Those businesses (flowers, travel, etc.) are all commission based. So because the bank or credit card brought in business through its website, the company you are buying from will pay a commission to the bank, which then passes on some of that to you through the discount or extra rewards.
I am 150% sure that FTD.com's business is solely based on this. As in, it makes all of its sales through banks and credit cards (Amex, Visa, Mastercard all
give a 10+% discount at FTD) where they offer a seemingly good deal, but the rates are jacked up anyway (before adding a $10 service charge). Even after the discount they usually cost more than a local flower shop. This is something car dealers and grocery stores do as well and it's a shame because it works so well because most people don't actually attempt to do the math, they just go "Oh, I'm saving X, nice, I will gladly buy it!"
Oh yah, so in response to your question, the discount is probably being paid for by the company and not the bank at all. The bank makes money by keeping a portion of the commission and whatever interest they can gouge out of you. I believe this because it would explain why Apple (a stingy company when it comes to discounts) only offers a 2% discount through all the banks/credit cards shop websites, whereas companies like FTD and the cruise-lines offer seemingly super-awesome deals of 10+%, when in reality it is actually most harder to put on prices on the goods they provide and therefore, they probably have a much higher profit margin than Apple's (before the discount, after it is probably comparable).
MagnoliaBlossom wrote:I hope I can make my question understandable.
When a credit card offers a premium, who pays for that? The bank, offering co. or both?
Norwegian Cruise Lines Mastercard WAS with MBNA and offered 3% on all purchases, 4% on NCL purchases. With enough points you could get a $500 gift certificate for cruises on NCL.
Then (big sigh) Bank of America took over the program and it became 1%, so you obviously need a boat load more points for the same $500. They threw in a few other little niceties but nothing that compared to that 3%.
My question is - was the cost savings measure (fewer certificates issued) benefitting BoA or NCL or both?
Thanks in advance.