Why Do We Still Care About Airline Miles?

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I’m currently in beautiful Palm Springs, California, at a conference for loyalty programs and co-branded products, namely the co-branded credit cards that we all know and mostly love. At this conference I did a talk on the consumer perspective of the state of co-branded cards that I may share a few more thoughts from in the coming days for anyone curious, but what got me thinking the most while I have been here surrounded by the folks that run some of these loyalty programs and manage the card relationships is essentially…why do we care airline miles anyway?

The Business Platinum® Card from American Express OPEN

Palm Springs Sunset

I mean, you can make that statement broader to questioning why do we care about miles and points in general, but I think the airline miles example is good enough all by itself.

Would you purchase airline miles at 2 – 2.5 cents per mile?

Some of you would and probably do on a fairly regular basis, but many people would say no, they would never purchase airline miles for 2+ cents per mile. However, as I said in my talk, with cash back cards readily available in the 2 – 2.5% cash back range, you are essentially purchasing airline miles at a 2 – 2.5 cent per mile rate every single time you swipe a co-branded airline card that is earning one airline mile per dollar instead of a cash back card.

I know that lots of us are getting more than one mile per dollar on many purchases by maximizing our wallets, so it isn’t a fair apples to apples analysis for everyone, but still, as airlines devalue, restrict saver awards, and go more revenue-based tying the value of a mile to a specific redemption value, the main competitor to airline miles is really no longer a different type of mile or co-branded card, but rather cash itself.

This is a reality that I think is truer today than even five years ago, but even when the math points to cash back being a viable competitor against, or even victor over airline miles from a value perspective, miles and airline cards still have a greater draw to many, including me, than flat cash back.

I’m sure the reason is complicated on some level, but it is also very simple. Airline miles represent the opportunity to dream about a future experience. Getting 2% cash back may be more valuable and pragmatic, but it isn’t nearly as fun or exciting. Dreaming is emotional in nature and therefore doesn’t have to be totally logical. I think there is also value in the dream itself, even if it doesn’t exactly materialize in the way you hope. Without goals and dreams, life is pretty boring.

With airline miles you can dream about playing on the beach in Hawaii with your family, or flying first class around the world, or visiting relatives more frequently, or strolling the streets of Paris with your spouse.

Those aren’t pipe dreams as airline miles can and do make all of those dreams and more a reality, though how many miles it takes to get to those dreams may come as a surprise when it comes time to finally pull the trigger. Some airline loyalty programs and their co-branded credit cards, I feel, are getting dangerously close to disrupting the dream by making some aspirational travel out of range or too complicated to secure.

My number one recommendation to airline loyalty programs was and is to not take away the dream by making it impossible for the ‘average’ person to achieve. Without the dream and the ability for miles to be aspirational in nature, people may get out the calculators and realize that being more pragmatic might be a better choice.

Skiing in Norway

For now, I still prefer airline miles and points to cash back by a wide margin because I like the chase of maximizing my redemptions and stretching my miles, but if the dreams ever become too hard to achieve, then a dangerous tipping point may be reached for the co-branded cards and the loyalty programs they represent.

Why do you still care about airline miles?

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Comments

  1. Nope. I have shifted everything to cash back in an investment account. I still collect due to work travel, but I no longer heavily top up my account from personal spending. I’ve cancelled 3 cards already this year and will most likely drop my Citi AA card shortly. I’ve done the dance multiple times with AA over the past 15 years and find the airline hasn’t changed much (delayed flights, no gates in Chicago causing late arrivals, ..).

  2. I currently view my miles more as insurance. My miles are there to get me to places where cash fares would be prohibitive either because of the type of service (business class TATL or TPAC) or because of the timing (family emergency or business related). We didn’t take any international trips this year and might not next year and all our flights were in coach. However I booked with miles more than cash because the miles I earned were by sign up bonuses or earned at 3-5 so the opportunity cost was lower. That will not be the case for people with one points earning card getting 1x on most purchases.
    I do agree that the appeal of getting a bucket list trip is seeming out of reach but the “Two round trip tickets on Southwest with a sign up bonus” will still appeal to people and on SW, that’s still possible 🙂

  3. I have been thinking lately if earning miles still a good choice considering the amount of time to find the deal and to execute it.

    The truth behind these dreams is not worth for those already in this habit for few years.

    The day I was still deciding which program to transfer the American Express reward points to maximize the points was the day I felt deeply that I should take a break now.

    They claw back 150k of the points I earn from the program in two years. And yesterday they took another 75k from my husbsnds’s account Saying he has suspicious activities. We only use the cards for everyday spending so I do assume that the computer system is sometimes inaccurate.

    I just maybe use two cards for the dell offers that is all.

    With the chase 5/24, AE’s Once in a life time bonus and the devaluation of the frequent flyer program, I think we should care less about airline miles.

    I need to sort through and close some of the cards that doesn’t provide value at all. The free night certificates and the companion pass are not working for me for most of the time. Even the upgrade for domestic flight I don’t see a huge difference especially if you are traveling with kids.

    Well, I still appreciate that I was able to take my family to see another part of the world every year in the last three years. We’ve been to 4 different Disneyland. We went to Paris, Amsterdam, Rome and Florence, Venice and London. However, my plan has changed. I think I will put spending on a 2% cash back and save that $ to my travel budget. Also I may just purchase points from Spg and Marriott when there is a deal to get the night and flight packages.

    Sadly The miles game will no longer work for me in my case.

    Best wishes for those who just started earning miles.

  4. I also think that most bloggers still like miles because that’s what they blog about. Most of my spending has moved to Amex MR (average more than 2x points per $ spent) followed by Chase UR (more than 4x per $$ spent). This is followed by hotel cards (Club Carlson, Citi Reserve this year and SPG) and put $0 spend on US airline specific credit cards unless I get targeted offers. Cashback cards are way better than most airline credit cards.

  5. You are so right…it really makes no sense for much of nonbonused spend.
    However, now that I have the freedom unlimited, I will certainly use that for nonbonused spend and tell myself that I’ll redeem it in a way that gives me more than two cents a point.

  6. I collect miles and have enough in two programs to use on a few decent trips.

    That said, the majority of the miles I have are a result of welcome bonuses. I don’t chase after miles and certainly would never purchase miles in order to pad those accounts.

    I am very limited in Canada with regard to what credit cards are available.

    I feel the biggest go to card is the SPG Amex to collect starpoints. With starpoints being valued at around 2.7 cents US each that is similar to getting 2.7%US on each Canadian dollar I spend on that card so technically I’m getting more like 4% for each dollar I spend when you factor in the exchange rate.

    I find SPG starpoints the most versatile when/if you want to transfer the points to other frequent traveler programs. Being able to transfer to Marriott Rewards at a 3 to 1 ratio is also a big plus.

  7. Thank you for the reflective post. I’ve gotten some wide-eyed looks from friends who say they want to “dabble” in the points/miles hobby and then I tell them how many credit cards I have so I can maximize my wallet. They all think I’m crazy for spending so much mental capacity on filtering all of my spend so I can get the BEST value for every dollar. They also zone out when I try to start explaining the differences in award charts and how to book flights with alliance and codeshare partners. It’s all a mess! You and I and many of your blog readers are outliers. We’ve learned the systems and know how to make the systems work for us, and that’s not common.

    Recently I’ve heard several stories from friends that go something like, “I went to book a round trip flight from [domestic US city] to [domestic US city] and [AA/DL/UA] showed 65,000 miles and wanted to route me through [some illogical airline hub] and have a 5 hour layover. When I looked at paying cash for the direct flight (or something with a better route/schedule) the flight was only $328, so I just paid cash because that seemed ridiculous. I use that airline card for everything and have had it for 3 years. I don’t want to spend all my miles on a single round trip domestic flight.”

    When I put on my “travel rewards expert” hat and try to talk up the flexible bank points from Chase and AMEX they stop me and say they don’t want any part of it. They can find perfectly good deals for cheap flights and never have to worry about how many miles it costs. I want to help, so, as an informed consumer (and much to my chagrin), I end up recommending one of the Southwest cards, a 2% cash back card, or one of the “travel eraser” cards like Capital One Venture or Barclaycard Arrival Plus. Southwest gets a nod because their point redemptions mirror the cash price of the ticket (easy), and they offer the most direct flights out of my home airport (MCI). All the others are “fixed value” rewards cards.

    I think the tipping point has happened within the last 5 years. The “average” person can’t achieve their practical (not even aspirational) award travel goals with their co-branded credit card. I read recently that only 13% of AA members fly more than once per year. That means 87% only fly once per year or less. I estimate that 1/4 – 1/3 of that 87% has an AA credit card in their wallet (or sock drawer). It’s only a matter of time before the $95 annual fee hits and they start shopping around for a card that actually rewards them. When they do, they’ll find A LOT of good options, and many of them will reward them with good old fashioned cash back.

    Those of us who are travel rewards outliers would do good to remember that cash back is THE MOST flexible credit card reward, because you can use it for, you know, ANYTHING.

  8. Summer, really enjoyed this piece. for better or worse, it’s 100% true for me that the potential “mega value” awards, no matter how difficult to actually book, are a big part of why i look past the poor “average” value of a points currency. this is why i’m still into almost any form of airline miles, but got rid of many of my hotel co-brand cards. where the top-prize awards just aren’t that great (current Club Carlson) or costs a zillion points (current Hilton), i start getting very critical of the system generally. but when i can get the occasional mega-value, it just hooks me in! I probably should have ditched my AA card by now, but when you book that long-haul sAAver seat in J, it just keeps you coming back for more! (even if you’ve been trying to book it for weeks!). i’m curious how you’d rank the US hotel loyalty programs at this point, in terms of their “magic” factor. i’d probably put Marriott higher – i’m a sucker for Ritz. thanks for the great writing!

  9. The state of play has changed drastically. Cash back or flexible points are king now. Both for earning and redeeming, the airlines have changed their points policies to the extent that their currencies are at the same time harder to get and of considerably less value. There are still some worthwhile credit card enrollment bonuses that mean airline miles remain a part of my strategy, but a diminished part. The flip side is that cash prices for many of the tickets I want – Europe, Asia – have come down to the point that the relative value of cash vs. airline miles has changed from that side of the equation too. For most airline miles I would not pay over 1.0 cent.

  10. So true for your average person. If they want to take the kids to Disneyland (US locations), other than getting a SW Companion Pass from 2 Chase cards, they are way better off with a no annual fee cash back card like the Citibank Double Cash. Especially if they need to go during traditional vacation times.

    However totally untrue for us. But only because we are totally flexible in our travel schedules, only need tickets for the 2 of us, and want to fly International ‘Premium’ (preferably FC). But most of all because I have been playing this game for many years and know most of the ins and outs by heart. That being said, my wife correctly describes my miles/points game playing as a ‘second job’, which only works because I have more free time than money.

    I am willing to juggle @30 credit cards (between the 2 of us), keep track of spending primarily where that spend is bonused for maximum ROI, cancel and reapply as often as possible to keep getting sign up bonuses, and search for sweet spots both in spend and redemption. No purchase is too small to not pay by credit card. 99% of everything we spend every month is on a credit card, from $1 for a head of lettuce to our house and car insurance with State Farm, and our health insurance from Kaiser. I keep up to date on doing all this by reading 3 travel blogs, and FlyerTalk, daily.

    Plus one has to keep in mind that “free” travel isn’t actually free. When we stay on points in a mid-level Hilton property in a major European city, with the 5th night free, our actual cost for that room is around $50 a night, instead of the $150 cash price. For the beach front room on the French Riviera it’s $95 a night for a room that sells for @$450 during July and August. In both cases having the right credit card means a full breakfast is included, so that helps too.

    The ‘good old days’ of this hobby are long gone. Playing it successfully requires much more skill, and the learning curve for people just starting out is extremely steep. All that being said, reading a blog like this one can be extremely valuable, even for the average person. There are several stupendous value points, even if one doesn’t want to work as hard at it as I do.

    Case in point is the AMEX Everyday card. No annual fee, use it 20 times a month, and put all of your grocery spend on it: 2.4 points per $ without paying much attention. For those that travel even once a year, the Chase IHG card, (not 5/24 restricted), for the nominal AF of $49, gives you a “free” night at any IHG property, including major city Intercontinentals that rent for $300 to $400 a night. A couple that both have that card get a “free” weekend for $98 that otherwise would go for $700. That’s hard to beat.

  11. In 2011, Rick Ingersoll was interviewed and a section of the interview went like this:

    In the luxury of a first class cabin aboard a parked United jet, Donvan asked him, “So you think this is something ordinary folks can do?”

    “Not only can, but should do,” Ingersoll said.

    Therefore, Summer, the day Rick Ingersoll folds his miles and points hobby will be the day that I do, too. And, until then, I will continue to put in the time necessary to monitor new offers, monitor my accounts, treat my miles/points as a special currency, and dream. Why? Because I am “ordinary folk” and not only can I do this, but I should do this.

    • Oh I agree (hence 7 years of blogging about this), but I do think there is a crack in the system when it comes to co-branded cards and if I can help be a canary in the coal mine warning banks/programs that there is a limit to how far folks can be pushed before they realize that cash is king, then I’m happy to help play that role. “We” over here in the miles and points community can still come out on top, but I want miles to be worth it for everyone, even those who just casually have and use one co-branded card.

  12. I tend to think the glory days are over. I’m fortunate that we are in the position of only needing two tickets and like Robert, we aim for First Class. One thing the increased redemption rates has ensured is that on international routes those First Class seats are regularly available on Cathay or Singapore.

    However I see hotel programs to be the first on the chopping block for me. Hyatt and Marriott with their free Cat 5 certificate doesn’t cut it. We have always had his and hers cards and hotel accounts but are going to take it to one in each program. I’m waiting to see what Marriott does with the SPG program because I have zero interest in promotions that earn yet another cat 1-5 certificate which is hard to redeem in California. I can see the day fast approaching where I will quit hotel programs and book all hotels through Points Hound or Rocket Miles.

  13. My wife and I like to travel international 2 or 3 times per year. Usually I purchase cheap seats in the off season and use points for peak season flights.

    Domestically Southwest airlines is a big win for us. Flying from Houston we can routinely get to Boston, Vegas, Denver, LAX, Florida and Cancun for under 4k miles each way.

    I’ve canceled all my Hotel cards (except the IHG for the free night). In my opinion, Choice, Carlson, Hilton, Hyatt, SPG, Marriott have all devalued to the point of being worthless. It’s easy to find better value on Booking.com, Airbnb, Hotel Tonight, etc.

  14. I am almost always working on a signup bonus, so the miles I’m accumulating cost a whole lot less than $.02. The rare times I’m not, I’m topping off for a specific redemption amount or using my BofA Travel Rewards, 1.5 points per dollar redeemable as statement credits for travel. (I live abroad and that’s the best cashback (nearly) rate with no foreign transaction last time I checked, feel free to correct me though. I should also say that some of my signup bonuses are straight cash, or for points I can redeem directly toward travel (Merrill+, Citi Thank you, Flexpoints etc). I also do a ton of checking account bonuses. Anyway, whether I’m accumulating miles, cash or flexible points, I’m using them to take trips or defray travel expenses which would otherwise be too great a stress on my finances (generally one tropical destination and one US-Europe trip for me and my husband per year, as well as a few more local trips). Travel is one if my greatest joys, and if not for credit card and checking bonuses I’d still manage it of course, but I know I couldn’t travel nearly as far or quite as often. I so love everything bonuses have allowed me to, so I know despite the hassle and expense of accumulating them, I’m winning, and I will continue for as long as that is the case.

  15. For domestic award redemptions, cash back cards vs. miles is usually the better route.  However, for international and premium cabin experiences, the value received from miles is many times more rewarding vs. the 2% from a cash back card.

    And that doesn’t take into account spending bonuses you earn from certain airline co-branded cards that help you achieve/maintain status or earn extra benefits, like the Southwest Companion Pass that you can earn solely on credit card spend.

  16. As a moderate business traveler where the corporate Amex card is required for airlines, hotels, rental cars, meals, etc., I have opted for loyalty points or miles from those vendors, and have chosen a cash back card for personal use including personal travel. I researched the differences between the miles-based and cash back cards before selecting one. I use the cash back money as a vacation fund and seem to be accumulating cash back faster than loyalty program points or miles.

  17. I have been traveling mostly on American Airlines for more than 30 years, and have used the mileage several times, but only for trips that 1) were miserable using coach, and 2) that is was too expensive for me to pay for business class, i.e. Australia and New Zealand. Qantas is connected to the AA miles, and it is a wonderful airline, especially in Business/First Class. I have traveled there four times, only one in coach, and when you have to travel across the US (I live near NYC) for several hours, wait in CA for another several hours, then 15 hours to Sydney, and another few to NZ, it was wonderful to have a flat bed and terrific service and food. I don’t use the miles for domestic or even from NYC to London, but even there, having a premium access gives you some additional perks, i.e. upgrade to Business to London for less than $500 most of the time, early boarding so you can find places for your luggage, etc. Even for domestic, you get ability to try to get an upgrade for free if the plane is not full in business/first. So I still have my two credit cards connected to AA and I still use the mileage for long trips. And I also use British Airways (connected to AA outside the US) when I travel in Europe. It is still worth it for me.

  18. I have the co-branded Delta card and actually like how they recently made them more cash based. While just a few years ago, I needed like 50,000 points to make our dream honeymoon to Europe a reality, which we did with the sign-up bonus, now they are converted directly to cash at $50 increments. So when we want to take that trip to Orlando and the round trip ticket is $200, even if I haven’t been doing a ton of my spending on the AmEx card itself and may have only racked up 5000 points, at least those are valued at $50 off my flight, making the ticket $150. This is versus having to wait until I had say all 20,000 points to get the entire flight free and couldn’t use the points prior to this. In that regard, it is a “cash back” program but is still valuable in certain aspects like dining bonus points I get along with 2x points via Delta charges. I spread points over all sorts of hotel and cash back cards but like that I can always rely on Delta being there for some money off my ticket.

  19. Why? Because it allows people to afford travel experiences they could not afford otherwise. Rebates just get spent on more stuff.

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