2010 Articles
18 August 2010
Do Airline Co-brand Credit Cards Meet Travelers’ Needs?
Do Airline Co-brand Credit Cards Meet Travelers' Needs?
Ai Editorial by Christopher Staab, Managing Partner, Airline Information
The airline co-brand is the king of credit cards, spurring consumer spending, as well as airline and bank revenues, like no other card. Consumers love to hoard frequent flyer miles, meaning they often choose airline co-brands versus cash-back and hotel cards which can offer more generous rewards. But, how long can the party last for this major source of revenue for airlines? It has been much discussed already that the lack of availability of frequent flyer seats is putting this model under pressure, but I believe airline co-brands could eventually be de-throned for also not meeting the needs of international travelers.
Almost all U.S.-issued airline co-branded credit cards, which are logically aimed at frequent travelers, charge a 3% foreign transaction fee on charges made on overseas purchases. 1% of this is the interchange fee charged by the Credit Card Networks and 2% is charged by the issuing bank (and it is reported that in some cases that the airline partner may share in this 2%.) The exception is American Express, which charges a 2% foreign currency transaction fee. Now many U.S-issued credit cards are even charging "foreign transaction fees" on U.S. Dollar transactions made abroad or even charged by foreign merchants via Internet, even though no foreign currency exchange takes place.
To read the entire editorial, visit http://www.airlineinformation.org/
