Many travelers transferring American Express Points from their cards—either the Amex Gold or the Amex Platinum—often find themselves puzzled by a common issue: “Why am I being charged to transfer my points?”
For newcomers, this can be a surprise, while seasoned points collectors find it, well, frustratingly familiar. The fees are relatively low and only apply when sending points to a couple of U.S. airlines, totaling under $99.
This situation raises a lingering question: Why does Amex (and specifically Amex) charge these transfer fees?
The origins of this charge trace back to laws enacted in the late 1990s. When frequent flyer programs began, the existing federal tax on domestic flights was expanded to include award transfers, impacting credit card companies as well. Over the last two decades, major credit card companies have been paying taxes when points are transferred to U.S. airlines.
Only Amex, a trailblazer in the rewards space, chooses to pass these costs onto cardholders. Representatives from other banks, like Chase and Citi, have stated they cover these extra tax costs instead.
This isn’t a minor issue. Tax obligations lead to banks and loyalty programs shelling out potentially millions each month for points transferred to U.S.-based airline programs.
American Express has not commented specifically on why it imposes these fees while competitors do not. However, it has detailed its reasoning on its website: “This fee offsets the federal excise tax incurred when transferring points. The amount may vary compared to the actual excise tax for any single transfer.”
Understanding Excise Tax Fees for Amex Transfers
These fees emerged in 2004 concerning U.S. airlines when transferring membership rewards, with slight increments over the past 20 years.
- Currently, you’re charged a 06 cent fee for each point transferred to U.S. airline programs
- This means transferring 50,000 points will cost you $30, while 125,000 points will cost $75.
- Fees are Capped at under $99 per transaction
- You can choose to pay the fee with your card or use points, but that’s not advisable: you’d only receive half a cent from each point, far less than the actual value of Amex points.
Even with Amex’s extensive list of 20-plus transfer partners, these fees only apply when transferring to Delta and JetBlue.
Unfortunately, Amex cut Hawaiian Airlines from its transfer partners earlier this year. Many Amex Points holders have been reminded of these fees, even while enjoying opportunities to earn valuable Alaska miles.
Delta customers might feel the sting the most, especially when they need to top off their SkyMiles for a new flash sale, considering Amex is Delta’s only transfer option.
Contrast this with major U.S. hotel chains like Hilton and Marriott, which do not impose such fees.
This begs the question: Where did these fees originate?
A Brief History Lesson
Every time someone buys a plane ticket in the U.S., the total includes additional fees, such as a 7.5% federal excise tax.
Amex’s transfer fees are rooted in federal law from 1997, which expanded this tax to award transfers. Lawmakers believed that as more Americans used miles for “free” travel, the flights shouldn’t be exempt from taxation.
However, instead of collecting the fee at the time of redemption, the tax is charged upfront. So, when you buy miles directly from U.S. airlines like Delta or Southwest, they also charge the same 7.5% tax.
Yet, travelers don’t just buy miles; banks participate too, often offering substantial welcome bonuses on airline credit cards, along with point transfers.
As stated by the IRS, credit card companies are also liable for this tax.
While transferring points seems straightforward—send 50,000 points to an airline and voilà, you have your miles—there’s more behind the scenes.
- The bank essentially purchases those points from its transfer partner at an agreed rate, depositing them into your frequent flyer account.
This transaction has tax implications. Amex or Chase must pay based on the value of the points, a well-guarded secret. But this can add up quickly given the millions of cardholders and billions of points involved.
Why aren’t U.S. airlines like Delta or United accountable for this tax? Simply put, the IRS doesn’t have jurisdiction over foreign airlines or their programs.
How Other Banks Handle This
It seems Amex may only be recuperating part of the significant tax burden they face. However, the fact that they impose any fees at all is notable. Other banks with transferable points haven’t adopted Amex’s approach.
- Chase points can be transferred to U.S. airlines such as JetBlue, Southwest, and United, without passing excise tax costs to cardholders.
- Capital One’s sole U.S. transfer partner is JetBlue, and they also don’t charge fees for transfers.
- Citi ThankYou Points can be sent to American Airlines and JetBlue, and they too do not impose transfer fees.
- Bilt Rewards, which allows renters to earn points for their monthly payments, also transfers to Alaska and United without passing on excise fees.
Those with Amex Points might hope that these charges disappear someday. Back during the early pandemic, Amex waived many fees throughout 2020.
Things didn’t stay that way, though. The federal law that suspended these taxes ended at the beginning of 2021.
Conclusion
American Express continues to charge cardholders for transferring points to U.S. airlines. This is a result of outdated laws imposing taxes on airline miles and transfers, similar to purchasing flights. Unlike other banks like Chase and Bilt, Amex opts not to absorb these costs.
So, if you’re looking at a $30 fee for a 50,000 point transfer to Delta or similar U.S. airlines, don’t hold your breath for a change any time soon. As major credit card companies navigate their customers’ wallets, passing this cost to consumers remains a puzzling decision.
