Update: Loyalty Programs and Credit Cards

For some of us, credit cards are more than a convenient way to pay—they are the lifeline to free travel through loyalty programs. Between points for purchases and bonuses for opening or upgrading credit card accounts, it’s possible to get quite a few awards. My wife and I have managed two trans-Atlantic trips a year that way for quite a while.

But lately, there have been lots of headlines recently about how airlines, Delta and United specifically, have been “gutting frequent flier programs,” “devaluing loyalty,” “favoring the elites over ordinary travelers” and more. Is it really the end of the world? Absolutely not!

It’s true that those airlines will now be giving out points based not on how far you fly, but on how much you spend—but for many of us that’s ALWAYS been true, because we’re getting our points by buying, not flying. And for us, in essence, the loyalty is to the card, more than the airline. On the other hand, the airlines benefit by selling points to the banks to give to us. And a pretty penny it is! Airlines sold over $4 BILLION in miles to banks in 2007, and it’s been growing since.

Further down, specific information on a few current credit card offers (December 2014), but for the moment, some thoughts.

Which kind of loyalty card is right for you?

There are three basic kinds of travel-earning cards.

• Airline cards are issued by banks that have contracts with the airline; the “miles” you earn can be used only for that airline and its affiliates (or for shopping on the airline’s “retail mall.” You book travel through the airline, which has an award chart for how many points are required for a particular trip.
• “Any airline” cards are issued by a number of banks—Capital One is the most widely advertised, but US Bank and a number of others are in this field as well. They advertise that there are no blackouts or restrictions—except that whether the points you have can purchase a trip may vary from day-to-day, because each point is worth about $.01 toward paying a regular ticket price.
• Cards with convertible points include American Express’s Membership Rewards-based cards, Chase’s Sapphire and Ink products and many more. These points may be used within the issuer’s own rewards system, or converted into “miles” on a partner air carrier. Another group of “convertible” cards are tied to hotel loyalty programs, such as Hilton and Starwood.

 Points to consider:

• If you close the account, will your points still be there? For the airline cards, severing ties with a bank or a card doesn’t affect your membership in the airline’s loyalty program or your points. But most of the “any airline” and convertible cards don’t let you keep points if you’re not an active cardholder. Check your options to see if you can keep them or convert them before closing the account.
• Where do you want to go and with which carrier? If you live in a city like New York, you might want to have a foot in each of the big airline alliances, but if you live in a city dominated by one of the majors, it may make more sense to focus your collecting on that airline. The same consideration applies to convertibles: If Delta is your choice, the Chase Ink and Preferred cards won’t help you because the points can transfer to United, British Air and a few others…but not to Delta. Check each card for its partners.
• What about those big annual fees? Ah, yes. One of the catches. Most points-earning cards carry annual fees, and some are quite big, and some of the biggest bonuses and benefit packages are attached to the biggest fees. Look for cards that waive the fee for the first year—many do. You can close the account before the fee hits next year. Or, if the bonus is big enough, a $95 annual fee may make sense to you.
• Don’t overspend chasing miles! To get the full big bonus offered, most cards have a required “spend” amount (charge $3000 in first 90 days, for example); only a few (Barclay’s USAir cards for example) give you the bonus on first purchase. Be realistic—figure out what you usually spend and add in any expected big-ticket items. If the total fits with the required spend, go for it. Be sure to charge everything you can, and don’t wait for the bills to start paying the bank what you would have paid in cash.
• What about your credit rating? Many people believe that your credit rating will be harmed by “churning” credit cards. But the real issues are a) are you paying your bills regularly and without missing payments and b) is your debt-to-credit ration reasonable. If you’ve been given a total of $50,000 in credit lines and have piled up $45,000 in active debt…that’s trouble. But if you use a lower proportion, and pay regularly…you’re building a good reputation.

Three more things before the cards:

• These are the things that can turn into all-day discussions (and there are a number of websites where that’s exactly what happens. Two of the most useful are FrequentFlier, run by Tim Winship, the guru of airline and loyalty programs and the MilePoint.com credit card discussion.
• Keeping track of your points and programs can be a chore. Let someone else do it. Over the years there have been a lot of mileage trackers, and most are gone. The one that’s persisted and which I think is the best (and I used a whole bunch) is far and away AwardWallet. It tracks your points in hundreds of programs, including airlines, hotels, credit cards—even OpenTable dinner reservations. You can log on to your programs through their website or phone app and not even have to remember all your passwords. It’s free for the basic functions, which are good; for great, the rest is turned on with a contribution that you choose—as little as $10 a year, but it’s worth much more.
  Oh, and did I mention that it also retrieves and tracks your itineraries? Yes, it does, and I can’t count the times it was the fastest way to check hotel, airline, car rental, and all the other parts of a long trip in one place. It even sends e-mail alerts when it’s time to check in, and so forth. No, I don’t get a commission; I just love it.
• Another good source of information on card offers and other frequent flyer strategies is The Points Guy.

So now some cards:

Barclays US Airways Dividend Miles World MasterCard

• What you get: 50,000 USAir miles; first checked bag free on USAir or American, Priority Boarding, annual $99 companion certificate
• What it costs: $89 annual fee (not waived). Bonus is paid after first purchase, no minimum spend
• Note: Sometime in spring 2015, the USAir miles will become American AAdvantage miles.

Chase Ink Plus Business Card

• What you get: 50,000 Chase Ultimate Rewards Points, 1:1 transfer to United, BritishAir and more, no foreign transaction fees, 5x and 2x points for certain purchase categories
• What it costs: $95 annual fee (waived for first year); must spend $5000 in first 3 months
• Note: Business card means they want some business affiliation, no matter how small. It could be your home business or your employer. In any case, the points belong to the cardholder—you.

Citi AAdvantage Platinum Select MasterCard

• What you get: 50,000 American Airlines AAdvantage miles, Group 1 Boarding, first checked bag free, 25% on inflight purchases, 2 1-day Admirals Club passes
• What it costs: $95 annual fee (waived for first year); must spend $3000 in first 3 months

Chase Sapphire Preferred

• What you get: 45,000 Chase Ultimate Rewards Points, 1:1 transfer to United, BritishAir and more, no foreign transaction fees, 2x points for certain purchase categories. 5000 of the points are for adding a second user to the account
• What it costs: $95 annual fee (waived for first year); must spend $4000 in first 3 months
• Note: This is a quirky card—metal rather than plastic. Showy, but…

Gold Delta SkyMiles Credit Card (American Express)

• What you get: 30,000 SkyMiles, first bag free, Priority Boarding, $50 rebate for using the card for Delta tickets in first 3 months, no foreign exchange fees.
• What it costs: $95 annual fee (waived for first year); must spend $1000 in first 3 months
• Note: Not a big bonus, but if Delta is your airline…and the required spend is only $1000.

Note that I haven’t included a United card such as the Chase MileagePlus Explorer Card. A few months ago I would have, and that’s the point. Bonuses are marketing tools, and they keep changing. Right now the bonus on that card is 30,000; then it was 50,000. Right now, the best bet for United miles are the two Chase cards listed above. But keep checking!