Credit Card Rewards Cost Amex More Than $9.2 Billion in the Last Year
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Ever wonder how much credit card rewards cost banks? If you know where to look, the answer is disclosed every quarter. Last week we found out that Chase “super users” cost the bank’s bottom line an extra $330 million from April through June. Now this week, we’re finding out just how much American Express’ member rewards are costing the company.
Over the last 12 months, “Card Member Rewards” have cost Amex over $9.2 billion. On top of that, the financial services company incurred another $7.5 billion on marketing, business development and card member services. In the second quarter (April-June) of 2018 alone, card member rewards cost the company $2.433 billion.
That’s a lot of high-value Membership Rewards redemptions, which are credit card points that can be used for premium cabin airline redemptions such as flying in Lufthansa first class or on a Singapore Suite to Asia. It’s also a noticeable increase compared to the same time last year, when rewards cost the company less than $2.2 billion. The 11% increase cut into the company’s bottom line by an additional $237 million.
But don’t feel too bad for Amex shareholders, because revenues are up by even more than that amount. The company added another $607 million in net revenue over the same period, with a large part of that return due to a 19% jump in net interest income, as the card issuer opened more credit cards and allowed charge card holders to carry a balance.
Increased Spending and New Card Members
Amex’s results were also boosted by an increase in card member spending, with an 8% average increase from $7,920 per member in Q2 2017 to $8,592 in the same period this year. Higher spending means more transaction fees and the potential for more interest income.
Also, at the top of the investor release, Amex’s CEO bragged about issuing 2.9 million new cards in Q2 2018. That’s around 32,000 new cards issued every day. It sounds good until you dig deeper into the report and see that the total number of Amex accounts (including authorized user accounts) only increased from 114.2 million to 114.3 million in the quarter. So, it seems that other card members closed around 2.8 million card accounts at the same time — meaning there were around 31,000 closed accounts per day.
Get Your Share
With Amex handing out over $9 billion dollars in credit card rewards every year, we here at The Points Guy want to make sure our readers are collecting as many of those rewards as possible. So if you want to know if you have the right credit cards in your purse or wallet — and that you’re getting maximum value for your travel rewards — check out some of TPG’s most popular posts on earning and redeeming Amex Membership Rewards points:
- Redeeming American Express Membership Rewards for Maximum Value
- TPG Readers’ Best Ways to Redeem Membership Rewards Points
- American Express Platinum Card 100,000-Point Offer Returns via CardMatch Tool
- 100,000-Point Welcome Bonus Returns on the Amex Business Platinum Card
- The Best Ways to Use 100,000 Membership Rewards Points
Welcome to The Points Guy!
Aside from the 120,000-point welcome bonus, Amex recently made huge improvements to the Business Platinum Card, including the fact that you will now earn 50% more points on purchases of $5,000 or more (up to a cap amount), earn 5x on flights and eligible hotels at Amextravel.com and cardholders will receive an up to $200 annual airline fee credit each calendar year (enrollment required).
- Welcome Offer: Earn 120,000 Membership Rewards® points after you spend $15,000 on eligible purchases with your Card within the first 3 months of Card Membership.
- Plus, 0% Intro APR for 12 months from the date of the account opening on purchases eligible for Pay Over Time. After that, your APR will be 14.24% to 22.24% based on your credit worthiness and other factors as determined at the time of account opening.
- Get 5X Membership Rewards® points on flights and prepaid hotels on amextravel.com.
- Earn 1.5X Membership Rewards® points on eligible purchases in key business categories, as well as on purchases of $5,000 or more everywhere else. Cap applies.
- Unlock over $1,000 in value per year for statement credits on select purchases with your Card, including up to $400 with Dell Technologies, up to $360 with Indeed, up to $150 with Adobe and up to $120 on wireless telephone purchases. Enrollment required.
- $200 Airline Fee Credit: Get up to $200 in statement credits per calendar year toward baggage fees and more at one qualifying airline.
- $179 CLEAR® Credit: Use your Card and get up to $179 back per year on your CLEAR® membership.
- Access to more than 1,300 airport lounges across 140 countries and counting with The American Express Global Lounge Collection®. More lounge options than any other credit card on the market as of 8/2020.
- $595 Annual Fee ($695 if application is received on or after 01/13/2022).
- Terms Apply.
- See Rates & Fees