True Luxury Comes in the Mail

Walk through any major airport today and you will see two realities. One has loud boarding calls, fluorescent lights, and long lines for overpriced food. The other is hushed and hidden behind frosted, sliding doors. This reality is one where travelers come three hours early for their flights, sip their premium espresso, and enjoy an assortment of luxury foods. What separates these two airport experiences? A small credit card sent in the mail. 

Luxury lounges, such as the Chase Sapphire Lounge at LaGuardia Airport and the Capital One Lounge at John F. Kennedy Airport, display how credit cards have changed what luxury looks like, acting as gateways to materialism and experiential privileges. The American Express Platinum, Chase Sapphire Reserve, or Capital One Venture X credit cards aren’t just financial tools, but lifestyle keys. They have quickly become the new quiet luxury, and a strategic way to gain access to a world unknown to most.

I was first introduced to the world of reward credit cards by my uncle, who told me how he took a course on credit card points over the pandemic. He explained how he and his family would go on fully paid exotic vacations in the Maldives, the Caribbean, and Europe every year by optimizing reward points. To me, this system seemed like a video game. After all, the essence was to make the right choices, build your inventory correctly, and hit all the bonuses to get the best rewards. I quickly began to teach myself more about the field; I read the The Points Guy blog, listened to Spotify podcasts like Point Me To First Class, and asked my dad about rewards systems and the reasoning of his choices when signing up for credit cards. 

As I immersed myself in this new financial world, I began to realize why my parents would use different cards for purchases like groceries versus clothes. The fact is, credit cards have turned every purchase into a strategy game. Travel rewards have grown into a multibillion-dollar business that airlines rely on more than ticket sales. Banks are also investing heavily in lounges, cafes, and lifestyle experiences, leading people to treat points as a prized parallel currency. 

Capital One Cafés are one of the clearest examples of credit card companies’ attempts at brand loyalty. Shoppers with a Capital One credit card get an immense 50 percent discount off all goods at their cafés, bringing the price of a coffee to a mere $3 a cup, creating long lines of customers. Additionally, over the Major League Baseball season, the cafés gave out free handcrafted beverages every Monday, a huge publicity boost for the company. Capital One Cafés aren't meant to be profitable for Capital One in the short term; rather, they are part of a scheme to build customer loyalty and connect with younger audiences. The company is able to generate significant wealth through the 1.5 to three percent interchange fees they place on Capital One credit cards, which accumulated to $758 million in 2019. 

Travel cards have also redefined who can access luxury experiences. In the past, business class tickets, exclusive lounges, and hotel upgrades were reserved for the wealthy. Today more than two in five Americans have reward cards, meaning someone in their mid-20s working a regular nine-to-five can sit side by side with a CEO of a multimillion-dollar company on a flight, simply because they know how to play the rewards game. Every purchase can become an investment in future adventures, and each multiplier, welcome bonus, or transfer airline partner feels like choosing the right power-up in a game: every choice can change your entire run. 

Rewards cards are not entirely equitable though. As credit cards aim to become more premium and profitable, they often come with high annual fees of up to $900 and require stellar credit scores to even obtain. This pushes out many potential customers, giving the already wealthy the most advantage. Companies also push high point multipliers onto categories like airfare, dining, and hotels—things that wealthy users already spend more money on. Additionally, when customers engage with rewards systems, the programs are intentionally complex and the points devalue over time, causing users to redeem suboptimal deals. American card holders earned $41 billion in credit card rewards in 2022, but redeemed just $35 billion, meaning that billions in unspent points never left the banks, allowing corporations to profit off of these systems. Furthermore, rewards systems are catalysts for overspending and debt because people will often buy more than they should to meet sign-on bonuses or redeem limited time deals. In fact, 35 percent of Americans think they spend more because of their credit card systems, and 37 percent say they would decrease their credit card spending if the rewards weren’t available.

There will never be a “one-size-fits-all” for credit cards, but given the abundance of credit cards on the market, there will be cards that fit spending patterns and provide useful perks for many holders. Finding the right card for personal spending habits and finances can allow consumers to benefit further from their normal consumption practices. Additionally, startups like Rove have created travel portals that allow consumers to win substantial points without needing to have a specific credit card, opening the market to people with low credit scores and to those who aren’t willing to pay high annual fees.

In order to properly take advantage of the benefits of rewards systems, users need to build financial literacy early on, and develop a strong understanding of the rules of the game. There are numerous comprehensive guides to credit cards online, and blogs such as The Points Guy are helping democratize the information needed to make proper credit decisions. But even with these tools, it’s crucial that people monitor their monthly spending habits and research the viability of certain credit cards to avoid getting trapped into a certain card’s annual fees or the frenzy to reach a sign-up bonus. Doing proper research is the key difference between letting a card dictate your behavior and making it work for you. In this modern economic landscape, it’s less about the highest bidder, but rather about the smartest player.