Tuesday, November 29th, 2016, 7:05 pm
Are Bank Points Overtaking The Value Of Airline Miles? 2 Hybrid Cards Allow You To Lock In The Best Of Both Worlds
American Express is a DansDeals.com advertiser.
I’ve always been an advocate of using airline miles over proprietary points from banks.
However the hits keep coming for airlines and the value of their miles.
After gobbling up airlines like Airtran, Continental, Northwest, and USAirways, the remaining airlines have made it increasingly expensive to earn elite status, while reducing benefits at the same time. They have reduced hub service and capacity in order to raise airfares. They have stopped awarding miles for flights based on distance flown. Their cheapest fares will no longer include free carry-ons.
They have all devalued their award charts, nearly doubling the cost of many awards:
-United massively devalued their award chart in February 2014.
-Delta removed their award charts from public view in February 2015. They have been stealthily making monthly devaluations since then, though their award availability has improved somewhat.
-Southwest has made a number of devaluations to their points value, despite having a fixed value that shouldn’t need devaluation like traditional award charts do when airline tickets get more expensive.
-American forced British Airways to charge 7.5K for their awards on AA instead of 4.5K in February of this year.
-American made huge devaluations to their own award chart in March of this year.
American, which once had the best saver award availability, has made it nearly impossible to redeem for saver awards. They have also increased the cost of their anytime award to eye-watering levels.
That’s not to say you can’t get some amazing values from airline miles. But it’s become increasingly difficult.
In the meantime there is still healthy competition in the credit card industry.
Non-convertible point cards:
-A 2% cash back card, like Citi Double Cash becomes increasingly compelling in the face of mileage devaluations, though that card has no signup bonus.
-The Capital One Spark Cash for Business offers a $500 bonus for spending $4,500 and 2% cash back.
-The Barclaycard Arrival Plus™ World Elite MasterCard® is offering 50K points for signing up for a limited time. It offers 2 miles per dollar everywhere and a 5% refund when you redeem points for travel.
The problem with non-convertible cards is that they can’t transfer points into real miles. There are hundreds of times that I’ve redeemed points for tickets that would have been prohibitively expensive without miles. Accumulating straight cash back or points that can’t be converted into miles leaves you at risk when airfare is expensive.
Convertible point cards:
Convertible cards traditionally offer a poor value for paid airfare. They allow you to transfer points into miles, but when tickets are inexpensive it’s not worth using miles. Devaluations and increasingly tight capacity controls have also hurt the value of miles.
But just in the past few months we now have 2 credit cards that offer the best of both worlds.
Let’s call them Hybrid cards.
Hybrid card #1: Chase Sapphire Reserve:
Chase launched the Sapphire Reserve in August and it has been wildly successful. It costs $450/year, but there are many intriguing benefits that make up for that including:
-100,000 points for signing up and meeting the spend threshold.
-$300 in travel spending per calendar year that is refunded back automatically
-Priority Pass lounge membership with unlimited free guests
-3 points per dollar spent on travel and dining
-Global Entry+TSA Pre-Check fee refund
But often times overlooked is that cardholders can use all of their Chase points at a value of 1.5 cents each towards airfare, hotels, car rentals, and vacation activities.
That means you can use 44K points today for a round-trip to Israel that would cost 80-170K miles from the airlines. Plus when you use the credit card points it covers the tax and you earn miles for the flight as if you had paid for it.
The same United flight that is 49.9K Chase points…
…would cost 170K United miles+$46:
The same Delta flight that is 49.9K Chase points…
…would cost 140K Delta miles+$46:
That means you effectively get back 4.5% on travel and dining spending on the Sapphire Reserve card.
You can earn even more by spending on other Chase cards
-If you have a Freedom Unlimited card you earn 1.5 points per dollar everywhere that are worth 2.25% towards travel when you transfer them to Sapphire Reserve.
-If you have a Freedom card you earn 5 points per dollar on rotating categories that are worth 7.5% towards travel when you transfer them to Sapphire Reserve.
-If you have Ink Plus or Ink Cash card you earn 5 points per dollar on office supplies, gift cards from office supply stores to hundreds of other stores, and telecom that are worth 7.5% towards travel when you transfer them to Sapphire Reserve. Gas, hotel, and dining purchases also have double point bonuses worth 3% towards travel.
-If you have Ink Business Preferred card you earn 3 points per dollar on travel, shipping, internet, cable, and telecom, and advertising on social media and search engines.that are worth 4.5% towards travel when you transfer them to Sapphire Reserve.
That means you can be earning between 2.25%-7.5% back everywhere.
The great thing about a Hybrid card like Sapphire Reserve is that if you need a one-way ticket, a last minute ticket, or a business/first class ticket you can transfer them instantly into real airline miles, assuming the value is better there. But if it’s not you can still get a great value from your points by redeeming them directly for a ticket without transferring them into miles.
That means you can use 53,375 Singapore miles (transferable from AMEX or Chase) to fly in Singapore Suites class:
Instead of paying $5.3K or using 353K Chase points:
Hybrid card #2: AMEX Business Platinum:
In October, AMEX responded to Sapphire Reserve by greatly increasing the value of The Enhanced Business Platinum® Card from American Express OPEN.
It also has nice benefits that also make its $450 annual fee worthwile:
-Up to 100,000 points for signing up and meeting the spend threshold.
-10 annual GoGo in-flight WiFi passes
-Unlimited worldwide Boingo WiFi access
-$200 in airline fee credits per calendar year to spend on the airline of your choice.
-Lost item insurance
-Priority Pass lounge membership
-Centurion lounge access
-Delta lounge access
-Airspace lounge access
-Global Entry+TSA Pre-Check fee refund
-Hilton, SPG, and Marriott elite status
AMEX then added:
-A 50% rebate on points used for coach tickets on the airline of your choice
-A 50% rebate on points used for business/first class tickets on all airlines
-50% bonus points on $5K+ purchases
Thanks to the 50% rebate your points are worth at least 2 cents each. The rebate typically posts the day after redeeming points.
Having other AMEX cards increases the value proposition further:
-If you have The Amex EveryDay Preferred Credit Card from American Express you earn 1.5 points per dollar everywhere that are worth 3% towards travel when you transfer them to AMEX Business Platinum. You’ll also earn 4.5 points per dollar on groceries that are worth 9% towards travel and 3 points per dollar on gas that are worth 6% towards travel.
-If you have the consumer AMEX Platinum card you earn 5 points per dollar on airfare that are worth 10% towards travel when you transfer them to AMEX Business Platinum.
-If you have the AMEX Blue for Business card you earn 1.3 points per dollar after the 30% annual dividend that are worth 2.6% towards travel when you transfer them to AMEX Business Platinum. Plus you’ll earn double points everywhere and 10 points per dollar at restaurants for a limited time that are worth more than 20% towards travel after the annual dividend when you transfer them to AMEX Business Platinum.
-If you have the consumer Premier Rewards Gold card you earn 3 points per dollar on airfare that are worth 6% towards travel when you transfer them to AMEX Business Platinum. Groceries and gas will earn 2 points per dollar worth 4% towards airfare.
-If you have the AMEX Business Gold you earn 2 or 3 points per dollar on categories of your choice that are worth 4-6% towards travel when you transfer them to AMEX Business Platinum.
If you redeem 74,879 points for a ticket you’ll get 37,440 of them refunded back to you within a couple days. That’s a value of 2 cents per point.
That’s an amazing value per point, though it comes with the annoyances of having to lock in one airline per year for coach travel and it requires waiting for the 50% rebate to come. You may have luck switching your airline of choice online via chat or over the phone, especially if you haven’t yet used your $200 in annual fee credit on that airline.
The 50% rebate for business or first class is for all airlines.
Instead of using 450K Delta miles plus $52 for business class…
Of course having these hybrid cards gives you the flexibility to use your points at a 1.5-2 cent fixed value or to transfer into airline miles when they prove more valuable:
For example this flight tomorrow would cost just 10K United miles (which can be transferred instantly from Chase)…
…instead of paying $573 or using 38K Chase points:
The flexibility that hybrid cards like Sapphire Reserve and AMEX Business Platinum offer put you one step ahead of the airlines. And it hinders their ability to devalue your points in the future.
Have you taken advantage of the benefits of these hybrid cards? Share your experience in the comments!