What Credit Cards Give You Airline Miles

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Airlines of the United States have extra-special status. How special? Many of those citizens who can’t fly could get a second pile of coronavirus relief money before they get another $1,200 check.

But as carriers have made their case to lawmakers in recent months, some are also pitching banks — using their customers’ rewards as a kind of collateral on free travel.

What Credit Cards Give You Airline Miles

United and Delta used their frequent flyer programs to support their efforts to raise more money with the help of Goldman Sachs and other banks. And it’s the same as these two carriers bragging about raising billions of dollars: they and their lenders think they have customers, more than 100 million of us in each program, wherever they want.

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Take it from a Delta securities filing last month, which called the foundation of frequent flyer programs “the basic desire to earn a free flight.” Because of our desire for freebies, Delta can “manage costs by modifying inventory levels and value,” he added.

In other words, the cost of airline trips and upgrades can be increased, in miles, at any time. And it believes it can do so with relative impunity from passenger revolt or serious protest from American Express cardholders.

Even as the coronavirus pandemic has reduced the ability and desire to travel, miles programs have been a winner for airlines. In the first half of 2020, Delta’s passenger revenue fell 60 percent, while the money the airline earned for its customers from purchases of American Express miles fell less than 5 percent. Obviously, no one expects us to keep collecting SkyMiles.

United adds another, but less enlightening set of words and numbers to our lust for miles. It goes into granular detail in its pitch about its ability to “proactively” control the redemption price of its miles on “peak days.” This explains why it’s so hard to use your miles to get a great deal on school holidays, Mardi Gras or other occasions.

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But perhaps the brightest is this one: United estimates its MileagePlus program is worth $21.9 billion. On the stock market, the entire airline’s value – its so-called market capitalization – is only half the figure.

First, people continue to use credit cards that offer miles as rewards instead of some other perk like cash back. Second, some customers do the math and realize that their miles aren’t worth much if they use them inefficiently.

Consider Delta’s euphoric filing. Under the heading of “significant value creation,” Delta said American Express customers who used its co-branded cards carried 22 percent more balances than traditional credit card holders in 2019.

Please: If you need to carry a balance on your credit card, don’t do it with mileage cards, which often charge obscure interest rates that create value for the card issuer. This is the very definition of letting the system beat you.

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Now, to the math of how much a mile is worth. First, a standard disclaimer: It’s always wise in this sort of exercise to read or re-read the classic 2002 column “The Contrarian’s Guide to Frequent Travel Plans” by veteran business travel writer Joe Brancatelli. In it, he likens frequent flyer programs to a “controlled lottery,” where your odds are uncertain and the rules can change at any moment.

And second, a benchmark of sorts: If you’re spending tens of thousands of dollars each year on credit cards, you can earn 2 percent cash back on Citi and Fidelity brand cards with relative ease. That’s 2 pennies for every dollar you spend, which means $1,000 in annual spending nets $50,000.

Instead, if you earn one mile for every dollar you spend on a credit card (and some cards can return a bit more), those miles are worth more than 2 cents when you exchange them for “free” plane tickets or upgrades.What’s the tangible monetary value?

Airlines don’t want you to do the math. Assume that $50,000 in spending yields 50,000 miles. Can you exchange them for an airline freebie that costs more than $1,000?

Mileageplus Credit Cards

Often, the answer is no, although a United representative told me the January trips to Fargo, N.D. And a quick email to Frankfurt, where the answer is yes. Again, airlines don’t want to know the odds of getting what you want at a reasonable value, and won’t allow most people to get a favorable exchange rate for good seats at the times they want.

Delta and United have, in fact, done away with their award charts entirely and instead engaged in what’s known as dynamic pricing. The price of the item you want, in miles, may vary from day to day. Your price depends on the total demand for Hawaii ticket during Christmas. And if demand explodes after everyone gets the vaccine or rapid testing becomes easier and more accurate, the value of the miles you’ve now stored will be even worse.

Historically, many people redeem miles for free coach tickets in the United States. If that’s what you want, check how many miles the airline requires for a given trip and see what the miles are worth by comparing the quoted amount to the current cash price.

Most people don’t do this. If they do, most of them will find that the 2 percent cash back is worth little more than the miles. And cash rebates are available for purchasing tickets on the cheapest or most convenient service on any airline.

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I ran my analysis through Travel-Mad Points and The Points Guy’s Miles Editor, Ariana Arghandeval, who has already been on the road and back in Turkey. She agreed that many travelers would be better served with cash-back cards.

But there are some caveats. Few people travel enough—or at least again—at some point to get real value from elite status. And some airline credit cards help you qualify for status faster, a Delta spokeswoman emphasized when I asked the airline for comment. Then there are the rare travelers who have a low-cost airline card that allows them to check bags for free.

Ms. Arghandewal also mentions a middle ground: Many card issuers offer products that give you generic points that you can transfer to several airline programs, which can be useful if you find a carrier that offers a free ticket worth more than average.

Still, your read on fundraising is the same as mine. “The financial market is putting a value on how we use airline currency in an ignorant way,” she said.

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We should contribute as little as possible to the high profitability of airline marketing programs. So some carriers try to help themselves to taxpayer dollars once again – while we brag about how we line up like lemmings to lap up their miles – please make them work a little harder and offer a little more reward. Since they first took off over 30 years ago, frequent flyer programs have undergone as many changes as the airline industry. While it’s still possible to earn some major rewards—or waste time collecting points you’ll never use—today’s programs look a lot different than they did just a few years ago.

Brian Kelly, who calls himself “The Points Guy” and runs the website “The PointsGuy.com,” says there has been a huge change in the way many airlines calculate their rewards. Often called a “revenue-based model,” it rewards passengers for the money they spend rather than the miles they fly. In other words, frequent flyer programs become serious spending programs.

This can be a good thing or a bad thing depending on the type of travel you are doing. If you normally travel in economy class, you will benefit less than before. On the other hand, Kelly says, “just two trips a year in premium class service” can add several thousand miles to your account.

With two-thirds of Americans saying they plan to resume travel in 2021, you may be interested in the best ways to save money on flights. While more changes may be on the horizon, here are some of the best ways to earn airline miles.

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If you focus on a couple of airlines that fly the routes you hope to fly, chances are you’ll actually earn enough points to get something. For example, it’s best to have 100,000 points with one carrier unless you can transfer points or miles between programs on a 1:1 basis.

Also note that points may expire if your account is inactive for a certain period of time (usually 18 months). You’ll need to monitor any account you open or risk losing your miles—another reason to keep the number manageable.

Many airlines belong to domestic and foreign networks

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