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Companies Like Afterpay and Affirm May Put Americans At Risk For ‘Phantom Debt’

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Buying mattresses, clothes and other goods on installment plans has propped up spending, but economists worry that such loans could put some people at risk.“Buy now, pay later” loans are helping to fuel a record-setting holiday shopping season. Economists worry they could also be masking and exacerbating cracks in Americans’ financial well-being.The loans, which allow consumers to pay for purchases in installments, often interest-free, have soared in popularity because of high prices and interest rates. Retailers have used them to attract customers and to get people to spend more.But such loans may be encouraging younger and lower-income Americans to take on too much debt, according to consumer groups and some lawmakers. And because such loans aren’t routinely reported to credit bureaus or captured in public data, they could also represent a hidden source of risk to the financial system.“The more I dig into it, the more concerned I am,” said Tim Quinlan, a Wells Fargo economist who recently published a report that described pay-later loans as “phantom debt.”Traditional measures of consumer credit indicate that U.S. household finances overall are relatively healthy. But, Mr. Quinlan said, “if those are missing the fastest-growing piece of the market, then those reassurances aren’t worth a darn.”Estimates of the size of this market vary widely. Mr. Quinlan thinks that spending through pay-later options was about $46 billion this year. That is small when compared with the more than $3 trillion that Americans put on their credit cards last year.But such loans — offered by companies like Klarna, Affirm, Afterpay and PayPal — have climbed fast at a moment when the finances of some Americans are showing early signs of strain.Credit card borrowing is at a record high in dollar terms — though not as a share of income — and delinquencies, though low by historical standards, are rising. That stress is especially evident among younger adults.People in their 20s and 30s are by far the biggest users of pay-later loans, according to the Federal Reserve Bank of New York. That could be both a sign of financial problems — young people may be using pay-later loans after maxing out credit cards — and a cause of it by encouraging them to spend excessively.Liz Cisneros, a 23-year-old college student in Chicago who works part time at Home Depot, said she was surprised by the ease of pay-later programs. During the pandemic, she saw influencers on TikTok promoting the loans, and a friend said they helped her buy designer shoes.Ms. Cisneros started using them to buy clothes, shoes and Sephora beauty products. She often had multiple loans at a time. She realized she was overspending when she didn’t have enough money while in a grocery checkout line. A pay-later company had withdrawn funds from her bank account that morning, and she had lost track of her payment schedule.“It’s easy when you keep continually clicking and clicking and clicking, and then it’s not,” she said, referring to when she realizes she has spent too much.Ms. Cisneros said the problem was particularly intense around Christmas, and this year she was not shopping for the holiday so she could pay off her debts.Pay-later loans became available in the United States years ago, but they took off during the pandemic when online shopping surged.The products are somewhat similar to the layaway programs offered decades earlier by retailers. Online shoppers can choose from pay-later options at checkout or on the apps of pay-later companies. The loans are also available at some physical stores; Affirm said on Tuesday that it had started offering pay-later loans at the self-checkout counters at Walmart stores.The most common loans require buyers to pay a quarter of the purchase price upfront with the rest usually paid in three installments over six weeks. Such loans are typically interest-free, though users sometimes end up owing fees. Pay-later companies make most of their money by charging fees to retailers.Some lenders also offer interest-bearing loans with repayment terms that can last a few months to more than a year. Pay-later companies say their products are better for borrowers than credit cards or payday loans. They say that by offering shorter loans, they can better assess borrowers’ ability to repay.“We’re able to identify and extend credit to consumers who have the ability and willingness to repay above that of revolving credit accounts,” Michael Linford, Affirm’s chief financial officer, said in an interview.In its most recent quarter, 2.4 percent of Affirm’s loans were delinquent by 30 days or longer, down from 2.7 percent a year earlier. Those numbers exclude its four-payment loans.Briana Gordley, who works on consumer finance issues for a progressive policy organization, learned about pay-later firms in college from friends, and still uses them occasionally for larger purchases.Montinique Monroe for The New York TimesThe service makes the most sense for certain purchases, like buying an expensive sweater that will last many years, said the chief executive of Klarna, Sebastian Siemiatkowski.He said pay later probably made less sense for more frequent purchases like groceries, though Klarna and other companies do make their loans available at some grocery stores.Mr. Siemiatkowski acknowledged that people could misuse his company’s loans.“Obviously it’s still credit, and so you’re going to find a subset of individuals who unfortunately are using it in not the way intended,” said Mr. Siemiatkowski, who founded Klarna in 2005. He said the company tried to identify those users and deny them loans or impose stricter terms on them.Klarna, which is based in Stockholm, says its global default rates are less than 1 percent. In the United States, more than a third of customers repay loans early.Kelsey Greco made her first pay-later purchase about four years ago to buy a mattress. Paying $1,200 in cash would have been difficult, and putting the purchase on a credit card seemed unwise. So she got a 12-month, interest-free loan from Affirm.Since then, Ms. Greco, 30, has used Affirm regularly, including for a Dyson hair tool and car brakes. Some of the loans charged interest, but she said that even then she preferred this form of borrowing because it was clear how much she would pay and when.“With a credit card, you can swipe it all day long and be like, ‘Wait, what did I just get myself into?’” Ms. Greco, a Denver resident, said. “Whereas with Affirm, it’s giving you these clear-cut numbers where you can see, ‘OK, this makes sense’ or ‘This doesn’t make sense.’”Ms. Greco, who was introduced to The New York Times by Affirm, said pay-later loans helped her avoid credit card debt, with which she previously had trouble.But not all consumers use pay-later options carefully. A report from the Consumer Finance Protection Bureau this year found that nearly 43 percent of pay-later users had overdrawn a bank account in the previous 12 months, compared with 17 percent of nonusers. “This is just a more vulnerable portion of the population,” said Ed deHaan, a researcher at Stanford University.In a paper published last year, Mr. deHaan and three other scholars found that within a month of first using pay-later loans, people became more likely to experience overdrafts and to start accruing credit card late fees.Financial advisers who work with low-income Americans say more clients are using pay-later loans.Barbara L. Martinez, a financial counselor in Chicago who works at Heartland Alliance, a nonprofit group, said many of her clients used cash advances to cover pay-later loans. When paychecks arrive, they don’t have enough to cover bills, forcing them to turn to more pay-later loans.“It is not that the product is bad,” she added, but “it can get out of control really fast and cause a lot of damage that could be prevented.”Barbara L. Martinez, a financial counselor in Chicago who works with low-income families, meeting with a colleague about an upcoming workshop for people wanting to learn more about financial stability.Jamie Kelter Davis for The New York TimesBriana Gordley learned about pay-later products in college. She was working part time and couldn’t get approved for a credit card, but pay-later providers were eager to extend her credit. She started falling behind when her work hours were reduced. Eventually, family and friends helped her repay the debts.Ms. Gordley, who testified about her experience last year in a listening session hosted by the Senate, now works on consumer finance issues for Texas Appleseed, a progressive policy organization. She said pay-later loans could be an important source of credit for communities that lacked access to traditional loans. She still uses them occasionally for larger purchases.But she said companies and regulators needed to make sure that borrowers could afford the debt they were taking on. “If we’re going to create these products and build out these systems for people, we also just have to have some checks and balances in place.”The Truth in Lending Act of 1968 requires credit card companies and other lenders to disclose interest rates and fees and provides borrowers with various protections, including the ability to dispute charges. But the act applies only to loans with more than four payment installments, effectively excluding many pay-later loans.Many such loans also aren’t reported to credit agencies. As a result, consumers could have multiple loans with Klarna, Afterpay and Affirm without the companies knowing about the other debts.“It’s a huge blind spot right now, and we all know that,” said Liz Pagel, a senior vice president at TransUnion who oversees the company’s consumer lending business.TransUnion and other major credit bureaus and pay-later companies all say they are supportive of more reporting.But there are practical hurdles. The credit-rating system rates borrowers more highly for having longer-term loans, including longstanding credit card accounts. Each pay-later purchase qualifies as a separate loan. As a result, those loans could lower the scores of borrowers even if they repay them on time.Ms. Pagel said TransUnion had created a new reporting system for the loans. Other credit bureaus, such as Experian and Equifax, are doing the same.Pay-later firms say they are reporting certain loans, particularly ones with longer terms. But most are not reporting and won’t commit to reporting loans with just four payments.That worries economists who say they are particularly concerned about how such loans will play out when the economy weakens and workers start losing their jobs.Marco di Maggio, a Harvard Business School professor who has studied pay-later products, said that when times were tough more people would use such loans for smaller expenses and get into trouble. “You only need one more shock to push people into default.” More

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    U.S. Consumers Are Showing Signs of Stress, Retailers Say

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    Consumer spending remains resilient, but retailers’ latest earnings offered a glimpse into worrying shifts in shopping habits.Consumers power the U.S. economy, and their capacity to spend has repeatedly defied predictions. In early 2020, after a short but severe recession caused by the pandemic, consumers splurged on big-ticket goods, from patio furniture to flat-screen TVs and home gym equipment. Then came what economists called “revenge spending,” with experiences that were off limits during lockdowns, like traveling and going to concerts, taking precedence.Now there are signs that some shoppers are becoming more cautious, as Americans’ savings erode, inflation continues to bite and other factors tighten their wallets — namely, the resumption of student loan payments in October. Financial reports from retailers — including Macy’s, Kohl’s, Foot Locker and Nordstrom — that landed this week suggest a shift is underway, from consumers buying with abandon to spending more on their needs.“Last year it was more psychological,” said Janine Stichter, a retail analyst at the brokerage firm BTIG. “But now that we’ve been dealing with inflation for as long as we have, I just think we’re getting to a point where savings are depleted.”In the aggregate, consumer spending remains solid. Retail sales in July were stronger than expected, leading some economists to raise their forecasts for economic growth this quarter. A robust labor market and rising wages have buoyed consumer confidence.But even retailers with strong sales say there are signs of economic strain among shoppers.“It is clear that the lower-income shopper, our core customer, is still under significant economic pressure,” Michael O’Sullivan, the chief executive of the off-price retailer Burlington Stores, said in a statement on Thursday. In the three months through July, Burlington’s sales rose 4 percent and its profit more than doubled.Discounters historically perform well during times of economic uncertainty as shoppers across the income spectrum look to save money. Burlington, along with Walmart, Dollar Tree and TJX, the owner of T.J. Maxx and Marshalls, all reported a rise in sales last quarter, as shoppers sought discounts on essential items like groceries, turned to cheaper private label products and reined in spending on discretionary goods.The strong performance at off-price and discount retailers stands in contrast to those at department store chains and many fashion and footwear retailers.In calls with Wall Street analysts this week, retail executives also flagged rising credit card delinquencies and higher rates of retail theft, ominous signs that consumers could be more strapped for cash.Jeff Gennette, the chief executive of Macy’s, the largest department store in the United States, said shoppers had “more aggressively pulled back” on spending in the discretionary categories, resulting in an overall decline in sales last quarter. Half of Macy’s shoppers make $75,000 or less.“They are not converting as easily and becoming more intentional on the allocation of their disposable income,” he said.“Probably the most important thing people are spending money on is general merchandise,” said Max Levchin, the chief executive of Affirm, which extends credit to shoppers at checkout via a so-called buy-now, pay-later model. “People are looking for more value for less money, or simpler functionality and lower price,” he said. The company reported an 18 percent rise in active customers from a year earlier.The finance chiefs of Macy’s, Kohl’s and Nordstrom told analysts that delinquencies on the department stores’ credit cards had risen. In Macy’s case, the increase in nonpayments last quarter was “faster than expected.”“When people are not paying their credit card bills, that suggests a really stretched consumer,” Ms. Stichter of BTIG said.And that means consumers are being more selective about where they shop and what they buy.“You’re going to see brands that are winners and losers,” Fran Horowitz, the chief executive of Abercrombie & Fitch, said in an interview. The fashion retailer reported a jump in sales of more than 10 percent last quarter, as it was able to “chase” the new styles that got more shoppers through the doors, Ms. Horowitz said.By contrast, on the same day Foot Locker reported a sales decline of nearly 10 percent for the quarter, it also cut its forecast for 2023 earnings for the second time this year, citing “ongoing consumer softness.”The back-to-school shopping season now underway is crucial for retailers, a harbinger of whether there will be strong sales for the rest of the year.And a new dynamic will soon come into play. In October, student loan payments will resume for about 44 million Americans, after a pandemic relief measure put them on hold in March 2020. Retail executives have warned that the payment resumption could further squeeze their shoppers’ budgets.Halloween, which is just weeks after repayments resume, will also be a barometer for people’s willingness to spend on discretionary items like costumes and candy, said Nikki Baird, vice president of strategy at Aptos, a technology company that works with retailers like Crocs, L.L. Bean and New Balance.She said that the repayments will most affect the age group that typically spends on Halloween. “I think that will really tell us what does this mean for the holiday season,” Ms. Baird said. “If Halloween is a bust, then I think we have to really start looking at whether consumers are going to go big for Christmas, because I think it says they won’t.” More

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    For Many Small-Business Owners, a Necessary Shift to Digital Payments

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    The pandemic accelerated a transition to cashless payments, forcing a reckoning among small-business owners. But there are benefits: One owner said the switch saved her $3,000 a month.“Making It Work” is a series about small-business owners striving to endure hard times.When Egypt Otis opened her business, Comma Bookstore and Social Hub, three years ago in Flint, Mich., the pandemic was full blown. But her neighbors welcomed the literature and art she sold in her store that celebrated people of color, as well as the community programs she hosted.Despite the warm reception, Ms. Otis quickly found that she had a sales problem: Her customers wanted to pay with their cellphones.“I realized that people were hardly keeping a wallet or a physical card, which limited my ability to sell and make money,” Ms. Otis said. So she upgraded her transactions platform to include tap-and-go purchases on mobile devices. “People are not carrying cash,” she said. “It’s becoming obsolete.”The number of Americans who say they are “cashless” has jumped in the last five years. Forty-one percent of Americans said they did not use cash for their purchases in a typical week in 2022, up from 29 percent in 2018, according to a Pew Research Center survey released last October.Small-business owners increasingly are making the switch to cashless payments for several reasons, including rising consumer demand, faster checkout, lower labor costs and increased security. Those who wait risk losing revenue, experts say.But there are drawbacks to going cash-free, including a learning curve for entrepreneurs who may not understand how to set up digital payments, a lack of accessibility to credit cards for low-income consumers, and privacy concerns.Signs at a pizza joint in New York indicating it takes multiple forms of cashless payments, a switch that accelerated in the pandemic.Karsten Moran for The New York TimesJuanny Romero was an early adopter of digital payments for her small business. Fifteen years ago, when she founded Mothership Coffee Roasters, a chain of coffee shops in Las Vegas, she began using Square, a low-cost digital payments system for small businesses.“​​I was a young businesswoman and not astute,” she said. But Square saved her $3,000 a month in merchant fees for credit card processing.As Ms. Romero expanded her businesses (to four locations in Las Vegas, with two more on the way), she added more payment options, including Apple Pay and Google Pay.But she noticed a shift during the pandemic: Her customers no longer wanted to use cash, and her employees did not want to handle it. “We didn’t know where Covid was coming from,” she said. “There were still people bringing in cash, but it was scary and dangerous.”When the coin shortage hit in 2020, she ran out of cash altogether, but Ms. Romero found it saved on labor costs. “My managers were standing in line for two hours to deposit the cash,” she said. “I can’t get an armored car service to pick up $100 in cash.”Even so, customer demand prompted her to return to cash sales, which Ms. Romero said are holding steady at about 11 percent of her overall revenue. She said she would go cashless if the share dipped below 10 percent.A digital transaction at Mothership Coffee Roasters in Las Vegas.Bridget Bennett for The New York TimesThe pressure to adapt is growing. More that 2.8 billion mobile wallets were in use at the end of 2020, and that is projected to increase nearly 74 percent to 4.8 billion — nearly 60 percent of the world’s population — by the end of 2025, according to a study released in 2021 by Boku, a fintech companyThe United States lags other countries in adopting cashless payments. Among the most cashless countries in the world is Britain, where the pound makes up only 1 percent of all transactions, according to a report from Merchant Machine, a payment research firm based in London. But in the United States, some small-business owners do not understand the complexities of digital payments.“Smaller merchants, they don’t always have the knowledge and resources to know what to do,” said Ginger Siegel, who leads the North America small-business segment at Mastercard, which offers training to business owners like Ms. Otis of Comma Bookstore.Ms. Otis said she noticed an increase in sales when she began offering mobile payments, which made the checkout process faster. “As a retailer, you want to make the experience as efficient as possible,” she said. “It is a matter of survival.”A veteran using a tap-and-go device to collect donations for the Royal British Legion in London in 2020.Guy Bell/AlamyBenefits include immediate payment, increased sales and the ability to sell to customers who might use other currencies. “You have to set it up, but it’s worth it,” said Kimberley A. Eddleston, a professor of entrepreneurship at Northeastern University.But some business owners say they are hesitant to move too quickly, worried that today’s technology could become obsolete tomorrow. And there are compatibility and cost issues to consider, said Wayne Read, the chief executive of Forged & Formed, an online jeweler with a physical store, Studio D Jewelers, in Woodstock, Ill. In his jewelry sales, where items can be pricey, he said a speedy transaction might not be suitable. “We don’t want people to feel they have rushed their decision,” he said.Despite advances in technology, many Americans still have little or no access to financial services like credit cards and mobile wallets, although that is slowly improving. An estimated 5.9 million households did not have a bank account in 2021, down from 7.1 million households in 2019, according to a survey by the Federal Reserve.Rewards points displayed on a checkout screen at Mothership. Mobile apps allow for cashless payments and can increase customer loyalty.Bridget Bennett for The New York TimesAnother obstacle to adoption is privacy concerns: Some people prefer the anonymity that cash provides. And cash is perceived as a way for consumers to remain aware of expenditures. Complicating the transition to the digital economy, the recent banking turmoil in the United States has made many depositors question the security of financial institutions.But experts agree that cash is unlikely to go away. Consumers in lower income households continue to rely on cash for payments, according to the Fed survey.And small-business owners say that despite the speed and efficiency that cashless payments offer, cash is still a viable option for their customers.“At the end of the day, I know the people I serve,” Ms. Romero said. “I would feel conflicted if I didn’t do the right thing.” More

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    What the Fed’s Rate Hike Means for Credit Cards and Student Loans

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    The Fed’s decision to raise its key interest rate by three-quarters of a percentage point is good news for savers, but less so for borrowers: They can expect to pay more on credit card debt, car loans and certain student loans. [Here’s what the Fed’s decision means for mortgages.]Credit CardsCredit card rates are closely linked to the Fed’s actions, so consumers with revolving debt can expect to see those rates rise, usually within one or two billing cycles. The average credit card rate was recently 16.73 percent, according to Bankrate.com, up from 16.34 percent in March.“With the frequency of Federal Reserve rate hikes this year, it will be a drumbeat of higher rates for cardholders every couple of statement cycles,” said Greg McBride, chief financial analyst at Bankrate.com. “And the cumulative effect is growing. If the Fed raises rates by a total of three percentage points this year, your credit card rate will be three percentage points higher by the first of the year.”Car LoansCar loans are also expected to climb, but those increases continue to be overshadowed by the rising cost of buying a vehicle (and the pain of what you’ll pay at the gas pump). Car loans tend to track the five-year Treasury, which is influenced by the federal funds rate — but that’s not the only factor that determines how much you’ll pay.A borrower’s credit history, the type of vehicle, loan term and down payment are all baked into that rate calculation.The average interest rate on new-car loans was 5.08 percent in May, according to Dealertrack, which provides business software to dealerships. That’s almost a full percentage point higher than December 2021, when rates had reached their lowest point since 2015 and when the firm began tracking rates.The average rate for used vehicles was 8.46 percent in May, also nearly a full percentage point higher than December. But those rates vary widely; borrowers with the lowest credit scores received average rates of 20 percent in May, Dealertrack said, whereas individuals with the most pristine credit histories received rates of 3.92 percent.Student LoansWhether the rate increase will affect your student loan payments depends on the type of loan you have.Current federal student loan borrowers — whose payments are on pause through August — aren’t affected because those loans carry a fixed rate set by the government.But new batches of federal loans are priced each July, based on the 10-year Treasury bond auction in May. Rates on those loans have already jumped: Borrowers with federal undergraduate loans disbursed after July 1 (and before July 1, 2023) will pay 4.99 percent, up from 3.73 percent for loans disbursed the year-earlier period.Private student loan borrowers should also expect to pay more; both fixed and variable-rate loans are linked to benchmarks that track the federal funds rate. Those increases usually show up within a month.But the Fed is not finished and has penciled in rates hitting 3.4 percent by the end of 2022. Private lenders will probably bake those and other expectations into their interest rates as well — meaning borrowers could end up paying anywhere from 1.5 to 1.9 percentage points more, depending on the length of the loan term, explained Mark Kantrowitz, a student loan expert and author of “How to Appeal for More College Financial Aid.” More

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    The Best Time to Use Your Airline Points and Miles

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    If you’re thinking of traveling and you’ve got points or miles sitting in airline and credit card accounts, the time to cash in may have arrived. Here’s what you need to know.Frances Meredith of Raleigh, N.C. used a branded American Airlines credit card for everything from groceries to medical expenses during the pandemic, piling up points with nowhere to spend them. That meant she had plenty to redeem when her family of four decided it was time for a winter getaway to Miami. Although the seats were pricey at 50,000 points each, Dr. Meredith, an internist, was excited to save money by using her rewards balance. “It was easy. There were lots of seats,” she said.As travelers return to the skies, many, like Dr. Meredith, have amassed larger than usual totals in airline and credit card rewards programs. And they are starting to spend them. United Airlines’ Mileage Plus program has had multiple record-breaking days over the past few weeks as customers have flocked to redeem miles, said Michael Covey, the managing director of the United program. “The demand is hitting the books in ways we’ve never seen before,” he said.Several factors make now the time to cash in points.More flexibilityFlights booked with points on the major U.S. carriers are fully refundable. That means if you need to cancel the trip, all your points and any associated fees will be returned without any penalties. Tickets bought for cash, in contrast, typically offer a credit for a future flight rather than a refund and may charge fees, so your money is tied up with the airline. Refundable tickets can be purchased, but they are more expensive.This difference, between ending up with a credit or a refund, can loom large for expensive trips like a family vacation overseas. Some travelers are “still uncomfortable with international travel,” while conditions remain in flux because of the pandemic, so using points to book a flight to a foreign country can offer more peace of mind, said Jamie Larounis, who writes about loyalty programs on his travel website, the Forward Cabin. He is now also seeing some worry about flights near Eastern Europe because of the Russian invasion of Ukraine.Better now than laterMany travelers are sitting on larger than ever point balances, both because they haven’t been redeeming their points and because they’ve been adding to the pile over the last two years with credit card purchases tied to airline loyalty accounts. According to a study by ValuePenguin and OnPoint Loyalty, the five largest airline loyalty programs — Delta Air Lines’ SkyMiles, American Airlines’ AAdvantage, United Airlines’ MileagePlus, Southwest Airlines’ Rapid Rewards and JetBlue’s TrueBlue — ended 2020 with $27.5 billion in liabilities, up $2.9 billion from 2019. Customers earned about half as many points in 2020 as they did the previous year, and redeemed just 10 percent of their available points compared to 30 percent the previous year.The most important reason to use points now is that they may have less buying power over the coming years, Mr. Larounis said. Airline and hotel points are like currencies owned by companies, and those companies can value their currencies however they like by changing the cost of redemption. Helane Becker, an airline analyst at the investment bank, Cowen, said airlines have devalued points multiple times over the past few years and she expects that practice to continue.This is already evident in both the airline and hotel sectors. Alaska Airlines recently upped the cost to book some of its first class tickets. Hyatt Hotels recently increased the points necessary for some hotel stays when it implemented a new peak and off-peak pricing program.Companies know that “people are sitting on big piles of miles and have a lot of pent-up demand for travel,” said Mr. Larounis of the Forward Cabin website. “There is no downside to them raising the cost of award travel.” That is especially true of airplane seats in the premiere cabin, he said. Some leisure travelers, who may have been content in economy class seats, are now purchasing seats in the front of the plane where passengers are a little more spread out. “They see it as safer in regards to Covid,” Mr. Larounis said.Still, the airlines are mindful of those with fewer miles. “We have more seats available for less than 10,000 miles than ever,” said United’s Mr. Covey.Nudges from the airlinesAirlines are encouraging customers to use their points. Rewards tickets booked on Delta airlines through the end of this year will count toward elevating the customer’s loyalty program status. Previously, only flights paid with cash counted toward program status. United Airlines recently joined the list of airlines that allow customers to combine “money plus miles” to buy tickets, so “members can redeem miles sooner and not wait until they have a large total,” Mr. Covey said. United also had flash sales in February for tickets to London and Australia purchased with points, and now allows members to use points to buy food and beverages on flights.More places to goTravel itself is less daunting now with more countries eliminating Covid testing for vaccinated passengers. London, one of the most popular destinations for U.S. travelers, dropped its testing requirement on Feb. 11. Thailand, Vietnam, Australia, and other countries are opening up to tourists.Alison Carpentier, the director of guest loyalty at Alaska Airlines, which is part of the Oneworld alliance of 14 global airlines including Cathay Pacific and Qantas, said the availability of tickets purchased with points “has been good as international travel starts to open back up.”More seats availableAirlines want to fill as many seats as possible so many now make almost all of their seats available for purchase with points, instead of just a subset. The prices set by most airlines fluctuate, so it pays to check back periodically before the flight to see if the number of points needed has come down.Travel Trends That Will Define 2022Card 1 of 7Looking ahead. More

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    Red Ventures, the Biggest Digital Media Company You've Never Heard Of

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    Red Ventures has turned very specific advice into very big business.INDIAN LAND, S.C. — Lindsey Turrentine first heard of Red Ventures last fall, when it bought the venerable tech news site CNET, where she is the senior vice president in charge of content. She sat down at her kitchen table in Berkeley, Calif., and frantically started Googling to find out what it was.Her experience wasn’t uncommon. People working at the tourism guide Lonely Planet, the travel site The Points Guy and the health and medical information site Healthline were similarly blindsided in recent years, when Red Ventures bought up special interest publications in a multibillion-dollar shopping spree.Their Googling and mandatory corporate retreats led them to the company’s South Carolina headquarters, a 180-acre campus with a cluster of modern buildings, a fire pit, a six-lane bowling alley, spin room, pickle ball courts and 264 residences for employees who choose to live where they work.Red Ventures, which started as a digital marketing company, has attracted serious investments from private equity firms. Its location has helped obscure what is perhaps the biggest digital publisher in America, a 4,500-employee juggernaut that says it has roughly $2 billion in annual revenues, a conservative valuation earlier this year of more than $11 billion, and more readers, as measured by Comscore, than any media brand you’ve ever heard of — an average of 751 million visits a month.Here in Indian Land, I felt as if I were back in the Ping-Pong days of Silicon Valley in the early 2000s. Red Ventures has built a culture that blends warm enthusiasm, progressive social values and the ruthless performance metrics of the direct marketing business.The company found itself in the publishing business almost by accident, and is now leading a shift in that industry toward what is sometimes called “intent-based media” — a term for specialist sites that attract people who are already looking to spend money in a particular area (travel, tech, health) and guide them to their purchases, while taking a cut.It’s a step away from the traditional advertising business toward directly selling you stuff. Red Ventures, for instance, plans to steer readers of Healthline to doctors or drugs found on another site it recently acquired, HealthGrades, which rates and refers doctors. Red Ventures will take a healthy commission on each referral.At the center of the company is Ric Elias, the chief executive and co-founder. A 6-foot-5 native of Puerto Rico, he has quietly become one of the most powerful media moguls in the country, a Barry Diller of the South, heading a company roughly the size of Mr. Diller’s IAC. (Mr. Diller, a more typically immodest media figure, said in an email that he finds Mr. Elias “impressive” but that there is only one Barry Diller: “I think of myself as all points on the compass.”)Ric Elias, the company’s chief executive, is known for his TED Talk about being on the US Airways jetliner that made an emergency landing on the Hudson River in 2009.Travis Dove for The New York TimesMr. Elias, who spoke with me in the company’s bright and sprawling cafeteria, had played basketball that morning with a former N.B.A. player who lives nearby. He is the largest shareholder in Red Ventures, with more than 20 percent of the company, and so a billionaire on paper — though he hasn’t done the self-promotion required to get on the Forbes list.“I think we’re a 20-year-old company that still is figuring out what we’re going to be,” he said. “And I don’t think we have anything to celebrate or tell.”If you’ve heard of Mr. Elias, it’s probably because you’re one of the eight million people who have watched the video of his TED Talk, “3 Things I learned When My Plane Crashed.” On the top floor of the main building on the Red Ventures campus, he pointed to his own blurred shape in a painting of passengers walking onto the wings of the Charlotte-bound US Airways Flight 1549, the jetliner that made an emergency landing on the Hudson River in 2009, the so-called “Miracle on the Hudson.” Mr. Elias’s seat was 1D.He returned from that near-death experience determined to remake his life — and his company. He devoted himself to causes, including a college scholarship program for undocumented immigrants ineligible for state aid, some of whom he has hired. And he started transforming Red Ventures, then a middleweight marketing company, into the kind of business where he would want to spend his career.“This is the perch from where I’m going to live the rest of my life,” he said, describing his thoughts at the time. “We’re not going public, we’re not selling. Red Ventures, as is, will never be a public company as long as I’m running it.”He persuaded key investors — the private equity firms General Atlantic and Silver Lake each own about 20 percent — to back an ambitious expansion. And now Red Ventures is the largest in a group of private equity-backed giants that have been snapping up trusted media brands once left for dead. North Equity bought Popular Science, Domino and Field & Stream, along with the men’s site Mel. J2 Media, a public company, scooped up the old publisher Ziff Davis with its online brands Mashable and IGN. In addition to Lonely Planet, CNET, Healthline and The Points Guy, Red Ventures bought the education advice site BestColleges.These low-profile media companies are riding a shift in technology as both Apple and regulators have eroded the dominance of the creepy advertising technology that allows companies to track you across websites. That has helped push the pendulum back toward the old-fashioned idea of connecting with readers seeking information relevant to their lives, whether it’s a Field & Stream article on the latest fly rods or a Healthline guide to Crohn’s disease treatments.Vaccinated employees have lunch in a dining area on Red Ventures’ 180-acre campus.Travis Dove for The New York TimesThat’s the context in which Red Ventures — a company that backed its way into media after specializing in online marketing — makes sense.Mr. Elias grew up in San Juan hearing stories of his late grandfather, a Lebanese immigrant who, according to family lore, built a huge produce importing business but lost it because he hadn’t paid his taxes. It recently occurred to him, he said, that he has spent his career trying to restore the family name.He arrived at Boston College, in 1986, a semester late because he’d been trying to make a local professional basketball team, the Leones de Ponce, and speaking what he described as broken English. From there, he earned an M.B.A. at Harvard Business School. In 2000, he and a friend, Dan Feldstein, who is now the chief marketing officer of Red Ventures, started a business built on the notion of driving online shoppers to physical stores. It was a “terrible idea,” Mr. Elias said, and they quickly ran out of money. They spent the next few years digging out and repaying their investors, among them their more successful Harvard Business School classmates.Mr. Elias and Mr. Feldstein sold the business to management in 2005 and started again under the name Red Ventures, becoming pioneers in that era’s efforts to link digital data and real world commerce. They entered the business of selling subscriptions for DirecTV and burglar alarms for ADT Security. Along the way, they figured out how to integrate online marketing and old-fashioned telemarketing — and they got very good at search engine optimization.Other tricks were more ingenious. For instance, they purchased more than a million toll-free phone numbers, and each visitor to their marketing website was shown a different one. So when prospective customers called, Red Ventures knew exactly what they had been looking at on the site, which gave the agents what they needed to make personalized sales pitches. This was a pretty high-tech form of digital surveillance in those more innocent times. As the company grew and the market shifted, its founders realized that the technological know-how they had developed had itself become a commodity and that they needed to develop their own brands, not just sell others’.In 2015, Red Ventures raised $250 million, which went toward its $1.4 billion purchase of Bankrate, a personal finance company that helps people comparison shop for financial products (and earns a commission on each sale). That acquisition included The Points Guy, a site devoted to elucidating airline mileage programs and credit card deals. The Points Guy had built a profitable business earning commissions whenever people signed up for credit cards they had read about on the site — often in rave reviews of high-end cards.The marketing of financial products promises far higher profit margins than the online “affiliate” businesses that underlie websites like The New York Times’s Wirecutter. While a publisher recommending a gadget on Amazon might earn a single-digit percentage of a shopper’s purchase, the “bounties” paid to Red Ventures for directing a consumer to a Chase Visa Sapphire Reserve credit card or an American Express Rose Gold card can range from $300 to $900 per card.The arrival of Red Ventures’ executives hasn’t always gone over well among the journalists who find themselves working under Mr. Elias. Journalists, like members of a medieval guild (the guild hall is Twitter), tend to be more connected to the folkways of their profession than to any corporate culture, and some roll their eyes at Red Ventures’ rah-rah retreats, which feature fireworks and song. More troublingly, some reporters at The Points Guy, which also covers the travel industry in general (it has been a comprehensive source for information on where vaccinated Americans can travel), have complained that the new owners have eroded the already rickety wall between the site’s service journalism and the credit card sales that fund it.Red Ventures is “all about profit maximization,” said JT Genter, who left the site more than a year ago. He and other Points Guy writers said they hadn’t been pushed to publish stories they found dubious — indeed, the site has occasionally offered carefully critical coverage of Chase and American Express, its dominant business partners. But he noted that Points Guy journalists are required to attend regular business meetings detailing how much money the site makes from credit card sales, which some take as a tacit suggestion to put their thumbs on the scale.Mr. Elias said Red Ventures has a “nonnegotiable line” concerning the editorial independence of its sites, adding that he has given his cell number to CNET employees and instructed them to call him if they ever face pressure from the business side.“I told them, ‘There’s a red line,’ and they’re like, ‘OK, we’ll see,’” he said.Red Ventures’ roots in marketing, its investment in tech aimed at selling you something and its almost-accidental move into trying to provide readers with trusted, even journalistic, advice have made for an odd amalgam. And the company’s Silicon Valley style extends only so far. Most employees don’t receive equity in the company, and lunch isn’t free, just subsidized.The company does offer a maxim-happy workplace, though, with inspirational slogans printed on the walls of its atrium in cheery fonts. The one I heard executives refer to most was “Everything Is Written in Pencil,” a motto that makes sense for a company that has changed almost entirely from its marketing origins to become a leading purveyor of service journalism. And its executives seem to have absorbed the idea that they are selling trust, even if they don’t put it in the language of journalism professors.“Brand and trust are at the core of everything that we do,” said Courtney Jeffus, the president of the company’s financial services division, which includes Bankrate. “If you lose brand trust, then you don’t have a business.”There’s quite a bit of good news in the rescue of old media brands by Red Ventures and similar companies — CNET plans to hire 150 new employees this year, for instance. A deeper concern may be what it will mean to transform the internet’s independent arbiters into nothing more than the gaping maw of the sales funnel.Less gloomy, I think, is something else that Red Ventures represents: a challenge to the oligopolistic dominance of Amazon over the internet, and a model for independent media companies that have spent a generation either losing their core businesses to cheerfully ruthless tech giants or, at best, living on their scraps. For sites like Wirecutter, internet commerce often means, in practice, serving as an Amazon storefront, with revenue trickling in from modest commissions. But Red Ventures has succeeded by building a tech and media company that is independent of that particular Goliath, if not of another one — Google.“We’re going to have a chance to be an alternative to the big walled gardens,” Mr. Elias said of his company. “This is a plane that just got some altitude.”The talk of planes prompted me to ask Mr. Elias how he got back to the Carolinas after the Hudson River landing. He said he’d told a surprised agent he wanted the next flight out.“The lady looked at me like I was crazy,” he recalled, but he’d figured that “if I don’t get on a flight right away, I may never fly again — and if the next flight goes down, it was me God was coming to see.” More