If you are a frequent traveler using American Express Membership Rewards, you may encounter an unexpected cost when transferring your points to certain airlines. This “excise tax offset fee” can act as a hidden drag on the value of your rewards if you aren’t prepared for it.
Understanding how this fee works—and how to bypass it—is essential for anyone looking to maximize the purchasing power of their points.
What is the Excise Tax Offset Fee?
The fee is not a random charge; it is a mechanism used by American Express to cover federal taxes. According to the IRS, excise taxes are applied to specific goods, services, and activities, including transactions involving loyalty programs.
When you convert Membership Rewards points into a U.S. airline’s frequent flyer program, American Express is required to pay a federal excise tax. To recoup this cost, they pass it on to the consumer through an “excise tax offset fee.”
The cost breakdown is as follows:
– Rate: $0.0006 per point transferred.
– Cap: The fee is capped at a maximum of $99 per conversion.
Where the Fee Applies (and Where It Doesn’t)
It is important to note that this fee is highly specific. It does not apply to every transfer you make.
⚠️ Where you will pay the fee:
The fee only triggers when transferring points to U.S.-based airline loyalty programs. Currently, within the Amex ecosystem, this primarily affects:
– Delta SkyMiles
– JetBlue TrueBlue
✅ Where you will NOT pay the fee:
- Hotel Partners: Transfers to hotel loyalty programs are exempt.
- International Airlines: Transfers to non-U.S. airline programs do not incur this fee.
The “Point Trap”: Why You Should Avoid Paying with Points
When you initiate a transfer to a U.S. airline, American Express will offer you a choice: pay the fee in cash (via your card account) or use your Membership Rewards points to cover it.
While using points to pay the fee seems convenient, it is mathematically inefficient.
Example: If you are transferring 50,000 points to Delta SkyMiles, the fee would be $30. If you choose to “pay” that $30 using 6,000 points, you are essentially valuing those points at only 0.5 cents each.
Given that the average valuation of an Amex point is significantly higher, using them to cover a tax fee results in a massive loss of potential travel value. Always opt to pay the fee with your credit card instead of your rewards.
Strategic Workarounds: How to Avoid the Fee Entirely
If you want to book domestic travel without losing value to excise taxes, there are two highly effective strategies:
1. The International Transfer Hack
This is the most effective way to book domestic U.S. flights without the fee. Many international airlines have partnerships with U.S. carriers. You can transfer your points to an international program and use those points to book a flight operated by a domestic airline.
- Example: Transfer points to Air France-KLM Flying Blue or Virgin Atlantic Flying Club to book flights operated by Delta Air Lines. Because you are transferring to an international program, no excise tax offset fee is applied.
2. Comparison with Competitors
It is worth noting that this is a unique quirk of the American Express ecosystem. Other major transferable point programs—such as Chase Ultimate Rewards, Capital One Miles, and Citi ThankYou Rewards —do not charge a fee when you transfer points to domestic partners like JetBlue.
Summary
To maximize your rewards, avoid using points to pay for excise tax fees, and consider transferring to international airline partners to book domestic flights. This approach ensures you get the highest possible value out of every point earned.
