American Express recently revealed how its members actually redeem their rewards points, and the results are surprising. Travel transfers – the holy grail for points enthusiasts – don’t even crack the top three most popular options. Instead, most cardholders are cashing out for gift cards, using points at checkout, or applying them as statement credits.
Why This Matters: The Average vs. The Optimizer 🎯
This data highlights a huge gap between how “points hackers” and average consumers treat rewards. Those who actively move points to airline partners for premium cabin flights (business and first class) get outsized value, sometimes over 1.7 cents per point. Meanwhile, most Amex members redeem at a fixed rate of just 0.6-0.7 cents per point.
This isn’t an accident. Credit card companies want you to redeem at the lower rate.
The Economics Behind It 💰
Card issuers profit from interchange fees, annual fees, and interest. But when you transfer points to partners, it can cost them. Some estimates suggest banks pay around 1.5 cents per point for certain currencies. This means savvy travelers are essentially earning back interchange fees (and sometimes more), while the average user barely scratches the surface.
The industry is structured so that card issuers make more money when you redeem your points for low-value options rather than high-value travel. This is why Amex pushes gift cards and statement credits – they’re cheaper for the bank.
The Takeaway: Cash Back Beats Loyalty 💸
If your goal is simply to earn cash back, there are far better credit cards out there. Many cash-back cards offer at least 2% returns, beating Amex’s typical 0.6-0.7% redemption rate. The lesson? Loyalty programs aren’t always the best deal.
This reinforces how many people choose cards based on brand recognition rather than maximizing rewards. The data suggests most consumers are leaving money on the table, unaware that smarter options exist.
In the end, American Express’s data confirms a simple truth: the vast majority of rewards cardholders aren’t playing the points game. They just want easy cash back, and Amex is happy to provide it – at a fraction of the cost for the bank.
