Are Frequent-Flier Miles About to Lose Value?
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1) 2.625% cash back on BofA's Premium Rewards/Travel Rewards credit card. No messing around with airline miles. Just buy whatever ticket you want. Or, you know, pocket the cash.
2) 5.25% cash back on BofA's Cash Rewards card for "online purchases," up to $2500 per quarter.
3) 100 free trades per month at Merrill Edge. You're not locked into any fund companies and can buy whatever you want. I buy-and-hold Vanguard ETFs.
4) Free BofA checking account, with unlimited ATM rebates + a free safe deposit box. It pays negligible interest, so you may want to use another checking option if you hold larger cash balances, but it's helpful to have around just in case you need a physical branch for anything.
It's really a great deal, and it's wonderful to never have to think about the "gotchas" of redeeming airline miles.
They also have levels below $100k, but they're not as good.
It'd be nice to have some information for comparison with other status banks.
They also block transactions constantly. I get being cautious but they blocked my brand new card because I added it to Apple Pay (which you have to verify with them to set up so it makes no sense that they locked my card after verifying).
The life hack here is to just double down on an American Express card with no fee and membership rewards. You collect more stable points and transfer into travel points at a positive ratio.
Can’t say enough good things about Americans Express.
A surprising number of people seem to have 'When shit hits the fan, Amex delivers' stories.
(Personally, I find Chase UR much better than Amex MR.)
If you have a house and a car it kinda doesn’t matter anymore. Those are the only credit I use, and both loans are already made. If travel hacking lowers my credit score from 800 to 785, which makes the APR of some credit card I never carry a balance on go from 18% APR to 21% APR.... so what?
You usually can get the best house loan rate at like 760 so not too hard to stay above that if you are past 30 and pay your bills (being old is s free credit score boost)
The only really valid question for point hacking is, "Are you planning to do anything with your credit score in the next 6 months?"
Decreases credit score: Decreases average age of credit
Increases credit score: Increases total number of credit accounts, decreases utilization rate vs total credit
The main barrier to doing this is single-card limits at certain banks (e.g. Chase's "No more than x new cards in y months").
And Chase's 5/24 rule only includes personal cards; many people on HN may consult or otherwise have a business, and business cards don't count. Even sole proprietors (which is you, if you have a SSN) can get business cards.
Worst case, they're pulling their second card, where it could easily have a 150 pt impact.
Last I heard, the Chase rule is a lot more nuanced than that with business cards. And if you're at 5/24, you'll be turned down for a new Chase business card as well.
I would suggest not doing this for a few months before applying for a mortgage or car loan. Also, only works if you pay your bills on time (auto-pay) and don't carry a balance (22% hurts) (i.e., have your personal financial house in order first).
Reading the ad now, it looks like you're right. 2.6 points per $1 spent.
That being said, I'm not advocating that everyone switch to BofA/Merrill Edge, just that it's a really good deal for those who want it.
BTW, Uber's Visa from Barclaycard gives something like 4% on restaurants and 3% on travel, which is the bulk of my discretionary spending.
https://thepointsguy.com/news/bofa-cash-rewards-pick-bonus-c...
Which is to say, this is a new deal BoA has not previously offered, scheduled to go into effect in mid-January 2019?
Not that it's a bad deal. Just to caveat the recommendation with the observation that in the game, good deals have a way of disappearing when they're taken advantage of. (Oddly enough, the $2,500 cap is probably the best long-term indicator!)
I understand this: the merchants pay interchange fees to the issuer, the fees are higher than the cashback. Then the credit card issuer gives a part of this interchange fee back to the card holder as a cashback.
So basically you fund a (tiny) zero interest loan to the credit card company and get part of the money back later.
But doesn't the merchant price in the interchange fee? I.e. prices are higher under the cashback system? If prices are not higher, who in the end pays for the interchange fees?
One correction--the credit card issuer actually gives a 30-60 day loan of the entire purchase amount to the customer. If you pay off the complete balance by the due date (you can easily set this up via bank autopay), you're charged 0% interest, plus you earn any credit card "rewards" on top of that.
It's all really a rigged game by financial institutions to get people to go into high-interest credit card debt (where they make all their money), but if you pay your balances off each month, it's the most efficient option.
Hopefully we'll see its eventual demise.
The answer to this question is always "yes". Quite some time ago, the Economist estimated that the "money supply" of miles expands by 20% every year, which means that existing miles get devalued at roughly the same rate.
https://www.economist.com/leaders/2002/05/02/frequent-flyer-...
I signed up for Delta's frequent flyer program because i frequently took cross country trips and decided I needed to take full advantage of the fact that only one airline provided a non-stop route from my location to this destination. Being apart of this program led me to choose international flights with this carrier over others because I would earn miles.
Once another airline with cheaper fares took on this route I completely abandoned optimizing for miles and simply started optimizing for cost like many travelers do.
Miles take too long to earn for travelers who fly less than 5 times a year, especially if these flights are domestic. If I were guaranteed to earn at least enough points for pay for a round trip around 500-750 miles from my nearest airport in exchange for flying with one airline consistently I would definitely consider it.
It took me at least a half dozen cross country flights and at least two international flights to earn enough miles for a free one way cross country flight, the benefit just isn't there for normal travelers but I guess this is why it's called a "frequent flyer" program.
I get waaaaay more value out of buying regular economy tickets and flying (most of the time) in at least economy plus, if not first class on small regional routes on the free upgrades than I could out of tickets purchased on miles.
(I'm typically around a couple dozen flights a year, so frequent enough to have basic status, but nowhere near frequent enough to get top-tier business traveler level status...)
And card issuers know about churning. The highest-value cards also have limits to how often you can churn. Chase's "5/24" rule (if you've opened 5 or more new credit cards in the past 24 months, anywhere, Chase will automatically decline you on any application for one of their cards) is one of the more well-known anti-churning tactics, but not the only one. You have to immerse yourself in the churning/manufactured spending world to really get much more than one or two free tickets from card signup bonuses.
On the other hand, if you already travel enough to reach at least mid-tier status with one airline, it's often worth it to do so; that's when you start getting into large RDM bonus territory. Combine with the airline's branded card and you can easily generate enough mileage to take a nice vacation every year.
Yeah, the value is mostly there if you can redeem for travel annually. Cash redemptions usually require taking a haircut of some kind (to incentivize consumers keeping points in the inherently depreciative system).
I'd often use it to make un-bookable connections where you land and immediately get on a plane instead of the required amount of transfer time, and get faster times to destination than you could officially order, lol. Also often just bought the last flight of the day and went to the airport whenever I felt like it that day and took the next flight out.
https://www.consumerreports.org/consumerist/all-major-u-s-ai...
The latter doesn't need to happen within 24 hours of purchase.
What the parent was talking about is usually called "same-day change" (abbreviated "SDC"), and is in fact only available free of charge to passengers who have a minimum status level within the frequent-flyer program.
Another related perk is the "guaranteed seat" -- the ability to purchase a ticket within 24 hours of the flight, and receive a guarantee that you will have a seat and will not be "bumped" due to overbooking (they'll bump someone else off the flight instead, if it comes to that). Which tends to kick in at the higher status tiers; back in my days of flying too much, I only used that perk once, and the last-minute ticket was expensive, but it was worth it to know I would get where I was going.
I subscribed to Scott's Cheap Flights to see some new (to me) parts of the world on the cheap. I'd say 80% of the flight deals are basic-economy-class seats and it's exceedingly rare to see a similar deal for the next fare class up. In other words if the normal difference between basic economy (can't pick your seat, luggage is extra) is $200, the difference between basic and regular is now far more. In fact it's so much more the flyer may as well pay the upcharge to take a bag.
I'm not sure if this is airlines dumping basic economy seats because they simply don't sell, or if they're trying to make flyers used to paying for upgrades since it's still all in cheaper than the next fare class.
Regardless it makes sense for airlines to price basic economy for the least amount of air miles as the seats again offer the least benefit and the airline will make their money up billing cash rather than miles for the extras.
For some people, they're exactly what is needed.
"We're going to charge you $25 for a checked bag" triggered everyone to stuff everything in the universe into a carry-on.
Now you end up with half the flight being told "the carry-on space is full, but we'll check the bag for free" at that point. So they're checking bags anyway.
I wish they'd let travelers choose either a checked or carry-on bag for free. I honestly don't need my carry-on during the flight, so long as I can stuff a snack and book into an under-the-seat laptop bag, and if I can check the bag instead for free, then I don't have to schlep it across the airport.
Obviously, it affects the airplane either way and there are some safety margins built-in, but the airlines have some reason to push people to maximize use of carry-ons.
If you fly a lot for work, the company may have a preferred carrier (ours is Delta), and the status you accrue from work travel may allow you to book domestic economy and almost always get upgraded to First class. (Basically, unless I’m flying out of Atlanta on Friday eve or into on Sunday PM/Monday AM, I’m >75% for an upgrade.)
This makes me fairly likely to choose Delta for personal domestic travel, as long it’s within a couple hundred bucks of another carrier (or unless that other carrier is Spirit and the price difference is less than $500,000...)
In very broad terms: tourism is a larger part of the travel market than business travel. When the economy is bad, fewer people travel for pleasure, and those who do don't fly as much. So loyalty programs ramp up the rewards for the people who are still flying, in order to hang onto them. Then when the economy recovers and tourism picks up again, there's less need to desperately keep customers by any means available, so loyalty programs start getting slashed.
On top of that, at all times the big US airlines tend to hand out redeemable-only miles like candy (elite-qualifying miles are the ones that are hard to accumulate¹), which makes them a heavily inflationary currency and requires jacking up the redemption rates every so often to soften the blow of all those outstanding miles.
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¹ Airlines in the US issue two types of miles. Redeemable miles, usually abbreviated "RDM" in the frequent-flyer forums, do what the name implies: you can redeem them instead of using cash to purchase a ticket. They offer no other perks. The other type is the "elite-qualifying mile" ("EQM"), which can be redeemed for a ticket but also contributes toward qualifying for some level of "elite" frequent-flyer status with the airline. Elite status is what gets you free upgrades and free checked bags and all the other perks.
Elite-qualifying miles, with very few exceptions, can only be earned by actually purchasing a ticket, getting on the plane and flying (sometimes this process is also referred to as "BIS" -- "Butt-In-Seat" -- miles). All the "50,000 miles for signing up!" type offers you see with credit cards are denominated in redeemable miles, for example. If you know your way around the loyalty programs, you can generate hundreds of thousands of redeemable miles per year without too much effort. Achieving 100k elite-qualifying miles in a year, however, is a significant feat and typically qualifies you to the highest public status tier (the big three US airlines each have at least one unpublished tier above that, offered by invitation only to customers perceived as extremely high-value).
Is AA still overbooking with regularity?
Passengers don't like the idea of overbooking. But most passengers don't really understand how the sausage is made. And they don't care when the system works for them most of the time, just that it's not perfect, so booooo.
That's assuming people prefer having a chance of getting bumped off a flight they booked to paying a few bucks extra and having the same chance of just not getting that ticket in the first place. For me that system never "works for me". Maybe it works for some people, but for others, there's a good reason to hate it.