Why You Shouldn’t Use a Southwest Airlines Credit Card

In the past few days, I’ve talked to family members who travel rarely and friends who travel every week. They all love Southwest Airlines, and most have a Southwest Airlines Visa credit card. I tell each of them to cancel that card and get a Sapphire Preferred Visa instead.

Both cards are offered by Chase, and in some cases these people already held both cards–a clear case of unnecessary overlap. Often the people I know who prefer to fly Southwest do so because of the simplicity. Easy customer service, easy fares, and an easy rewards program, as I outlined yesterday. If you want to keep things simple, a Sapphire Preferred card is the way to go (other than a cash back card, but that often has a poor return). The Sapphire Preferred will also earn you more Rapid Rewards points from a larger variety of purchases.

Ultimate Rewards Points Transfer to Southwest …and Everyone Else

This is the number one thing to remember throughout this post. The Ultimate Rewards points earned from a Sapphire Preferred card can be transfered instantly at a 1:1 ratio to Rapid Rewards. When you earn an Ultimate Rewards point, it is like earning a Rapid Rewards point, so all the other math after this will consider them identical: just points.

But also remember an Ultimate Rewards point can be used for lots of other things if you prefer. You can transfer them to United or Avios for international awards. You can transfer them to Hyatt or Marriott or Priority Club for hotels. You can do this with Southwest points, too, but at a fixed value, meaning X number of points = Y dollars. The benefit of other rewards programs is that you can sometimes redeem a relatively small number of points for a very expensive flight or hotel.

Finally, you can consolidate your Ultimate Rewards points into a single account. My family consolidates points in my account to pay me back for flights I book them through United Airlines, for example. Megan and I also have multiple cards that earn Ultimate Rewards points (not just the Sapphire Preferred), and so we take those points every couple months and put them in one spot.

Sapphire Preferred Earns in More and in More Categories

The Southwest Rapid Rewards Visa earns 2 points per dollar on all purchases through Southwest.com, whether you are purchasing Southwest flights or reserving a hotel or car through a Southwest partner. Everything else earns 1 point per dollar.

The Sapphire Preferred Visa earns a 7% dividend on all points earned each year. So before we can even start, you have to factor that in. You’ll earn 2 points per dollar on ALL travel, including flights, hotels, train tickets, parking, cruises–you name it. And it doesn’t matter where or how you purchase it. Multiple by 7% and you’re really earning 2.14 points per dollar. You’ll also earn that 2.14 points per dollar at all restaurants and for catering, too. Everything else earns 1 point per dollar, which will end up as 1.07 points per dollar after the dividend.

But wait, you can do better. Book flights and hotels or purchase merchandise through the Ultimate Rewards shopping portal and you’ll not only earn your typical 2.14 or 1.07 points per dollar, you’ll also earn whatever bonus points are provided by the shopping portal.

Potentially Lower Annual Fee

The Southwest Rapid Rewards Premier card, which offers an opportunity to earn tier qualifying points toward A-List status, has an annual fee of $99. The Southwest Rapid Rewards Plus card, which does not include this perk, has an annual fee of $69. Otherwise they’re mostly the same. The Chase Sapphire Preferred has an annual fee of only $95. This is $4 less than the Premier card, and only $26 more than the Plus card. In my mind, these differences a small enough that they are not worth worrying about, and you shouldn’t worry about having to pay a higher annual fee to get all the additional benefits that come with a Sapphire Preferred card.

I will admit, however, that some people will want those tier qualifying points that you can earn with the Premier card. All I can say is more power to you. They seem expensive to earn at 1,500 per $10,000 spent, so you’ll need to put a lot of purchases on that card to make a meaningful contribution toward your elite status.

The Final Message

In short, you are guaranteed to earn at least a little more, and sometimes a lot more, points on the same purchases that you would make with the Southwest card, and you can do a lot more with them. But you can still turn those Ultimate Rewards points into Rapid Rewards points if you want. I’m not here to argue that Rapid Rewards is a bad program–in fact it’s a very good one. But I don’t think the Southwest Rapid Rewards Visa is a card that belongs in your wallet given that another Chase product can do as good a job or better.

What Do Bloggers Have Against Southwest Airlines?
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Scott created Travel Codex after learning how to travel better on a budget during grad school. He now flies over 150,000 miles every year.
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  • Gene

    Because bloggers hate Southwest? ;-)

  • KateFromCA

    You are right about not putting spend on the Southwest card; however, I strongly disagree with the advice to cancel it.

    Having the Southwest card allows you to use your Rapid Rewards points to book hotels and cars (http://www.southwest.com/morerewards), which is the benefit I value highly (I am always short on points that can be used to book rental cars). Just that alone is worth keep the card in my mind – besides, the $99 annual fee is offset by 6,000 points ($100 value in Wanna Get Away tickets).

    • Scottrick

      Fair enough. My family members detest card churning and will use any excuse to cancel a card. They kept asking: “Which one do I cancel?”

      I was also under the impression you could still use the points to book hotels and cars with a different card as long as you had a Rapid Rewards account, i.e., any member of their frequent flyer program could use this benefit, not just card holders. If the card is necessary, then that should factor into any decision.

      • KateFromCA

         From what i see on the page, it looks like you do have to have one of the Southwest cards from Chase. I can’t really check if not having it gives you access, because I do have it :)

        http://www.southwest.com/morerewards

        • Scottrick

          I’m curious if, since both cards are operated by Chase, perhaps what is happening is that Chase is actually converting the Rapid Rewards points to Ultimate Rewards points and then redeeming them through the Ultimate Rewards program to provide these other opportunities. After all, if I can transfer UR to RR, then why could Chase do the reverse behind the scenes?

          • Colin Lowenberg

            Scott, it’s possible. They have the same conversion rates. 5,000 for $50 gift cards. 

          • Scottrick

            If you join me in Vegas, Colin, I’ll have to ask to take a look at your account. ;) Without a Southwest Visa of my own, I’m unable to look at some of these redemption opportunities.

    • http://pointstopointb.wordpress.com/ AKold

      The annual point bonus is probably the main reason to keep this card, if you actually fly Southwest.

      For a normal family (that isn’t going to do card churning), one Sapphire Preferred + several Chase Freedoms that earn 5x would help, but the Southwest card pretty much pays for itself if you use the points.

  • Patrick M

    The only thing you missed is that the Southwest Credit Card points count towards companion pass, whereas points transferred in from Ultimate Rewards do not. While this probably won’t matter to most card holders, I travel on Southwest Business Select flights frequently for work and when you add the points I earn for that travel to the 50,000 bonus I got for signing up for the card, I am slightly shy of the 110,000 needed for companion pass. The Southwest Card will make up the difference for me to earn companion pass for next year which will be extremely valuable. However, once I earn enough points for the companion pass I will likely be cancelling the Southwest Card in favor of the Sapphire Preferred. 

    • http://www.travelbypoints.com/ Jimmy @TravelByPoints

      I was just going to comment on this. In addition, once you have earned CP, the $99 fee you pay for the premier card actually turns into a $200 value.

      • Patrick M

        Good to know. So you would keep it past the date of the annual fee in order to get the 6,000 points (the $200 value)? I was mostly thinking of cancelling it if I was not approved for the Sapphire Preferred to transfer the credit over. But I just got approved for a rather large balance on the British Airways card for their 100k points promo as well so I am thinking approval may not be an issue.

        • Scottrick

          It’s only worth $200 if you have a companion pass ($100 for yourself from points, another $100 for the companion).

          In general, I do not recommend canceling any card with Chase right before applying for a new one. And if you already paid the fee, there’s no reason to decide whether to cancel until the next year’s fee becomes due. If you want to apply for the Sapphire, do that first, and only close the Southwest account if your application is rejected and you need to negotiate. Even if the Sapphire is approved with a small balance, you could keep the Southwest card open but transfer most of your open credit line to the new card. Generally Chase’s minimum credit line is only $500.

          • Scott

            I wouldn’t look at it that way. The points are still only worth $100 since you can get the same benefit with the companion pass and $100 as you can with the companion pass and 6000 points.

          • Scottrick

            Good point.

        • http://www.travelbypoints.com/ Jimmy @TravelByPoints

          Yes, I’d pay $99 to keep it if I plan to take full advantage of the CP. If the fee is due soon and you have been using the card a lot, it doesn’t hurt to try and ask for a retention bonus, too. As for your Sapphire Preferred, you could always transfer some credit from your BA card.

  • xzolian

    The Southwest Plus card has an annual bonus of 3,000 points (~$50) and the Southwest Premier card has a bonus of 6,000 points (~$100). Does the Sapphire have any annual bonuses?

    • Scottrick

      The Sapphire has it’s 7% dividend, which makes the comparison complicated. Southwest’s renewal bonus has value roughly equal to the annual fee. With Sapphire, you’d have to earn ~70,000 UR points each year to earn a large enough bonus to cover the fee (assuming UR points are worth 2 cents each). I think this is not too difficult to do given the double points on all travel and restaurants. You can also earn more points on purchases through the UR mall.

      However, this also reduces the advantage of the Sapphire if you can’t reach 70,000 earned points since it doesn’t completely balance the annual fee. Personally, I value the flexibility of the UR points and would be wiling to pay the difference of $20-40 a year if I earn only 50K or 30K points.

  • Adam G

    No love for the Southwest Companion Pass, via two cards plus $10k? -One card alone wholly validates your position, but how can you not mention the two card “magic trick” to get a companion pass which is like the infamous little pot of gold

    • Scottrick

      I mentioned that in yesterday’s post. I had good things to say about RR then, and I agreed the signups were a good deal. My point today is that I don’t believe the Southwest Visa is a good long-term card for spending (except for some exceptions as we’ve been hashing out this morning).

      • Adam G

        My apology for not reading yesterday’s! -That gives me a nice “whew” It’s been a live saver for me [the companion pass] and outside of that your post here gets amens from me. 

  • Stan

    Interesting read. I applied and was approved for a SW Chase card 7/11 for 50,000 points and cancelled it just last week. I know I should use it for flight tickets but right now I want to redeem amazon gift cards. Since I am not a cardmember anymore, I don’t think I can use it for gift cards. What are my options? Should I apply for the SW business card just so I can be a cardmember again or is it too soon since I just cancelled my card last week? Thanks

    • Scottrick

      No, I don’t believe you can use it for gift cards. If you do not hold a Southwest credit card, your only choice is to use it for Southwest flights. You can apply for another card in the future to regain access to other options. There are two personal cards (Premier and Plus) so you could apply for the other one from what you had if you don’t want to try for a business card.

      It’s not necessarily too soon to apply again. The greatest danger from canceling a card is that your total available credit and number of open accounts will decrease. This potentially hurts your credit score, but the effect is lower if you already have a lot of open accounts and credit. Assuming you can be patient, you might want to wait a month or two to let the effects of the closing wear off just to be safe.

  • Jen

    Canceling credit cards adversely affects your credit rating.

    • Scottrick

      There are lots of reasons canceling a card drops your score, but the effect is usually temporary. I don’t think people should cancel a card just for the heck of it. I’ve made that mistake before. But I do find it annoying to carry cards that I don’t need, and I don’t like calling the bank each year to negotiate a fee. If I’m not willing to pay after the first year, it goes into the trash.

      I have a stable of cards that I applied for FIRST and which I do plan to keep every year, so my average account age and available credit will stay relatively high despite canceling younger cards.

  • onezerofive

    I’m pretty stupid on the subject matter… so this may be a dumb question… Will I earn rapid reward points (on either card) by paying bills? So (for example), could I pay my rent through this card (instead of my bank), get the rewards for the “purchase”, then just pay off the card immediately? Do you still get the rewards of you payoff the purchase right away? — again, completely dumb on the subject matter…

    • Scottrick

      You can get points for paying your rent or other bills with the card. However, the problem is that your landlord may not accept a credit card as payment. There are services that take care of this for you, like WilliamPaid, which basically charge your card (plus a fee) and write the check on your behalf.

      Another option is to buy gift cards, assign a PIN, and load them onto a Bluebird prepaid card at a Walmart store. Bluebird has a check-writing feature that allows you to write checks that will be debited against the account.

      http://travelcodex.com/2013/04/modifying-my-strategy-for-manufactured-spend/

  • Bryan Proven

    I don’t understand the value of of being able to transfer 1:1 to southwest rewards, when using your SW rewards is 1:1 to a dollar. You should cash out of all your rewards, which I believe is 1:1 also, and just pay with your regular card and get an additional 2.14%.

    • Scottrick

      If the goal of using a Southwest credit card is to earn Rapid Rewards points, you can earn more Rapid Rewards points by using the Sapphire Preferred card and transferring the Ultimate Rewards points to Rapid Rewards. All the category bonuses are the same or better.

      If you don’t want Rapid Rewards points, then that’s a different question.

  • lbalk

    I cary a southwest card, the one item you missed is the card gets you closer to a companion pass in addition to the tier miles. I travel frequently with the sake person and that person flies at no cost. Pretty good deal.

  • chitown

    I’ve been on the fence between the Capital One Venture and Chase Sapphire Preferred for a while now. However, I did not know that you could consolidate UltimateRewards points across Chase accounts. Given that I already have a Chase Freedom card (which gets me 5x points on up to $1500 spending on quarterly rotating purchase categories), that puts the Sapphire Preferred over the top. It would be like having a single psychotically awesome card (and further research after reading your article tells me that this is actually a popular approach). Awesome write-up.

    • Scottrick

      Thanks! Always different cards for different people/situations, but glad to help you out.

  • pohlmacs

    You are not factoring in that you can start the RR Visa card with 50,000 RR points bonus. People can sign up for that card, meet the requirements for the bonus, get the points, cancel the card, and then wait for the period to expire to sign up for the deal again (I believe this may be 1-2 years). So, may be more beneficial to get the RR Visa card first, then get and use Sapphire.

    • Scottrick

      That’s an argument to get the card, get the bonus, and dump it. It’s not an argument to actually USE the card to buy anything after that, which is what this post is about.

      • Guest
      • pohlmacs

        Use is a relative term — short term or long term. There can be cases to get either Sapphire or the RR Visa, heck, get both and 90,000 bonus points on top of my Chase Freedom that still is grandfathered on 10% bonus (they just got rid of the 10 points on every purchase which bumped my average cashback to around 2.3%). For those still grandfathered in the Freedom 10%, with no annual fee, may be good to stay with that and just get the Sapphire and RR for the bonus points — if you do both you pretty much are going to get companion pass after a few months of uss that you have to do anyway to get the bonus points.

      • pohlmacs

        I do agree, if you are just going to use either a Sapphire or RR card everyday, the benefits lean towards getting Sapphire for sure. Combo with the Freedom changes the strategy a bit.

  • JerryNYC123

    Why you shouldn’t use a Sapphire Preferred card: You have to spend $5,263.16 just to break even. The Sapphire Preferred card $95 annual fee gets you NOTHING. Scott, your comparison does not factor this in. The Southwest Premier card gives you 6000 bonus points ($100 worth) every year. Your formula for Sapphire states “Multiple by 7% and you’re really earning 2.14 points per dollar” meaning you are only getting 1.14 more points than the Southwest card on specific purchases. Again, just to equal the Southwest premier card annual bonus you would need to spend $5,263.16 (6000 points % 1.14) a year before you start saving anything. Also you only start saving when you spend this amount on travel that is non Southwest flights and hotel/ car rental partners (Southwest card also 2 pts) or dining that is not part of Rapid Rewards (3 pts) This leaves only a small number of purchases to get your money back let alone make a profit compared to the Southwest card.

    • Scottrick

      I disagree with your argument for several reasons. First, I think you’ve done your math incorrectly to relate the benefits of each annual fee and their corresponding bonuses.

      The Southwest Rapid Rewards Premier card offers, as you said, about $100 in Rapid Rewards points each year (6,000 at 1.67 cents each) when you pay your annual fee of $99. You get back what you put in immediately.

      The Sapphire Preferred card offers a 7% bonus when you pay your annual fee of $95, and that bonus can be highly variable. I assign a value of 2 cents to Ultimate Rewards points because they can be used for more awards, including more valuable awards, as well as for transfers to Rapid Rewards points. You would need to earn roughly 68,000 points each year to get back enough points to equal the fee.

      As you can see, it’s not really about how much you spend each year that determines whether you make up the annual fee or not. It’s how many points you earn. So let’s address that topic second.

      My second disagreement with your argument is that the Sapphire Preferred card supposedly has a “small number of purchases” that earn more points than the Rapid Rewards card. This is a very subjective argument. Some people who only fly Southwest Airlines, who book hotels through Southwest Airlines, and who use Southwest’s dining rewards program will certainly find that Sapphire Preferred offers fewer benefits. I think these people are a minority.

      Many of the people I know who fly Southwest are infrequent travelers or price-conscious travelers (who may be frequent travelers but have no specific loyalty to Southwest — they’re just cheaper in that particular instance). An infrequent traveler won’t have many travel expenditures anyway and might benefit more from the dining bonuses. A price-conscious traveler will want to take advantage of a bonus that applies to more than one airline.

      People who book hotels through a third party are also less likely to be concerned with elite status since those stays are technically ineligible. I say they should look at Hotwire, Priceline, or any number of additional options that earn the 2X bonus with Sapphire Preferred. Locking yourself into Southwest’s booking portal seems a poor decision.

      And the dining bonus for the Sapphire Preferred is also less restrictive. I have only ever found one restaurant in my local area that participates in a dining rewards program and is actually good. Maybe the situation is different where you live, but at least my Sapphire Preferred earns me a bonus wherever I choose to eat.

      Finally, my third disagreement with your argument, which isn’t really a disagreement because you never explicitly mentioned it: I highly value the flexibility of Ultimate Rewards points and the excellent customer service. I think these things are worth paying an annual fee, so it’s okay if I don’t earn the 68,000 points each year needed to get a 4,750-point bonus.

      In conclusion, if your personal circumstances suggest that the Rapid Rewards card is a better choice, then I suggest you use it. But I have explained in my reply and in my original post many reasons why the Sapphire Preferred may be better for other individuals.

    • vega25

      I should say that upfront that I prefer simplicity and minimizing calculations related to where I must use what card to maximize rewards – except: using Chase Freedom quarterly bonus categories, and my Amex Blue Cash for groceries and gas (in months where Chase Freedom does not have these categories). For ‘everything else’ which includes travel, utility bills, etc, I’d rather have only one card.

      And with that in mind, it appears that @JerryNYC123:disqus’s point that the annual fee paid for Chase Southwest Premier is, in a manner of speaking, reimbursed immediately, sounds terrific to me.

      The fact that I’d have to first spend ~$5000 each year to cover the Chase Sapphire fee BEFORE I start earning additional rewards sounds like I’ll be thinking about that more than I should.

    • Queenv

      Actually, the $95 fee gets you A LOT. Call the company to ask about your benefits. One of the benefits is travel insurance on any purchase with that card. Travel insurance on any trip will run you at least $100 with any other 3rd party.

      • Buxx5

        Travel insurance is included in all Visa Signature cards including both the Southwest and the Sapphire card. Not a benefit exclusive to that card.

  • Don

    With my SW card and Rapid Rewards membership, I earned over 200,000 points last year, working on about the same for this year. I travel for work, not a lot, but usually last minute travel costs the most, and earns the most.
    I couldn’t have gotten $2000 worth of gift cards from Southwest, but I chose a variety of redemption methods. All I know is I get my $69 dollar annual membership.

    I see your point though on how to use the Sapphire to earn and put it SW bucket.

  • Nate

    Right now the initial spend bonus for the Southwest card is pretty juicy — 50,000 miles for $2K in spend. However, as you say, there are other cards that are even more rewarding.

    To quickly compare your expected rewards from the Southwest card, Sapphire Preferred card, etc., you can use the rewards calculator at:
    http://www.creditcardtuneup.com/

  • Jeff S

    One major advantage to the Southwest card over Chase Sapphire that I did not see mentioned here. Southwest will often run promotions where you get double the rewards points on travel for flights booked with the SW card. And I am not just talking with respect to 1 point per dollar spent. I am referring to the actual earning rate you receive for flights (6,10,12 points per dollar depending on fare type). So if I book a $500 “Wanna Get Away” fare…the double points results in an extra 3000 ($500 x 6 points) Rapid rewards points (currently a $50 value, slightly less when devaluation occurs next year). And of course up to double that amount for other fare types. For frequent travelers, this is a HUGE amount of additional points…and I have found this promotion is running at least 6-9 months out of the year. This makes the Southwest card indispensable for frequent SW travelers compared to any other card.

    • man

      this^^^^

  • Joey

    Doesn’t work out as well as you say until you hit huge amounts of spend. Dude, fire up excel and do the math. Take into account all benefits or it’s worthless to even have the conversation. Sorry bro… needs a bit more work on your end.