When a retailer gives you air miles for your purchase, how much is it costing the retailer per point?

Question

It costs me 30 cents to buy an airmile from the airmiles company, so how much is it costing the retailers, such as a bank?

Answer 1

It's something that not always clearly disclosed (no offense to merchant account reps).  When giveaways are used to encourage credit card use (like free air miles) the merchant accepting the card foots the bill and gets charged a "mid-qualified credit rate" which can be 1.5 points (or more!) above their qualified credit rate.

Say you're charged 1.75% of a transaction for accepting a Visa card.  If that card offers air miles as an incentive to use it, you'll be charged 3.25% of the transaction.  Plus the per transaction cost.

Your best bet is to ask for debit cards.  These have lower percentages.

For more info on e-commerce transactions contact Slick and Bubba's (www.slickandbubbas.com).