Card-sharp travelers get rewards
By Tim Winship
What do laser eye surgery, home mortgages and Internet access have in common? Frequent flyer miles can be earned for them all. And the list of mileage-earning opportunities grows longer every day.
Even as the universe of travel rewards programs expands, credit cards continue at the programs' center. In most airline programs, the number of miles earned for credit card use is second only to miles earned for actually flying, supporting the theory that frequent flyer schemes have evolved into frequent buyer programs.
The larger part played by credit cards in loyalty programs has increased the pressure on the cards to distinguish themselves from their competitive counterparts. And that means better deals for consumers.
UNITED'S 'CHOICES'
Most recent in travel rewards cards is the United Airlines' Mileage Plus Choices Visa card, launched on May 1.
United followed Capital One's No Hassle Miles and other independent cards whose claim is that earned miles can be redeemed for any flight, on any airline, with no blackout dates or seat limitations. With so much attention focused on how difficult it is to get award seats, that resonates with travelers.
United's consumers have two options:
Credit card points are worth one cent each when redeemed for tickets, so 25,000 points could be used to purchase a $250 ticket outright, or for a $250 discount when buying a more expensive ticket.
When redeemed for hotel stays or car rentals booked at united.com, the value of points declines to .8 cents each.
Cardholders may also exchange 40,000 points for an annual subscription to Economy Plus Access (United's premium coach section) or up to 50,000 points for as many as 5,000 elite-qualifying miles and five elite-qualifying flight segments per year.
DELTA'S PATH
United is actually following in the footsteps of a strikingly similar card already on offer from Delta Air Lines. Like the Choices card, the Delta SkyPoints card, issued by American Express, awards cardholders with points which can be redeemed for discounts on paid Delta tickets.
Points can be used for discounts up to 75 percent off the first $500 of the price of a ticket. So in a best-case scenario, exchanging 20,000 points for a 75 percent discount on a ticket costing $500 or more, the points would be worth $375 or just under two cents per point. That's a solid value proposition, especially considering that the tickets are purchased and therefore free of the capacity controls which undermine the availability of traditional frequent flyer awards. But consumers must bear in mind that the points' value diminishes as the price of the ticket decreases. Using 20,000 points for a ticket with a $250 purchase price, for example, would yield a discount of $187.50, and the per-point value would fall to less than one cent.
Comparing the Delta and United cards, United has the edge in allowing points to be redeemed not just for discounts, but for the full price of the ticket. And assigning the points a set value of one cent simplifies the calculation. But for more expensive tickets, the value of Delta points can be double the value of United's.
UPPING ANTE
In response to competition, particularly the Delta and United cards, issuers of other airline-linked cards have been ratcheting up the benefits.
E-Certs are delivered within 36 hours after registration and redemption of miles, and a maximum of 60,000 miles may be redeemed for six E-Certs through the end of this year.
With new cards or promotional offers from American, Delta, Northwest, and United, it's a safe bet that other airlines have new credit card offers in the pipeline.
Reach Tim Winship at questions@frequentflier.com.
