Time To Ditch The Airline Affinity Credit Cards?

I was already thinking about ditching my Gold SkyMiles American Express card when I got billed for the annual fee. It has gone up to $95.

The main reason I want out is that the miles I earn on Delta with that card are losing value. The fee increase just sealed the deal. I’m also going to take a hard look at my Citi / AAdvantage Mastercard, which earns miles on American.

I’m just no longer sure airline affinity cards are worth it.

One problem is that airlines are increasing the fees they charge to redeem miles for tickets. An award ticket that once was available at a nominal charge may soon cost $100 or more. So the customers pays the $95 fee to American Express to earn the miles, and then pays the airline to redeem them.

Meanwhile, airlines are reducing the availability of award seats and trying to push consumers into a “pay with miles” arrangement with a lousy exchange rate of 1 cent per mile. And it’s widely expected that the base rate for an award ticket – typically 25,000 miles for a domestic ticket – will be increased across the board.

I’m surely not the only one thinking about this. Tim Winship of SmarterTravel.com believes the airlines are ruining their frequent-flier programs, and he writes that he may dump his airline affiliated cards.

What to do? I’m thinking I’ll switch over to an American Express Blue Cash card, following the advice of George Hobica of airfarewatchdog.com, or an American Express Preferred Rewards card, on the advice of my brother-in-law, Ed. (He’s a big man. One tends to do what he says.) 

The Blue Cash card returns cash rewards that vary, based on what you buy and how much you spend. And of course you can spend that money on airline tickets. (Unlike a flight on an award ticket, those flights earn miles.)

The Preferred Rewards card earns points that can be converted into miles on multiple airlines or points in hotel loyalty programs. It shares some of the drawbacks of an affinity card, but it’s a lot more flexible.

I’ll study up. If you want to do the same, Hobica has posted some very useful information about cash-back cards, with a chart laying out the benefits of a miles cards vs. a cash rewards card under different spending scenarios.  


2 thoughts on “Time To Ditch The Airline Affinity Credit Cards?

  1. Audrey duBay

    I discovered the American Express Blue Card earlier this year. The only problem is tht some retailers will not take American Express cards. What do we do with those purchases? Can you explain why American Express Cards are not accepted everywhere? Audrey

  2. Jeanne Leblanc

    Hi Audrey,
    The short answer is that American Express charges higher transaction fees to merchants than Visa and Mastercard do. The long answer is this:
    In more simple times, the American Express card was not a credit card. It was a charge card. The customer had to pay off the balance every month. So the company didn’t make money from interest on monthly payments. Instead, AmEx made its money from an annual fee to the customer and fees charged to the merchant. Credit cards like Visa and Mastercard (bank credit cards) made a lot of money from monthly interest payments and could charge merchants lower fees.
    In those days, American Express was far more widely accepted overseas. Many restaurants, even in the U.S., accepted only AmEx because the company would reduce its fees for establishments that accepted only AmEx charge cards.
    After Visa and Mastercard gained a foothold in restaurants, American Express went into the credit card business. While its green cards are still charge cards, many of its other cards are true credit cards. Customers can carry a balance. (My Delta card is that type, though I never carry the balance.) Still, AmEx fees run higher than bank card fees, and many merchants refuse to accept them.
    This is all very complicated, and I’m sure I haven’t touched on all the complexities. But I believe that’s a solid summary.
    Because some merchants won’t accept AmEx, I would recommend that a consumer also carry a Visa or Mastercard. Overseas, I use a Capital One Visa for its superior deal on foreign exchange rates.


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