American Express Membership Rewards points are a powerful travel tool, but a hidden cost can diminish their value when transferring to U.S. airlines: the excise tax offset fee. This fee, a result of IRS regulations on loyalty programs, applies specifically to transfers to domestic carriers like Delta and JetBlue.
The IRS levies excise taxes on certain transactions, including those within loyalty programs. American Express, to account for this, imposes a fee of $0.0006 per point, capped at $99, when you move points to a qualifying U.S. airline program. They state this is to offset the federal excise tax they themselves must pay.
Imagine transferring 50,000 Membership Rewards points to Delta SkyMiles. You’ll immediately see a $30 excise tax offset fee added to the transaction. While you *can* use additional points to cover this fee, it’s a remarkably poor return on your rewards.
Using 6,000 points to avoid a $30 fee effectively values each point at just half a cent. This is significantly lower than the true potential value of these points, diminishing the benefit of earning and collecting them in the first place.
Fortunately, there are ways to circumvent this fee entirely. Transfers to hotel loyalty programs are exempt, offering a straightforward alternative. More strategically, transfers to international airline partners avoid the charge altogether.
Consider booking domestic flights operated by Delta through programs like Air France-KLM Flying Blue or Virgin Atlantic Flying Club. By utilizing points earned with these international carriers, you bypass the excise tax offset fee and unlock greater value from your American Express Membership Rewards.
It’s also worth noting that other major transferable points programs – Capital One, Chase, and Citi – do *not* impose similar fees on their airline transfers. This highlights the unique aspect of the American Express system and the importance of understanding its nuances.
When planning a redemption with Delta SkyMiles or JetBlue TrueBlue, always factor in the excise tax offset fee. Paying it with cash is preferable to sacrificing valuable points. Otherwise, explore hotel or international airline partnerships to maximize the power of your Membership Rewards.
