Opinion: The bad news about your airline points

Opinion by Ganesh Sitaraman and William J. McGee

(CNN) — Over the last several months, America’s largest domestic airlines have made a number of changes to their rewards programs, which enable members to reach different tiers of “status” that come with increasing levels of benefits.

Delta recently made it harder to gain status — and withdrew benefits for those with status, such as ease of lounge access. Alaska published an entirely new chart for point accrual, increasing the number of points needed to fly to some areas.

American went even further, changing its policy to only allow customers to accrue points when they book through American, partner airlines or certain preferred travel agencies — thereby directing its customers away from competitor booking platforms.

To many flyers, point systems seem terrific, and their logic simple: They are like the punch card at a cafe where your 11th coffee is free. And for many, they are the core benefit of credit card rewards. But beneath the surface, airline point systems are rife with extractive, abusive policies that, in many cases, allow the airlines to deceive consumers and pocket their cash without giving them any real “rewards.”

To start off, consider the most basic question: How much are your points worth? Despite online points-estimators like The Points Guy, we can’t know for sure. While the biggest airlines once posted redemption charts publicly, some have stopped doing so.

This lack of transparency means that airlines can change the value of points anytime they want. And if an airline drops the value of the points, that means that passengers effectively pay more in points for flights. Indeed, a recent survey found that, since 2019, the prices of airline rewards have increased faster than the rate of inflation, even as the benefits of rewards have decreased.

What about those offers for a “mileage multiplier”? Often times after you book a flight, the airline might offer you the chance to buy additional points. But it turns out that the airlines sometimes charge more for these “multipliers” than what the points themselves are estimated to be worth.

This is like the airline offering you a deal of paying $20 to get back $10. No sensible person would take that deal. But because the conversion rates aren’t transparent, people might not know it’s a bad deal.

Alternatively, if you have ever tried to transfer points, you find out that, here too, the deal is unfair. Say you want to transfer 10,000 Delta points to your spouse. According to some online estimates, those points are worth $120.00. But it turns out that Delta charges you a $30 fee to transfer the points, plus one cent for every point transferred. That means you pay Delta $130 to transfer $120 worth of points. Other airlines charge similar fees. By the way, all of this is simply changing ledger entries in an account, so it shouldn’t cost more to transfer more points.

If these policies seem shocking and unfair, that’s because they are. “Rewards” programs often enable airlines to extract extra cash from unwitting consumers. Some analysts even estimate the value of airline points programs as far outstripping the airlines’ transportation business.

Not only does this incentivize airlines to continue relying on points programs for revenue, with all of their deceptive practices: It also takes them away from their core business of delivering passengers safely to their destination. And there is no underestimating how financially critical these programs have become for the airlines. In 2023, major US carriers generated $27 billion in revenue from loyalty programs and commissions, 68% of the global industry total.

So what can we do about this? Congress could take aim at these practices legislatively. Importantly, there is already bipartisan concern about this topic: Senators Richard Durbin (D-Ill.) and Roger Marshall (R-Kan.) have together identified these types of practices as problematic. In a letter to the Department of Transportation and Consumer Financial Protection Bureau, the two senators write that “there are troubling reports that airlines are engaged in unfair, abusive, and deceptive practices,” and they requested that the agencies describe their plans to address these problems.

The Department of Transportation can use its authority to define and prohibit “unfair and deceptive practices” in the transportation sector to address these harms. Indeed, the Department held a hearing on Thursday, in conjunction with the Consumer Financial Protection Bureau. Rohit Chopra, director of the Consumer Financial Protection Bureau, said its “review of all the fine print suggests that credit card companies and airlines have the power to quickly and dramatically devalue those points by making it more challenging to redeem them.”

Actions from Congress or these agencies could get rid of unfair and deceptive practices in airline point systems. This won’t mean the end of reward programs. It will just mean a fair shake for consumers.

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This piece has been updated with news of the hearing.