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Subsidies aren’t always visible

The first article today is about Brian Kelly, founder of The Points Guy, and talks about the wide world of travel “hacking” and travel loyalty points. It’s interesting on its own but the biggest piece in all this is that these programs create two side effects (quotes are from the article):

  • Airlines make a fortune off these points – “A major reason points-and-miles trips exist is because airlines turn a more stable profit by minting their own currencies than by selling actual airline seats.”
  • And people who use cash are subsidizing people who use rewards cards – “According to a 2010 policy paper by economists at the Federal Reserve Bank of Boston, the average cash-using household paid $149 over the course of a year to card-using households, while each card-using household received $1,133 from cash users, partially in the form of rewards. It remains a regressive transfer to this day.”

Users of cash are paying more because of these programs – they, in effect, are subsidizing the programs. And people who use cash are often poorer than those who have better credit and can get these more valuable cards.

The Man Who Turned Credit-Card Points Into an Empire [New York Times] – “Brian Kelly, The Points Guy, has created an empire dedicated to maximizing credit-card rewards and airline miles. What are they worth in a global pandemic — and why are they worth anything at all?”

My Cost of Mindlessness: A $500 Insurance Deductible [Budget Life List] – “As I am speedily exiting our driveway, I am jolted from my mindless reverie as I smash into my neighbor’s parked pickup. I feel blood drain from my face as I hear the backup camera screaming at me.

What a way to meet my new neighbors.” The importance, and practice, of being present cannot be overstated.

Money Laundering Via Author Impersonation on Amazon? [Krebs on Security] – “Patrick Reames had no idea why sent him a 1099 form saying he’d made almost $24,000 selling books via Createspace, the company’s on-demand publishing arm. That is, until he searched the site for his name and discovered someone has been using it to peddle a $555 book that’s full of nothing but gibberish.”

This next story is one I’ve read before, it follows Michael Larson and his epic run (he won over $110k) on Press Your Luck, but it also includes what happened after he left the show. Be warned, and you probably expect this, it’s sad.

Who Wants To Be a Thousandaire? [Damn Interesting] – “Larson was not allowed to return as champion since he had surpassed CBS’s $25k winnings limit. As all of the perplexed parties parted ways, CBS executives were called to a meeting to dissect the episode frame-by-frame. In spite of their efforts they could find no evidence of wrongdoing or rule-breaking, so after a few weeks they grudgingly mailed Larson his check. Some people at CBS didn’t want the over-extended episode to be released to the public at all, but it was ultimately decided to air it in June as an awkwardly edited two-parter.”