There are a lot of rumors surrounding the company SimplyMiles, which have recently been spreading across the internet. It seems like this company is not as trustworthy and transparent as it claims to be.
SimplyMiles is a company that has been in the news recently as they are one of the companies that has been paying for all those bazillions of miles. They have come under fire from some people who claim to be “simplymiles review”
Who’s footing the bill for all those SimplyMiles?
on January 1, 2022 by Gary Leff
SimplyMiles allows you to earn American Airlines AAdvantage points for purchases made at a number of retailers when you use a Mastercard that has been connected to the site.
They have a lot of ‘Mastercard Offers,’ which are similar to Amex Offers. However, unlike Amex, Mastercard does not have a direct customer interaction with its closed loop. So they’re targeting American AAdvantage customers, and American’s co-branded consumer and small business cards in the United States are all Mastercards.
With their year-end bonus campaign, I earned 7 million miles. Some folks claim to make almost twice as much.
SimplyMiles allows American to profit from the sale of miles, while Mastercard saves money on the purchase of those miles. The year-end 5x bonus program was ‘partially financed’ by American Airlines, therefore I’m guessing Mastercard is purchasing these points at a lower rate than normal.
- Let’s assume Citi buys 1.5 cents worth of miles for every dollar spent on a credit card.
- However, since American wants to reward drawing new cardmembers – increasing the number of AAdvantage cardmembers means increasing the amount of miles the bank buys from them – up front introductory incentives cost them less. So let’s call those miles a dime each.
- In each example, American is selling miles at a ‘discount,’ but at a profit. They record a cent of responsibility for each mile when they reward miles for flying, and around an eighth of that when they sell miles to third parties. Their’mile cost’ is somewhere in the middle of the two figures, most likely on the upper end.
- Because this is a joint venture, I’m guessing Mastercard is purchasing these miles at a rate closer to the ‘up front initial bonus’ pricing (at least for the bonus offer). The 5x Christmas incentive was intended to draw attention to SimplyMiles (which it did!) and keep it sticky, resulting in future mileage purchases.
The miles aren’t being purchased by the charity. Mastercard has opted to help them by raising funds for them… They do take a cut for administrative costs and then send the remaining funds to the charity.
Mastercard doesn’t say how much the administrative cut is or whether it’s the same every time (whether they take a bigger cut in this case or not). There may be FOIA-able state charity solicitation registration filings that would expose such information. However, I am convinced that the charity will not have to pay for this out of pocket.
When it comes to Amex Offers, the merchant is generally the one that funds the incentive in order to boost sales. However, each transaction is unique.
- For example, when Amex has a partnership with Hilton or Marriott, they may be spending funds on marketing that are part of the cobranding agreement.
- They may also have other budgets to spend and encourage transactions (for example, promoting small business spend with an Amex because customers have traditionally not thought of Amex as being accepted at small stores, and small shops haven’t accepted Amex as much, and Amex is working to change that).
Some major merchants may have agreements with Mastercard that oblige them to spend money marketing the brand as well.
As part of the co-brand agreement, Mastercard, like Citi and Barclays, must spend money advertising American AAdvantage credit cards in some way.
Mastercard financed guacamole and avocado toast in the lounges since the premium Citi Executive card comes with Admirals Club membership. On the front of the chef’s jacket, you can see the Mastercard logo:
At airport gates, they’ve also done culinary and golf demos.
I don’t know the specifics of the SimplyMiles arrangement between American and Mastercard (if some of the cobrand marketing funds are spent here) or whether they were able to spend part of that money on making good on the 5x promo ‘above what was allocated.’
I’d estimate $10 – $20 million if I had to guess how much Mastercard had to spend beyond their budget on this promotion. There was a budget for this to run through December, and they finished it on December 14th. The funding definitely ran out over the weekend (perhaps on the 12th), although it’s unclear when. So, how much more is Mastercard responsible for the transactions that were fulfilled on Monday and Tuesday mornings?
Overall, consider SimplyMiles to be similar to Amex Offers, in that it encourages you to choose a Mastercard for your spending and use it at particular merchants, as well as making incremental purchases with those merchants. Customers are accessed by Mastercard via its partners since they do not interact directly with Mastercard as they do with Amex.
Some people are concerned that the SimplyMiles campaign may result in an AAdvantage devaluation as a result of all the miles issued. That just does not take into account the scope of the AAdvantage program. To be certain, you should bet on a depreciation (after 2022). SimplyMiles, on the other hand, has no bearing on this computation>
Around a trillion AAdvantage miles are still available. This contract didn’t change anything, and American is very probably being rewarded for the miles by Mastercard – over and above the cost of the miles.
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American Airlines is the most popular airline in the world. They have a fleet of more than 3,000 aircraft and serve over 1,000 destinations across 5 continents. They are also one of the few airlines that still offer frequent flier miles for their customers. Reference: american airlines.
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