The rise of the credit card airport lounge

Summary

The Indicator from Planet Money: The Rise of the Credit Card Airport Lounge

Release Date: May 20, 2025
Host/Author: NPR

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Overview

In this engaging episode of The Indicator from Planet Money, hosted by NPR, Darian Woods, Waylon Wong, and Adrian Ma delve into listener-submitted questions that explore significant economic and financial topics impacting everyday lives. The episode, titled "The Rise of the Credit Card Airport Lounge," addresses three main queries:

1. The Rapid Expansion of Airport Lounges Under Reward Credit Cards
2. The Effectiveness of Canadian Carbon Taxes
3. The Paradox of Falling Oil Prices Amid Rising Gasoline Costs

Throughout the episode, the hosts provide insightful analysis, supported by expert opinions and real-world examples, making complex economic phenomena accessible to all listeners.

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1. The Rapid Expansion of Airport Lounges Under Reward Credit Cards

Listener Inquiry: Michael Locklear from Salt Lake City poses a multi-part question regarding the swift proliferation of airport lounges associated with reward credit cards. He wonders about the underlying factors driving this expansion and how it remains financially viable for credit card companies.

Discussion Highlights:

• Personal Insights:

  • Waylon Wong shares his personal experience as a Priority Pass holder obtained through a Chase credit card, humorously noting the irony of rarely using the lounges despite holding premium access:

    "[02:10] Waylon Wong: Okay, so full disclosure, I am a priority pass holder. I get it through a Chase credit card."

• Industry Perspective:

  • The hosts reference insights from Eric Rosen of The Points Guy, a prominent travel and credit card website. Rosen explains that the expansion of lounges is fueled by competition among credit card issuers striving to offer exclusive perks to attract and retain high-value customers:

    "[03:40] Adrian Ma: The next part of the listener's question was, how much do they cost to run, and how do they make sense for the credit card companies? And so did you find an answer?"

    "[03:48] Waylon Wong: Yeah. Eric says these lounges definitely cost a lot, but people aren't really milking these lounges for all they're worth. And even if they were, don't worry too much about credit card companies making enough money. They're just fine."

• Economic Viability:

  • Cathy Jones elaborates on the financial model, highlighting that credit card companies benefit significantly when cardholders carry balances, accruing high-interest revenues that offset the costs of lounge operations:

    "[04:01] Cathy Jones: Every time someone carries a balance on that card, they're making a tremendous amount of money. They are definitely not hurting in terms of earning money based on regular, you know, use."

• Market Trends:

  • Waylon Wong and Darian Woods discuss the concurrent rise in air travel, attributing part of the lounge expansion to increased passenger numbers. In 2024, air travel surged by 10% compared to 2023, necessitating more lounges to accommodate the growing demand:

    "[03:29] Waylon Wong: It is. But these new lounges are definitely driven by competition. It's also just air traffic. So in 2024, people traveled 10% more on average than in 2023."

Conclusion: The expansion of airport lounges under reward credit cards is a strategic move by credit card companies to enhance customer loyalty and differentiate their premium offerings in a competitive market. Despite the high operational costs, the financial benefits derived from interest on balances and increased card usage make this trend sustainable.

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2. The Effectiveness of Canadian Carbon Taxes

Listener Inquiry: Clay Perrin from Peterborough, Ontario, requests an analysis of the effectiveness of Canada's carbon tax implementation.

Discussion Highlights:

• Policy Overview:

  • Adrian Ma outlines the carbon tax structure introduced in Canada in 2019, which imposes a $20 per ton fee on carbon dioxide emissions, increasing annually by $10. All revenue generated is redistributed to citizens:

    "[04:37] Adrian Ma: Yeah. So it's carbon taxes on both the consumers and industrial emitters. And it went into effect in Canada in 2019, where every ton of carbon dioxide emitted would cost the emitter $20, and that would increase by $10 every year, or all revenue collected went back to citizens."

• Projected Outcomes vs. Reality:

  • A study by the Canadian Climate Institute initially forecasted a significant reduction in carbon emissions. However, economists express caution, noting the difficulty in isolating the tax's impact amid other environmental policies:

    "[05:01] Darian Woods: Yeah, you know, I guess the idea was that raising the cost of carbon would push people to lower their carbon emissions rather than paying that extra cost."

    "[05:40] Eric Rosen: It's really hard to disentangle the impact of a single policy on our emissions."

• Behavioral Changes:

  • Dave Sawyer, Principal Economist at the Canadian Climate Institute, observes a shift in consumer behavior, such as the increased adoption of heat pumps replacing traditional furnaces:

    "[05:51] Adrian Ma: What Dave has seen is that carbon taxes have changed behaviour. That a lot of consumers are racing to replace furnaces with heat pumps."

• Mixed Results:

  • An economist from NERA (a leading economic consulting firm) indicates that since 2019, reductions in carbon emissions in Canada have been modest and overshadowed by a greater decrease in the U.S., suggesting limited effectiveness of the tax:

    "[06:11] Adrian Ma: From his analysis, the carbon taxes haven't really moved the needle much."

• Policy Adjustments:

  • Following public pressure, newly elected Canadian Prime Minister Mark Carney has considered scaling back the consumer carbon tax to alleviate financial burdens on citizens:

    "[06:39] Darian Woods: And didn't the newly elected Canadian Prime Minister, Mark Carney, didn't he axe this consumer carbon tax?"

    "[06:47] Adrian Ma: Yeah, he said it will help hard pressed Canadians."

• Future Implications:

  • Dave Sawyer suggests that the effectiveness of the carbon tax will become clearer as policy changes unfold:

    "[06:56] Eric Rosen: We do know that emissions will be higher without it. How much, we're not quite sure. So that's, that's what we're really waiting to see."

Conclusion: While Canada's carbon tax has influenced consumer behavior towards more sustainable practices, its overall impact on reducing carbon emissions remains inconclusive. The interplay with other environmental policies and recent governmental adjustments further complicates the assessment of its effectiveness. Ongoing evaluation will be essential to determine the long-term benefits of the carbon tax.

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3. The Paradox of Falling Oil Prices Amid Rising Gasoline Costs

Listener Inquiry: Rick Weiland from Evanston, Illinois, is perplexed by the phenomenon of declining crude oil prices juxtaposed with increasing gasoline prices at the pump. He seeks an explanation for this counterintuitive trend.

Discussion Highlights:

• Statistical Overview:

  • Darian Woods presents data showing a slight increase in retail gasoline prices from approximately $3.19 to $3.30 per gallon, despite crude oil prices dropping from $80 to $60 per barrel:

    "[07:26] Darian Woods: Rick, I hope we can unplex your perplexity. You've come to the right place. Thanks for the question. So if you look at national data on retail gas prices going from say January to now, they've gone from about $3.19 a gallon to around 330 a gallon. So not a huge increase. However, during that time, the price of crude oil has dropped a lot from $80 a barrel to around $60 a barrel."

• Expert Insight:

  • Javier Blas, a Bloomberg columnist specializing in energy and commodities, explains that gasoline prices are influenced by factors beyond crude oil prices, including seasonal variations and refining processes:

    "[07:12] Cathy Jones: ... isn’t this counterintuitive? What's going on with oil?"

    "[07:26] Darian Woods: ...we ended up reaching out to Javier Blas for some insight here."

    "[08:34] Darian Woods: ...The pollution is a factor here. So during the summer when the temperatures get really hot, gas can actually evaporate while it's still sitting in your car's tank."

• Seasonal Gas Grades:

  • Gasoline is produced in different formulations for summer and winter to comply with environmental regulations addressing evaporation and pollution. The production of summer-grade gas is more costly:

    "[08:25] Adrian Ma: Yeah. One of them's like more polluting, right?"

    "[09:00] Javier Blas: The summer one that we use to reduce pollution in major American cities is a bit more expensive to make. And that explains why the price at the pump station has gone up in the last few weeks."

• Refining Margins:

  • The cost discrepancy is further exacerbated by 'refining margins'—the profit refineries make from turning crude oil into gasoline. Recent refinery outages in regions like Mexico, West Africa, and Europe have strained global refining capacity, leading to higher margins and, consequently, higher gasoline prices:

    "[09:13] Darian Woods: The other big reason that crude oil and gas prices don't always move together is that, well, they're not the same thing. Crude oil has to be refined into gasoline and that's costing more right now because of something called the refining margin. That's the profit that a refinery takes when they turn a barrel of crude oil into, into, say, gasoline."

    "[09:36] Javier Blas: We have had a number of refinery glitches, particularly Mexico, in West Africa, in parts of Europe. That means that we are using the global refining capacity a bit harder than it has been in previous months. That means that the margin has gone up."

• Future Outlook:

  • Javier Blas anticipates that if crude oil prices remain lower over the long term, this could eventually lead to decreased gasoline prices, assuming refining margins stabilize:

    "[09:55] Darian Woods: Now, Javier says if lower crude oil prices continue longer term, then that will probably translate into lower gas prices."

Conclusion: The apparent disconnect between declining crude oil prices and rising gasoline costs at the pump is primarily due to the higher costs associated with producing summer-grade fuel and increased refining margins caused by global refinery outages. These factors collectively contribute to sustained or even elevated gasoline prices despite lower crude oil benchmarks. Future trends suggest that continued low crude prices may eventually alleviate gasoline costs, contingent upon the stabilization of refining capacities.

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Final Thoughts

This episode of The Indicator from Planet Money provides a comprehensive analysis of current economic trends affecting consumers and industries alike. From the strategic expansion of credit card-associated airport lounges to the nuanced impacts of environmental policies and the complexities of energy pricing, the hosts deliver valuable insights that enhance listeners' understanding of the economic landscape.

For more inquiries and discussions on pressing economic questions, listeners are encouraged to reach out via the show's official channels.

Transcript

[NPR]

Npr.

[Darian Woods]

Darian Woods, Waylon Wong, Adrian Ma, that's you.

[Waylon Wong]

The gang's all here today and we've got a special episode because it is listener questions.

[Adrian Ma]

This is the indicator from Planet Money, and we are here with listener questions where we answer your queries about all things economic and financial in your lives.

[Waylon Wong]

So today on the show, why oil prices are down but gas prices are up, why airline lounges have gotten so popular, and whether Canadian carbon taxes actually work.

[Darian Woods]

All that after the break.

[Liz Ann Saunders]

This message comes from NPR sponsor Charles Schwab with its original podcast on Investing. Each week, hosts Liz Ann Saunders, Schwab's chief investment strategist, and Cathy Jones, Schwab's chief fixed income strategist, along with their guests, analyze economic developments and bring context to conversations around stocks, fixed income, the economy and more. Download the latest episode and [e-mail] oninvesting or wherever you get your podcasts. This message comes from Apple Card. Picture this. Somewhere in the world, an Apple Card user is getting 3% daily cash back on the purchase of an iPhone 16 at Apple. That's not all. They also earned 2% back on the new shoes they bought using Apple Pay. Visit Apple Co CardCalculator and see how much daily cash back you can earn. Subject to credit approval, Apple Card issued by Goldman Sachs Bank USA, Salt Lake City branch terms and [e-mail] all right, listener questions.

[Adrian Ma]

Our first one is for Waylon. Comes from Michael Locklear. My name is Michael from Salt Lake City. What's behind the rapid expansion of lounges under reward credit cards? And how do they even make sense for the credit card companies?

[Waylon Wong]

Okay, so full disclosure, I am a priority pass holder. I get it through a Chase credit card.

[Darian Woods]

Damn. Okay.

[Waylon Wong]

Oh, you know, fancy jetsetter Waylon maybe. Although I feel like the lounge is never in the same part of the airport that I end up in, so I never get to use it.

[Darian Woods]

So in theory you're a high roller.

[Waylon Wong]

In practice, I am just a schlub. Yeah. So Michael had this multi part question. Let's look at his first point. What is behind the rapid expansion of airport lounges? So since like 2018, travelers have complained that these lounges have gone downhill because of the explosion of these credit card reward programs. And with them, all of these lounges, the lounges used to be backed by specific airlines to create loyalty, and now credit cards are doing the same thing. Some people say they've gotten overcrowded and chaotic and they're a lot less fancy. I mean, at least 10 new lounges are set to open this year. Several are backed by credit cards. We reached out to Eric Rosen of the Points Guy. It's a sponsored credit card and travel website. And we asked him what's going on here.

[Cathy Jones]

If an issuer is going to introduce a premium card or keep it competitive against the others that are out there, it's got to offer a similar suite of perks.

[Adrian Ma]

I mean, a lot of the time what you're selling is exclusivity, and that's kind of hard to scale. Among a lot of people.

[Waylon Wong]

It is. But these new lounges are definitely driven by competition. It's also just air traffic. So in 2024, people traveled 10% more on average than in 2023.

[Adrian Ma]

The next part of the listener's question was, how much do they cost to run, and how do they make sense for the credit card companies? And so did you find an answer?

[Waylon Wong]

Yeah. Eric says these lounges definitely cost a lot, but people aren't really milking these lounges for all they're worth. And even if they were, don't worry too much about credit card companies making enough money. They're just fine.

[Cathy Jones]

Every time someone carries a balance on that card, they're making a tremendous amount of money. They are definitely not hurting in terms of earning money based on regular, you know, use.

[Adrian Ma]

Right. Very high interest rates on credit card debt, basically.

[Waylon Wong]

Yeah. You'll never eat enough bruschetta or whatever to make up for their spending.

[Darian Woods]

Okay, Waylon, one day I hope you achieve your lounge dreams. Next up, we have a question for Darien.

[Eric Rosen]

My name is Clay Perrin, and I'm from Peterborough, Ontario, Canada. Could you do a show on how effective or ineffective the carbon tax has been?

[Adrian Ma]

Yeah. So it's carbon taxes on both the consumers and industrial emitters. And it went into effect in Canada in 2019, where every ton of carbon dioxide emitted would cost the emitter $20, and that would increase by $10 every year, or all revenue collected went back to citizens. A study by the Canadian Climate Institute forecast a pretty dramatic reduction in carbon pollution.

[Darian Woods]

Yeah, you know, I guess the idea was that raising the cost of carbon would push people to lower their carbon emissions rather than paying that extra cost.

[Waylon Wong]

Right. So it's been six years since a carbon tax went into effect. Let's go through what actually happened.

[Adrian Ma]

Let's start with the federal government, which says the carbon taxes will play a big part in Canada's overall emissions. Emissions reduction effort as much as 1/3 by 2030. From economists we spoke to, though, the effectiveness of these taxes aren't so easy to pin down. Dave Sawyer is the principal economist with the Canadian Climate Institute.

[Eric Rosen]

It's really hard to disentangle the impact of a single policy on our emissions. So we have biofuel mandates, we've got EV mandates and subsidies, electric vehicles.

[Adrian Ma]

What Dave has seen is that carbon taxes have changed behaviour. That a lot of consumers are racing to replace furnaces with heat pumps. Another economist we spoke to also crunched the numbers. He's at nera, which is a prominent economic consulting firm. From his analysis, the carbon taxes haven't really moved the needle much. Since 2019, the US has actually reduced carbon emissions more, but that doesn't mean.

[Waylon Wong]

It hasn't contributed something in Canada.

[Adrian Ma]

Sure, it's just that a lot is going against both the consumer and industrial taxes. On the industrial side, there is a minimal tax. Provinces and territories are allowed to make up some of their own rules. That's been leaving room for random exemptions or leakage opportunities.

[Darian Woods]

And didn't the newly elected Canadian Prime Minister, Mark Carney, didn't he axe this consumer carbon tax?

[Adrian Ma]

Yeah, he said it will help hard pressed Canadians. Dave Sawyer thinks this change will reveal just how effective the tax really was.

[Eric Rosen]

We do know that emissions will be higher without it. How much, we're not quite sure. So that's, that's what we're really waiting to see.

[Waylon Wong]

All right, thank you, Darian, for looking into that. Lastly, we have a somewhat related question and that goes to you, Adrian Ma.

[Cathy Jones]

Hi, this is Rick Weiland from Evanston, Illinois. And I'm perplexed. The price of crude is plummeting, the price of gasoline is soaring. Isn't this counterintuitive? What's going on with oil?

[Darian Woods]

Rick, I hope we can unplex your perplexity. You've come to the right place. Thanks for the question. So if you look at national data on retail gas prices going from say January to now, they've gone from about $3.19 a gallon to around 330 a gallon. So not a huge increase. However, during that time, the price of crude oil has dropped a lot of from $80 a barrel to around $60 a barrel. We ended up reaching out to Javier Blas for some insight here. Javier is a Bloomberg columnist who covers energy and commodities and he says there's a few reasons why oil, like crude oil and the gasoline you buy at the pump don't always move in the same directions. And the first reason is, well, I found this pretty fascinating. But did you guys know that the gas that you buy at the pump is actually different depending on the season. They actually have summer grade gas and winter grade gas.

[Adrian Ma]

Yeah. One of them's like more polluting, right?

[Waylon Wong]

Oh, I thought it was like you can't wear white after Labor Day. You can't put summer grade gas in your car after Labor Day.

[Darian Woods]

I'm pretty sure that is a part of it. Yes. It's like it's a faux pas. Yeah. The pollution is a factor here. So during the summer when the temperatures get really hot, gas can actually evaporate while it's still sitting in your car's tank.

[Waylon Wong]

Really?

[Darian Woods]

Yeah. I didn't know this, but the summer grade gas is designed to evaporate more slowly and Javier says that this makes a difference in the price.

[Javier Blas]

The summer one that we use to reduce pollution in major American cities is a bit more expensive to make. And that explains why the price at the pump station has gone up in the last few weeks.

[Darian Woods]

The other big reason that crude oil and gas prices don't always move together is that, well, they're not the same thing. Crude oil has to be refined into gasoline and that's costing more right now because of something called the refining margin. That's the profit that a refinery takes when they turn a barrel of crude oil into, into, say, gasoline.

[Javier Blas]

We have had a number of refinery glitches, particularly Mexico, in West Africa, in parts of Europe. That means that we are using the global refining capacity a bit harder than it has been in previous months. That means that the margin has gone up.

[Darian Woods]

Now, Javier says if lower crude oil prices continue longer term, then that will probably translate into lower gas prices.

[Waylon Wong]

Well, thank you so much to all of our question askers. And if you've got a burning economics question you would like for us to tackle, please email us. We [e-mail] that's indicatorpr.org this episode was.

[Adrian Ma]

Produced by Cooper Katz McKim. It was engineered by Robert Rodriguez. It was fact checked by Cierra Juarez and edited by Kate Concannon. The indicator is a production of npr.

[NPR]

This message comes from Mint Mobile. Mint Mobile took what's wrong with wireless and made it right. They offer premium wireless plans for less and all plans include high speed data, unlimited talk and text and nationwide coverage. See for [e-mail] Switch this message comes from Capital One. Banking with Capital One helps you keep more money in your wallet with no fees or minimums on checking accounts. What's in your wallet terms apply. See capitalone.combank for details. Capital One NA Member FDIC this message comes from Mint Mobile if you're tired of spending hundreds on big wireless bills, bogus fees and free perks, Mint Mobile might be right for you. With plans starting from 15 bucks a month. Shop plans [e-mail] Switch upfront payment of $45 for 3 month 5 gigabyte plan required new customer offer for first 3 months only, then full price plan options available, taxes and fees extra. See Mint Mobile for details.