Christopher Elliott argues in the Washington Post that rewards credit cards aren’t worth it because of the ‘headache’.
He doesn’t just think you should avoid loyalty programs and credit card benefits (his usual tact). He thinks the government ought to step in (“it’s time for the Consumer Financial Protection Bureau to say, “Enough is enough.”).
But what are his complaints?
- You have to buy your United ticket from United if you want checked bag fees waived. “In order to qualify for the [United Explorer Card’s] free bag check and priority boarding, the ticket must be purchased directly from United, via its Web page” except this is false. (The Washington Post should really fact check Elliott before publishing him.)
You do have to buy your United Airlines ticket from United, and not from an agency like Expedia or Orbitz. But you do not need to buy it from United.com. Other United booking channels (like telephone reservations) work as well.
“United should be required to disclose it more prominently” except that it’s disclosed both on the Chase website for the credit card and on United’s website. It isn’t a secret. In fact, United doesn’t want to keep it secret, they want consumers to know precisely so that this can serve as an incentive for passengers to book direct which means lower costs for the airline.
Meanwhile, it’s cherry picking an example. Neither the co-brand credit cards of Delta and American have a similar rule.
- American Express will no longer give signup bonuses for the same personal credit cards twice.
When Joan DePalma, a retired social worker from New York, applied for a Delta-branded American Express card recently…“When I received the card, I was refused the credit and the bonus mileage,” she says. The reason? She already had another Delta American Express card, and the offer was limited to first-time applicants.
This trips up even the savviest of credit card consumers who want signup bonuses, but is Elliott really suggesting that the Consumer Financial Products Bureau require banks pay out signup bonuses to consumers multiple times?
- Companion tickets require high priced fares or have other restrictions. (Except when – contra Elliott – they don’t.)
Other “free” companion tickets are restricted by destinations. For example, a Lufthansa offer is limited to tickets departing from the United States to Europe, the Middle East, Africa and the Far East. It also must be on a Lufthansa flight — no code-sharing.
Except that scammy free companion tickets usually come from outfits other than airlines and credit card companies. There are restrictions to be sure — but is it really a legitimate complaint that you can only use a Lufthansa companion ticket on a Lufthansa flight (and not to Southeast or Central Asia)?
Still, he has to look to the US co-brand credit card for German airline Lufthansa to make his point.
Elliott thinks consumers are “duped” and sees himself as a consumer advocate, but doesn’t use his perch to educate consumers how to get the most from the benefits that companies offer. He doesn’t point out the outstanding value provided by the companion tickets that come with the Alaska Airlines Visa (the only restriction is that it’s for a coach ticket) and after meeting spending requirements with the Barclays American AAdvantage Aviator Silver card (which has a reasonable minimum ticket price).
- Fuel surcharges. Fuel surcharges are a scam. But he complains about the high costs imposed by the British Airways frequent flyer program. That’s not really a gotcha of rewards credit cards as much as most non-US loyalty programs. A good consumer advocate might tell readers how to avoid those fuel surcharges, or which programs charge them when (Delta on a few partners like China Southern and China Eastern and award trips originating in Europe, American for awards on BA).
Ultimately we can find credit cards that provide less value than their marketing copy is designed to suggest. That’s true of almost any kind of consumer product, because advertising.
It’s true of dishwashers and cars, but doesn’t mean you shouldn’t drive or that you should only wash dishes by hand.
There are great rewards credit cards, too, and even simple ones. You aren’t better off getting a credit card without rewards which Elliott seems to imply by not providing examples of cards that do deliver simple high value. By only finding examples of benefits with fine print, and not suggesting valuable alternatives, he does his readers a real disservice.
The most ironic part, to me, is his penultimate paragraph:
Loyalty-program expert Bill Hanifin, chief executive of Hanifinloyalty.com, coined the term “loyalty asterisk” to define these complex and confusing cards. He says that although these two-for-one and “free” ticket offers are not illegal, they can be difficult to decipher. “Unfortunately, the complexity of the financial models behind these programs is enough to mandate the asterisks in the copy,” he says.
The “asterisks in the copy” are largely a function of regulatory requirements and fear of fines by the Consumer Financial Protection Bureau. His solution is more regulation by the Consumer Financial Protection Bureau. That won’t eliminate asterisks in marketing material, it will only increase them.
Many loyalty programs are complicated. It’s the complication that creates arbitrage opportunities, the possibility of receiving outsized value for awards. A consumer advocate might tell readers how to come out on top.
Many consumers shouldn’t play the game of spending on a credit card linked to an airline loyalty program, or even points that transfer to airline frequent flyer programs… not because those programs are complicated, but because most people look to redeem their points for domestic coach travel and would be better off with the simplicity of a 2% cash back credit card. Oddly, Elliott doesn’t offer that advice.