With Visa/MC, it's a card association (until recently, a non-profit), and an issuing bank. The issuing bank may have a bunch of banking relationships with you (so you're unlikely to walk over a credit card), or only a credit card (so you're not that valuable to them anyway), and doesn't have as much incentive to protect the card association brand. End user consumers almost never contact the card association itself.

Note that in this case, the credit card company punished a merchant who wasn't even connected to the fraudulent transaction.

The rule of thumb is that the more lenient the company is for the customer, the more harsh they are on merchants, the higher their fees for merchants, the more reluctant merchants are to accept them, and the harder it is to find a merchant who will accept the card.

(Note how many businesses accept Mastercard and Visa but not AmEx).

Centurion (Black) is pretty much the same as Platinum, with a 6x higher fee. It used to be a lot cheaper than it is now AND have more benefits, but it's been substantially devalued. Platinum does provide a lot of perks just for having one (lounge access, etc.) worth about $500+/yr, as long as you travel. It also has no international fee.

SPG gives effectively 5% return if you use it aggressively. The problem is a high international fee.

The Blue Cash Preferred is a bad card for any single individual living in New York, for example, since he/she will spend very little on gas, and not enough on groceries to recoup the $75 annual fee.

However, cash back shields you against arbitrary inflation by the credit card company - it's very easy for a company to start requiring more points (or more miles, etc.) to purchase the same reward - and in fact, they've done this a lot with airline miles over the past few years.

As a result, cash back tends to be slightly less lucrative than points, just because they're able to charge an implicit 'premium' for this kind of security.

What's the premium? The annual fee? I've read through the comment several times, perhaps I'm missing something. Either way, the Blue Cash Everyday is there for nice rewards (3% groceries, 2% gas, 1% everything else) without the annual fee; I just chose to mention the BCP since, like most of the sought-after points-based cards, it has an annual fee.

I am skeptical of the actual worth of the points provided by various travel rewards cards. Here's an example: http://www.delta.com/skymiles/use_miles/pay_miles/index.jsp -- the typical conversion rate for a "mile" is one point per "mile", is it not?

10,000 points -> 10,000 "miles" -> $100 credit for total fare

Granted, there is the benefit of MQMs, but one has to consider the $150 annual fee for the particular card.

rdl specifically mentioned the Starwood Preferred Guest, which earns up to 4-5 points per dollar, although that is restricted to Starwood Preferred Guest Hotels and Resorts; it's 1 point per dollar anywhere else. Thus, there's a possibility for big travelers to earn an effective 4-5% cash back some of the time. In cases like this, I can see how points have merit. Otherwise, I'm in favor of cash back.

Assume for a moment that the point allocations are constant (though in reality they usually fluctuate). I can redeem those points/miles for flight tickets, hotel bookings, in-kind purchases, etc. In that case, the exchange rate of the point is set by the dollar value of the reward that I'm purchasing. Usually rewards-based cards let you choose from a few options, so we can define the highest-valued reward to be the one that determines this exchange rate.

The credit card company can adjust this exchange rate at will, either to the benefit of the consumer or not. They can do this by awarding more/fewer points or by adjusting the value of the reward (by changing the number of points required to purchase a particular reward) - or both. This is analogous to the US government increasing/decreasing the money supply (and in fact, it has the exact opposite effect, since it's the credit card company doing it). In the case of airlines, frequent flyer miles have experienced dramatic inflation recently - if you had held onto your miles from, say, 2002, they'd buy you a lot less today (assuming they didn't expire altogether).

The credit card company can do this because they're acting as a central bank for the 'points' currency and as a monopoly (if you consider the products' parent companies, not the final branding), and as a monopsony (they are the only purchaser of the 'points' currency, so the only way to gain value from their points is to purchase their products - but they can set the prices of those products at will, since they're also a monopoly).

So, to circle back to your original question, the 'premium' is the difference between the constant cash rewards rate (say, 1%) and the 'effective' exchange rate of your points.

> I am skeptical of the actual worth of the points provided by various travel rewards cards. Here's an example: http://www.delta.com/skymiles/use_miles/pay_miles/index.jsp -- the typical conversion rate for a "mile" is one point per "mile", is it not?

I share your skepticism - they can probably change the points-per-mile rate via the fine print (though that's a more cumbersome sword). More likely, though, they'll just change the dollars-per-mile rate (ie, 'how many points does $FLIGHT cost'), since that doesn't require notifying the customer of the updated terms of their card.

For that reason, the cash back cards are more reliable - why arbitrarily force yourself into a completely centrally-regulated market?

Personally, I find that airline miles have gotten totally inflated to uselessness. I care about airline STATUS, but mile redemptions are a huge pain. (You can get Star Alliance Gold for 20k miles/year on Aegean Airlines, and CX Silver (mid-tier and One World status) for free with Founders Card, and such). Lounge access, easier boarding, etc., which is especially useful if you buy cheap economy tickets. Airline status also helps a lot during irregular ops -- if a flight is cancelled, the guy with a UA Global Services card is going to get rebooked before the person who flies United once a year.

SPG has been fairly good about keeping the terms of the program constant (or improving them) over the past 13 years that it's been around. If you use the points optimally, you can get $0.03-0.04 per point redemption -- remember with hotel points you also get out of taxes, which in some markets can add 20-25% to the base room rate. As of last year, Starwood point redemption stays now count for elite qualification, too. You only get 1 point per general dollar spent, but can get up to 12 points per dollar during certain promotions when spending at Starwood properties; there are times when a marginal dollar spent at Starwood on a card, with status, during a promotion is actually returning $0.60 directly and then bonuses like 500 points per stay, requalification for elite tiers, etc. which make people do crazy things called "mattress runs" where they take trips just to check in and collect credit. Hotel points are kind of special with Starwood since redemptions are constant-price in points, or constant price in cash and points, while cash rates fluctuate widely. 10k points can get you a $99 Tuesday night in Las Vegas, or it can get you a $600 Saturday night in Las Vegas. Status also lets you force availability during some events (sort of works during SXSW, unofficially, and NYE in NYC).

The best cash-back cards are 2% unlimited -- there was a Schwab card (no longer offered, I believe) and was a Pentagon FCU card. Cash is undeniably easier to work with, but having point bonuses in various programs can be useful as well.

The best deal for Amazon cash back is the Citi Forward card. It gives 5% cash back on all bookstore purchases, and currently all Amazon purchases are coded as bookstore purchases. (I am going to try it with AWS once my credit balance runs out; it would be hilarious for someone to run Netflix's AWS bills through a 5% cash back card!). Otherwise by using the Chase Amazon card you get 3% on amazon, and can use a 1.78x multiplier (redeeming $900 of credit for $1600 in flights).

Someone smarter than me recently said "I could optimize for that stuff, but then I look at how much value I can add to my startup by working an extra hour...", and yeah, that makes sense too. But travel programs are a fun game to hack.