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An email from Southwest today brought good news and bad news about the Rapid Reward Program (mostly bad news).  In 2011 Southwest dramatically changed their Rapid Rewards program to go from a credits system to a points system.  Now Southwest is introducing another change to the program.  The good news is that the change is neither massive nor happening overnight, but that’s it as far as the good news is concerned.

The email I received today states that (bolding mine):

We want to inform you of an upcoming change to the Rapid Rewards® Program that will affect the number of points needed for reward travel. Wanna Get Away® reward flight bookings made on or after March 31, 2014 will require 70 points per dollar. This is an increase from the 60 points per dollar currently required. Anytime and Business Select® reward flight redemption rates, as well as the points per dollar you earn when flying, will remain the same as they are today.

Southwest Devaluation

As a practical example, if you currently want to book a Wanna Get Away flight that is selling for $100, you currently need around 6,000 Southwest points (at a value of 1.67 cents each) to do so.  As of March 31st next year you will need about 7,000 points to book that same $100 flight (at a value of about 1.42 cents each).  That is an across the board 15% devaluation on Wanna Get Away redemptions.  While that isn’t the worst devaluation I have ever heard of, it isn’t great considering their award chart is just over two years old to begin with.

To put it another way, the 50,000 points you can currently get from signing up for the Southwest credit cards (and meeting the spending requirement) are currently worth about $835 toward Wanna Get Away fares, and as of March 31st next year those same 50,000 points will be worth $710 toward Wanna Get Away fares.  Obviously that is still a bunch of money toward free travel, but clearly $835 is better than $710.

Naturally this means I would get the Southwest cards sooner rather than too much later in order to get more value from points earned via the sign-up bonus.  It also means I would book as much travel using Southwest points before March 31st next year as possible.  Your travel can be for after March 31 as long as you book it by that date.

Consistently getting a little over 1.67 cents per point for domestic redemptions is actually pretty good, but dropping that to 1.42 cents starting next year would make me evaluate if earning Southwest points is still the best strategy for your family.  It may be, especially if you have the Companion Pass, or enjoy the flexibility of being able to rebook if the price drops, and redeposit your points without penalty.  However, I would at least give a look to cards like the Barclaycard Arrival Plus™ World Elite MasterCard® since it earns 2x points (worth one cent each) on all transactions that you can use toward travel.  You can then use those points to pay yourself back for Southwest flights (or any other travel expense) and you would also earn Southwest points for those flights when you travel.  You also get 10% back on redeemed points, so that makes those points even more valuable.

Don’t get me wrong, I don’t think a 15% devaluation is cause for immediately jumping ship from a program, but I do think it is a good time to evaluate if focusing on earning those points with your daily spending is still the best strategy for your family.  I am very happy that Southwest has given ample advance warning about this change.

What do you think – will this change your Southwest points earning loyalty at all, or is it a minor enough change to not rock the boat too much for your family?

 

Disclosure: I do receive a commission if you are approved for a credit card using one of my affiliate links. 

Posted by Mommy Points | 21 Comments

21 Responses to “Bad News From Southwest Rapid Rewards”

  1. AlohaDavekennedy says:

    Long live the old Southwest! Rarely fly SWA anymore as they lost theır way and that spırıt that used to endear theır loyal flyers.

  2. Steve says:

    BOOOOOOOOO.
    I got my companion pass this year, and enjoyed getting 3+% back on my SW card spending.
    This drops it to less than 3%. I’d rather take the cash (i.e., I’m more likely to jump ship from SW after my CP expires, rather than try to re-qualify)

  3. Mike Reed says:

    Interestingly, I just posted about a devaluation to the AirTran companion pass this morning, too: http://boardingarea.com/gettingstatus/2013/09/23/southwest-airtran-companion-pass-not-reciprocal

  4. DWT says:

    This also changes the economics of renewing the Chase Southwest Premier Visa– the current annual renewal bonus is 6,000 RR points, which basically makes the $99 annual fee a wash, but that will no longer be the case.

  5. Z-Man00 says:

    Nothing new here from SWA. No other airline has increased the cost to fly with miles/points like they have in the last 7 years. First they got rid of double credits for booking online, then you needed 32 credits, instead of 16, for a RT ticket, then they changed to points, now this BS! I had a CP from 2002-2004, have not flown them once since 2005.

  6. Grant says:

    @DWT, exactly what I was thinking. It will make the retention bonus call a bit easier next year.
    .
    @MP, it shouldn’t be a surprise to anyone considering SWA, AA, US, UA, and DL make millions of dollars selling points/miles to the credit card companies. They will probably all change their awards sometime too.

  7. Gabriel says:

    Even with the devaluation, it’s still by far the best domestic rewards program, IMO. Just think about it for those who own an Ink business card…5x points and all can be transferred to SWA?? Um, hell yeah.

  8. Gabriel says:

    I mean, where else can I consistently get a round trip ticket for less than 12.5k points? Already that’s half the cost of a saver award from United. Not to mention the free bags, flexibility in changing and re-booking for free to save points. So it goes up to an avg of 14.5k points instead? Yeah, I’m still on board (not to mention Denver is a hub for them…so it’s direct flights nearly everywhere). I understand we all love to complain about program devaluations, but SWA moving to a points based system instead of a fixed redemption rate was the BEST THING EVER and this won’t deter me one iota in fully participating in the RR program

  9. Minos says:

    Think about it: a devaluation on a program that is exclusively revenue-based for both earnings and redemptions is a pure customer rip-off that has little justification. At the very best, it reflects the short-sighted way they have been pricing their airfare.

  10. Cogswell says:

    This is yet another example of why miles are always massively overvalued. They are constantly being devalued. Bloggers should be a little more responsible in stating this when trying to estimate the value of miles.

    Even valuing SW miles at 1.67 cents each ignores that this means you would only redeem them for limited, and often inconvenient Wanna Get Away fares.

    Caveat Emptor!

  11. TylerP says:

    Summer, I think this point devaluation is only half the story though. The wanna-get-away fares have been increasing in price and therefore increasing in points over the last several months. So it’s a double wammy….higher prices means more points needed + less valuable points = massive devaluation. Anyone else seeing this trend recently?

  12. Vince says:

    TylerP, I have noticed the same trend myself. Although I have not exactly run any numbers, I suspect this is true. In April I started pricing tickets from Louisville, KY to Orlando for a family Disney trip. I wrote a blog about getting to Disney World on a budget. Included in this blog I stated that Southwest tickets for me were currently $220 each roundtrip. I took an average price at the time. Currently the same tickets look to be priced at $240 roundtrip, but most of them are far more expensive.

    I also have noticed that the last really good sale they had was around June 12. Tickets at that time from Louisville, KY to Denver, CO were $190 (10,560 points) for a round trip ticket. Currently the lowest priced option is $188 or 10,620 points each way ($376 or 21,240 round trip). These are the cheapest available on the calendar, most dates are $454 round trip. During this sale the prices really dipped to affordable levels for all open travel dates. All subsequent sales have been inferior, offer less destinations and include far more blackout dates. This means that the ability to find a low cost fair, in my experience, has diminished. Higher prices already mean more points per dollar. So a deflation on Southwest point currency only further exacerbates this situation. http://simplisticsaving.com/2013/04/going-to-disney-world-on-a-budget-part-1/

  13. tassojunior says:

    A good reason to cycle Southwest points thru the AirTran converter program where 19,200 points gets a r/t standard award anywhere.

  14. Amit says:

    I agree with @TylerP, Southwest fares have been increasing steadily over the past year. They are no longer the lowest cost carrier.

  15. Matt says:

    not a huge deal breaker for me. The ChaseUR to SW transfer is consistently the cheapest way to travel my family and inlaws around the country.

  16. Carrie says:

    I love SW for their free baggage and how they typically get everyone onboard, shut the door and go — at least that has been our experience. And, we just qualified for the Companion Pass. However, I am NOT liking how many points it is taking us to get where we want to go. 30K+ to get from Phoenix to Houston? Not good. It just seems really, really high.

  17. Scott says:

    This knocks down the value to 1.42 c/point. Factor in the now 8.6% rebate you get when paying, and transferring UA points to SW is very similar to using the 1.25c/$ travel benefit from chase. Either way, I still like SW and will purchase tickets, but I have better uses for UR points.

  18. Scott says:

    @Gabriel,

    From DEN, always check Frontier, as its their hub and you can often get flights for half what Southwest is going for. A 1/2 price flight on Frontier beats redeeming SW points in my book.

  19. Gabriel says:

    @Scott
    Frontier’s service sucks…and I’ve NEVER found any flights 1/2 price of SWA. But since I can accumulate SWA pts for 0.67 cents/pt, that’s still a 53% discount off of their fares even after the devaluation. So in essence, I’m already paying half price and getting better service. I mean, FFS, Frontier now charges for carry-on’s.

  20. Jeff C. says:

    You’re missing the biggest point of all this. Devaluing a revenue based program shouldn’t happen. The point value is supposed to be static. But also, when they devalue the point price, they also devalue all the points sitting in peoples accounts; points that we earned supposedly at ~.0167. They are in effect raiding all of our accounts of about 14% of their value. This is flat out wrong and I challenge you to write another piece informing the readers of what is really going on. It’s not just a rate increase.

  21. Kevin says:

    I just sent SW an email, we’ll see how they respond…

    “…Wanna Get Away® reward flight bookings made on or after March 31, 2014 will require 70 points per dollar. This is an increase from the 60 points per dollar currently required…”

    I received your email about the change to the Rapid Rewards program and am GREATLY DISAPPOINTED! I also feel that you are not only ripping me off, but going against your word based on ‘our agreement’: If I buy a business ticket, I will need exactly 60 points to redeem for a future flight – now you are changing that AFTER I already spent the money! You are giving me LESS THAN WHAT I PAID FOR!! This is dishonest and feel you need to think twice about this policy – or give me the monetary value back since I already earned these points. Or at a minimum, on 3/31 you need to give me 16.7% more points of my current balance – and all the other valued, committed customers you are ripping off. The obvious reason for this is that we earned these points fair and square based on your policy at the time, and there should be no reason the value should decrease. After that date, and since you now announced it, I suppose it would be fair going forward since you are NOW disclosing the new points redemption. Anything before that announcement should be worth EXACTLY what you said it’s worth.

    Please keep in mind that customers like myself have previously stayed exclusive to your airline because of the rewards program, and the value our earned points are worth – changing that makes us consider changing our minds…

    I trust you will do the right thing:
    * Keep our points already earned before the announcemnt worth exactly what they should be worth
    * Consider reverting this new policy and making the points worth what they previously were

    Sincerely,

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