With the gutting of Delta Skymiles, the major devaluation of United MileagePlus especially for premium cabin international partner awards, and now with no-notice changes to American AAdvantage awards you probably don’t book, it’s worth re-evaluating and thinking through your strategy to approach frequent flyer loyalty.
This all comes after a year of major changes to hotel loyalty programs, none so extreme as the destruction of Hilton HHonors.
The Best Values Don’t Last
You can pretty much assume that any outsized offer providing materially better value than the rest of the industry isn’t going to last. That doesn’t mean you avoid playing the game. You take advantage of great value while you can, just assume it’s going to be short-lived. Short-lived may mean years, even. The last major adjustment to the US Airways award chart was four years ago, and at that time US-Asia awards didn’t change much. The 90,000 mile business class North Asia award lasted many years. But it was bound to go away.
For some of the best values even as US programs make adjustments, consider reading up on my Devaluation Plan B.
You Need to be a Loyal Free Agent
Put another way, loyalty is a two-way street. If your loyalty program changes its value proposition, you need to re-evaluate your loyalty and be willing to adjust to seek out the best value.
When Credit Card Programs Devalue, It’s Usually on the Earning Side Not the Redemption Side
Chase Freedom eliminated the Chase Exclusives program 10 bonus points per transaction. That benefit was rich, and abused with large numbers of penny transactions.
American Express changed the bonus category earning for its co-brand Hilton product.
A card program may find that the extra money they’re spending on bonuses isn’t getting them the juice they’re looking for — the consumer response from higher spending, the categories may not resonate well enough with consumers. Or the card is just spending too much to acquire customers and incentivize spend.
So they’ll pull back on the earning.
When Redemption Options Change It’s Usually Because of the Redemption Partner, Not an Across-the-Board Cut
The times we see changing on the redemption side is when the program has to go out and buy tickets directly. Citi Thank You Points have gone through round after round of devaluation over the past 5 years. Capital One has had its own devaluations too.
The miles-to-points transfer bank programs don’t’ change nearly as much, and when they do it’s mostly the loss of a partner rather than a change to transfer ratios. Or as in the case of American Express Membership Rewards, it’s the passing on of costs like charging a tax recoup fee for transfers to US airline frequent flyer programs (where the government does impose an excise charge).
The Credit Card Program that Did Devalue
The major devaluation of a points-to-miles transfer program was Diners Club. When the US version of the card became a MasterCard, we saw the end of 60 days to pay, the end of the restaurant savings program (seriously, Diners Club with no dining benefits!), and increase in foreign transaction fees. We saw a reduction in earning bonuses and transfer bonuses. So it does happen, a card can become a stepchild of its issuing bank. And in the case of Diners Club, Citibank even eventually sold it to Bank of Montreal.
The Credit Card Program That May Be Overvalued Now
Chase Ultimate Rewards is almost too good.
- 40,000 points after $3000 spend within 3 months, plus 5000 more points for adding an authorized user to the account and making a purchase
- Double points travel and dining
- No foreign currency transaction fees
- $0 fee the first year, then $95
- 50,000 points after $5000 spend within 3 months
- Quintuple (5x) points at office supply stores and on telecommunications (cell phone, internet, cable/satellite tv)
- Double points at gas stations and hotels
- No foreign currency transaction fees
- $0 fee the first year, then $95
Both cards let you transfer points one-to-one into United, Korean, British Airways, Virgin Atlantic and Southwest. They let you transfer to Hyatt, Marriott, Ritz-Carlton, IHG Rewards, and Amtrak.
I don’t expect the earning partners to disappear, at least in the short-term. In most cases Chase issues the co-brand card for the loyalty program so they have a good long-term relationship.
But the earning is so good, that my personal strategy and my advice is to take advantage of the cards now and earn as many points as possible now.
The Best Strategy Going Forward
Here’s the five point plan:
- Diversify points. Don’t put all your points in one program. I have way too many American and way too many US Airways miles (and will even pay to accumulate more). But since different programs make changes to different degrees, and they don’t do so all at the same time, you want to spread out your balances to the extent you can.
- Focus on the most trustworthy programs. For me that means mostly Chase Ultimate Rewards, American Express Membership Rewards, and Starwood Preferred Guest Starpoints. Each have made changes in the past, but I trust them more than other programs. Programs will still disappoint you. I trust American AAdvantage – even with today’s changes – more than Skymiles or MIleagePlus. Perhaps that’s naïve. But focusing on high value programs that have built a reservoir of trust will, on a portfolio basis, serve you well.
- Focus on the banks. They want to keep earning your business every day, focusing on generating additional revenue from spend, rather than reducing the liability of accrued points. Their incentives are better than those of airline and hotel programs.
- Chase the best values. There are fantastic values in the world of miles and points. They don’t last. That doesn’t mean you should run away from the game. It means you take advantage while the opportunities are there and remain alert to the next opportunity.
- Earn and burn. Enjoy your points now. The will not ever be worth more in the future than they are worth today. Earn miles, spend them rather than saving them for years, and you will do fine — essentially earn and burn under the same award chart and valuation structure. Then earn some more, and burn some more.
There will be changes, but keep up on those changes and spread out your points and you will do very well in the meantime and you’ll be prepared for when changes come.
That’s why I’ve got Chase points, I’ve got American Express points, and I have (not nearly enough) Starwood Starpoints. I still have United MileagePlus miles (more than I’d like) and Hyatt Gold Passport points. And six figure balances across a variety of other programs, too.
(Note that cards in this post offer credit to me if you’re approved using my links. The opinions, analyses, and evaluations here are mine. The content is not provided or commissioned by American Express, by Chase, by Citibank, US Bank, Bank of America, Barclays or any other company. They have not reviewed, approved or endorsed what I have to say.)
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