Brian Lutz / December 14, 2019

Not everyone can fly first class like Roger Federer. But what if you have reward miles?


The illusion of travel rewards is so prevalent in our society consumers believe that travel rewards are as good as cash or simply better. Some even proclaim it be free money, the proverbial “no brainer”. Like picking Roger Federer at Wimbledon.

The popular saying goes something like this: ‘I have to buy groceries so I might as well charge it to get the points’. Then repeat in every transaction you do all day long. Building up these “valuable” reward points. This is music to the card issuers ears. Now Liu Yiqian has taken it to the next level.


Liu Yiqian, a former cab driver now Chinese billionaire recently bought a piece of art at an auction in NYC with his American Express “Black Card” for a tidy sum of 170 million dollars. Not only does he want the painting for his museum and utilize a loophole China’s banking regulations by using his Amex card. He and his wife also wanted the benefits of accruing rewards points for travel. The press and social media has been giddy about this perceived brilliance and a life time of First Class travel benefits.


“We are on a one-year payment plan for the painting. If we had to pay cash upfront, that would be a little difficult for us. I mean, who has the money for that?” Wang Wei (Wife of Mr. Liu)


This popular mantra feeds right into the Issuer’s marketing plan. You are going to buy it anyway you might as well build up your rewards points. Psychology in consumer spending in strong. I need it for my state of mind. I need it for my lifestyle. I need it to feel good about myself. I need it because I have to eat. I need it because I have to wear something.


Keep as little friction as possible between the card holder and the merchant.

Imagine for instance if Mr. Liu had to secure a cashiers check at the bank. Or had to run a wire transfer. Or better yet produce 170 million dollars in cash. This would require time and energy filling out forms and a verification process. All of these barriers might cause someone to have second thoughts on a purchase. Feel the money in your hand. Smell it. Recall the labor to acquire those earnings. Or just swipe.

Both the issuer and the merchant are aware of this phenomenon. Mr. Liu’s heart rate barely elevated. It was if the experience had no consequence or friction. “Why are you so nervous? I’m the one paying”, Mr Liu exclaimed to his Hong Kong bidder, “and I’m not even nervous. Just buy it.”

Rewards points. It’s like eating celery. I’m losing weight while I chew.


Initiation and Annual Fees

In the US this card has an initiation fee of $7500 and an annual fee of $2500 no matter what you buy. There is an annual purchase expectation around 200k. In China the banks have a licensing agreement with Amex and the conversion come out to slightly less. Since the owner in this purchase is a billionaire this is pennies to you and me so we won’t even consider the impact as more than pocket change. I’ll let it slide. $0 effect.

Reward Redemption Fees

He and his wife can ask to waive these or use their abundance of awards to pay for these so they don’t have to reach into their pocket. You and me. We pay out of pocket. They are between $20 and $50 for this “free money”. Just be ready to book your flight 1 year in advance and remember the block out dates. Also, remember the issuer can change these terms anytime they want to suit their needs so keep logging into your credit card account for stimulating reading on their Terms of Service for the bank you do business with and the airline you are flying on.

Foreign Transaction Fees

This one is killer. It’s between 2-3% on your purchase. Who can do the math? That’s $5.1 million dollars in fees. And if you think they will give him a break because he is a billionaire think again. What sane person would loan someone 170 million dollars passing through a Chinese and American banks and not want their cut. Think about it. 170 million just in inflation over 1 year of time. Put it in the most conservative Treasury Bond and you would make a few points. Conclusion no discounts. Banks have bills to pay. Cost: $5.1 million dollars to Mr. Liu

Interest Rate

As noted by his wife Ms. Wang. They don’t have 170 million dollar lying around so the wise thing to do is pay this off in a year. 12 months makes our calculations quite easy then. Lets hope they aren’t late on a payment. As I type this blog entry the average credit card rate is 15.1%. I’m feeling generous I’ll shave off .1 for a round 15%. After all Mr. Liu seems like a regular guy. He smokes cigarettes and used to drive a taxi.

If he pays it off in one year without late fees his interest will be $25.5 million dollars.

The Cost

He will have paid out a total of $30.6 million dollars in fees and interest rates a year from now just on one purchase. I don’t know what they spend on groceries. If I’m American Express I’ll waive his annual $2,500 fee for this year. No problem

The Holy Grail: Reward Miles Breakdown

Let’s break down the miles. He spent $200 million dollars to get these rewards points. $170 Million Purchase and $30 Million in fees and interest. With 2 weeks notice you can fly First class from Miami to Sydney on American Airlines for $15k in cash. In this scenario he could fly half way around the world and back. To get value from his rewards he will need to fly 2000 times to pay off his $30 million dollars in interest and fees.

If he flies around the world once a week for 52 weeks it will take him 38 years to get his moneys worth. By the time he is adjusted for jet lag he will have to fly again to his next destination. At that rate he might as well get a job with the airline. He will be ahead of the game since he will be collecting a salary.

Oh you say but it is for his family. So divide that by wife, kids and grandchildren. Because we all know how pleasant it is flying long distances with young children who are jet lagged. The kids will have no time for school or friends since they will be busy redeeming their good fortune over the next 4 decades.

One Last Thing: The Artwork

If he stays true to his word and does not sell the art in the future. Add another 180 years of year round travel to his travel regiment. Mr. Liu and his wife are 52 years old. They will have travel miles in their family for generations. Unless of course one of these airlines goes out of business or merges with anther airline and drops their rewards programs. Nah, that will never happen. Right?

All this leaves me with only one question: What’s in your wallet?

Brian Lutz