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Why no good credit card offers outside the US?

Discussion in 'questions. answers. conversations.' started by Andy B, Nov 4, 2017.

  1. Andy B

    Andy B Reader

    Hi Ben/Lucky!

    I understand much of your blog and - as a matter of fact business model - is based on credit cards linked to airline or hotel frequent flyer/guest programs.

    Now, being based in Europe, there are just no such schemes available. Yes, you can earn airline miles with credit cards - but only non-status miles (whatever they are called). Also no further benefits, such as complimentary status. And yes, these credit cards are usually more expensive than regular ones, about the same like the US but with considerably fewer benefits. So why bother?

    Why are no such schemes available in Europe (and elsewhere other than the US)?
  2. No Name

    No Name Well-Known Member

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    Why is the world round? What is the meaning of life? Etc? Etc? This question keeps being brought up again and again.

    Simply put Europe is number of different smaller markets with much less competition rather than one large marked. Some countries are also decidedly anti-credit cards (Holland) and use debit cards instead, or in some of the countries around the Med Cash is KING since tax avoidance is easier with no electronic records.

    Plus I seems to remember the EU putting limits on what credit card companies can charge merchants, hence less money for benefits/miles.

    Banks in Europe to a large degree serve their home country markets for retail costumers so much less competition.

    The market for hotels and airlines are also far more fragmented meaning less competition for customers in their home markets where they offer credit cards.

    In the US there are cities that are hub captives, aka one of the US3 have a very dominant position. This leads to these cities having higher prices for direct flights. But since they are part of large country with competition you get things like credit cards with benefits/miles earning because the airline needs to compete in the rest of the US market.

    Problem with Europe is again hub captives, but this time whole countries which leaves the airlines no/less reason to offer lucrative credit cards in their home market and a lot of red tape/extra work if they are going to offer it in other countries. BA owns the UK, with VA as minor competitor on long haul. LH now owns Germany with little real competition on long haul, AF is in much the same situation in France and finally Iberia largely owns Spain with Air Europa as a minor competitor.

    Frankly the only airlines with bases in more than one country/market is the low costs and of them only Norwegian operate long haul flights. And lets be honest most of these airlines does not target the high end of the market so much less demand for co-branded credit cards.

    On the Hotel side the only major group is Accor, again leading to less competition. Over half of the Accor hotels are budget properties and finally a very large percentage of their hotels regardless of brand are in France or close to its borders.
    rickyw likes this.
  3. Tiffany

    Tiffany One Mile At A Time

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    This is the biggest part. Merchant processing fees in the US are very high -- they can be over 3.5% of every transaction in some cases, on top of flat monthly fees, and other costs. With PointsPros, for example, we pay 3% plus $0.30 per transaction if someone pays us with a credit card. So the credit card companies make a ton, which lets them have more budget for incentivizing customers, and the cycle continues.

    I'm not sure what the current rates are in Europe, but a few years ago the EU was working to pass legislation to cap merchant processing fees at 0.3%, so you can see how much of a discrepancy there is.
  4. No Name

    No Name Well-Known Member

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    rickyw likes this.