your original question of who pays, you really pay in the end. Here's the flowchart in my mind:

1 - You buy merchandise. That costs a bit more because the merchant has to pay 3% to Amex to accept payment from you (hence cash discounts in some circumstances).

2 - Out of that surcharge that you paid to the merchant, they've paid Amex, and Amex then pays the first airline for miles.

3 - The first airline then pays the second airline for the seat.

It's really a transaction with a lot of friction. I personally think we'd all be much better off if we followed the European model of debit cards being the de facto payment standard for many merchants, with credit cards incurring a higher fee. Then our costs would be lower and more direct and more efficient.

No.1 and 2 are not true as long as there is no surcharge upfront to pay by credit card.

The merchants costs are absorbed and burried in the overheads, which are born by all shoppers - and since the CC users do get something back, it is the debit card or cash users who subsidize the CC users, i.e. "pay" at least partly the awards CC users enjoy.

True, not many would pay for an F ticket out of own pocket - but why not take advantage of the award scheme and treat ourselves a nice flight when it really does not cost you extra? Personally I have no problem to give up the 6K miles and fly in J or F, in a Flat-Bed or Lie-Flat seat, nice wines/champaign, decent foods, and airport lounge accesses ... for the taxes and fees paid, would still be LESS than a coach ticket cost for the flight. :D

I'm always amazed when people use cash for anything, but, I agree, they're subsidizing us, so I can't really complain.

What do you mean by 6k miles to fly in J or F?

Yes and no. In theory, if merchants did not accept credit cards, they could reduce the price of the merchandise. If 50% of people use a credit card and it costs the merchant 2% fee for accepting credit cards, theoretically everyone is paying 1% more due to the fact that the merchant is accepting credit cards.

So I do see No. 1 as being true - theoretically.

Having said that, I am still puzzled at some businesses who say "no checks" - one local business started such a policy. But within a couple of months they realized that the percentage of bad checks was no more than the credit card fee they were paying so they started accepting checks again. So both the bad checks and the credit card fees are just a cost of doing business.

Doesn't a merchant get dinged with bank fees if a check bounces? Whereas with credit cards, as long as the merchant follows the rules for obtaining an authorization it is protected and the credit card issuer incurs the risk of fraud or non-payment.

Not so! I wish, but no, even with an authorization, credit card accepting-merchants are in no way protected from the risk of fraud. Sorry.

The merchants are protected in the way as long as the credit cards charges are cleared - then the unauthorized charges become the battle between the cardholder and the card issuer, with very little or 0 involvement of the merchants. With the POS system, the merchants would NOT sell any merchandise should the authorization does not go thru.

Do not confuse charge back with fraudulent charges on one's credit card by someone else other than the owner of the card.

The merchants only get involved when the cardholders dispute a charge because they are wrongly charged by the merchants, do not receive promised merchandise / service, things in such nature. It is a totally different situation versus the fraudulent charges on one's credit card as they are commonly defined.

No.1 is only true as you say, theoretically. But we are living in a practical world - that is why it is moot to talk about the theorectical outcome, as it is not how the system function.

Bad check bounce fees would far outnumber the credit card transaction fee. Big merchants have the means to prosecute bad check writers to the letter of the law, and they dont hesitate to post such warning at every register. Small businesses dont have the means to do so - so they would need to weigh the pro and con about accepting check / credit card, or cash only.

One ethnic grocer we frequent, takes only CASH. Period. His business is not affected at all by such policy as there is only one place to buy Chinese BBQ pork, roast duck and other delicacies in 30 miles radius, plus his stuff are good. I was there today and witnessed an American woman trying to use her CC or check for, like, $8.50 purchase. Of course she was politely told NO, Cash Only.

If you think taking checks is good business, why would rental car companies, everyone of them, would only take credit card as form of guarantee payment when you take the car out? On the bookings, they specify that if one wants to use debit card at pick up, one must pre-arrange such and receive pre-approval. Of course you can settle the rental bill at return. But you will not be able to take the car out without a credit card.

Years ago, when CC POS system was just introduced, in Houston where we lived back then, a regional grocery chain did a study on whether they would install such machines at their stores - they found CC transaction costed several pennies LESS than processing a check, when everything taking into account, including the time the customer had to spend at the register, using CC versus writing a check (using CC saved labor cost as a cashier can process many more customers for the same time.) So, Randall's, the regional chain, was the one first installed the system. It took Kroger and Safeway almost a year to follow. Needless to say, Randall's had captured most of our business.

In the argument the poster said if you fly an award, you would forfeit 6K miles by flying a revenue ticket, JFK to Paris - obviously he was talking about coach ticket, as if you fly revenue J or F, you would earn 50 to 100% more miles depending on each FF program.

I say I would give up the opportunity to earn 6K miles sitting in pay coach, to fly J or F, having nice sleeper seat, wine and dine not just onboard, but in pre-flight lounges, with often LESS costs than paying for a coach ticket... In essence, I dont care whether it is 8c or 10c per mile value or 0c per mile value for my J or F award ticket, I only know I would do a whole lot better than paying more $ to fly coach and get the 6K miles back. :D:D