Time to trade in your credit card

Actually, it has probably been past that time for a long time for most folks.

Airlines have been quick to brag about how profitable their frequent flier programs are as a part of their overall operations. And most of that profit seems to come from the airlines selling their points to the credit card companies. These transactions are worth millions of dollars to the airlines, but that gravy train may be drying up as the value of the points to the consumers drops. With all the new fees associated with redeeming points for tickets and reduced inventory thanks to flights being cut, the points are worth less and less. And now the New York Times has finally figured it out and published an article about it.

The gist of the article is that most folks are not going to benefit from a “normal” miles earning card. Unless you fly a lot in addition to your charges or you charge so much that you don’t mind cashing in double points for the grand vacations in long-haul premium cabins you just aren’t going to get value for your spend. And if you carry a balance you should get a card with the lowest interest rate possible no matter what. Ignore the temptation of earning points. You’ll actually be paying too much for them since the interest rates on those cards are higher.

So what to do now? If you’re still addicted to the points game like I am, get the Starwood AmEx card. Hotel points are worth more than airline points in many cases, and the Starwood card is the cream of the crop in that regard. The annual fee is pretty low and points are definitely worth more than airline points in almost every scenario (except transfers to Continental and United).

My big concern at this point is what this shift will do to the mileage programs. United and Continental each just raised hundreds of millions of dollars by selling huge blocks of points to Chase, and Delta has remained solvent in large part by selling points to AmEx. If folks stop paying the annual fees for the cards then those major buys are going to dry up, and that could mean even more trouble for some of the airlines in the near future.

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.