Travel credit cards are among the easiest ways to earn miles and points, but nothing in life is free. The costs of those rewards are time, effort, and (sometimes) money. It bears reminding people of this from time to time, but maybe not for the reasons you think.
TravelBloggerBuzz linked to a post by Chris Elliott yesterday, in which Chris tried to explain why some people are frustrated with their travel credit cards. I think Chris has a pretty polarized view of these cards based on this post and others, in which he thinks the cards and the marketing operations used to promote them take advantage of some customers. And even if I don’t like the evidence he uses, I think the conclusion is accurate when applied to most people.
There’s no way that we can all get the better end of the bargain and the banks still earn a profit. When you score a great deal it’s because someone else was a sucker and got a really bad deal. Never forget that. You wouldn’t pay $10 for a small Coke, would you? Then why are you paying 50,000 miles for a domestic ticket in coach? Miles are a currency. Their value is erratic, and they can be devalued at the whim of an airline executive. But the basic fact holds: If you spend them poorly, it’s no different from spending money poorly.
From the beginning I have used this blog to argue that the best use of miles is part of a holistic strategy. Some flights you book with cash. Some you book with miles. Sometimes you book a complete itinerary using a combination of paid and reward tickets. Sometimes you book a trip and use points for the hotel but pay for the flight. If you learn to use your miles and points wisely, they can become cash equivalents, held in reserve until you find the right opportunity to use them at their maximum potential.
But I will also admit that this ideal strategy is not for all people, and this is where people like Chris Elliott have a good point. (I just think Chris is a little too black and white on the topic.) If you aren’t able to spend the time to develop a good strategy, if you go into this blindly thinking you’re getting a free trip, then this is not the game for you. Because it is a game, and you shouldn’t play games you don’t have a chance at winning.
Some of the quotes in Chris’s post are very telling:
Dick Martin was frustrated with blackout dates and complained that the cost of “any flight” was too high. I agree that Dick should not be accumulating miles if he requires complete flexibility.
Few U.S. airlines, if any, still have blackout dates on award tickets. Lack of availability and blackout dates are not the same — I’ve booked award tickets for holiday travel. But if your goal is to book any flight at any time, you’ll usually face some frustration. Cash is a safer play.
Milton Kidd earned miles with his credit card for years before he “finally” had the chance to use them for a ticket between Portland, Maine, and Tallahassee. But he still didn’t have enough miles and needed to buy more for the trip. I’m wondering if there’s more to the story, but clearly Milton is not the target audience.
What bothers me most is that Milton waited years before he finally had a chance to use them. Does he not fly? People who don’t fly shouldn’t get airline credit cards. It doesn’t seem that he was waiting for something else, like low-level award space, since he was willing to buy more miles.
Chris does have some interesting discussion of “neuromarketing.” It’s true that some people develop an unhealthy obsession with collecting incremental rewards, reaching goals, etc. Did you ever wonder why most credit cards come with sign-up bonuses? A customer who redeems an award is much more likely to remain vested in the program. In other words, giving you 25,000 miles up front keeps you committed to earning more in the long run, just as some casinos promise to refund some of your initial losses. (This just raises more questions about why Milton needed to buy more miles for a domestic flight after years of earning plus a bonus, but let’s move past that.)
I actually think the article would be stronger if Chris built up the psychological aspect more and separated it from what are, frankly, some rather weak customer complaints. There are entire conferences where executives talk about how to get people to buy into their programs. I’ve attended more than one.
Keep yourself from getting addicted by remembering that the cards are a tool, nothing more. You can earn miles, you can earn points, you can earn cash back, or you can earn nothing. The first three options will cost more, either through an annual fee, interest rates, or both. Ask yourself what value you get from the rewards. Ask yourself if you get more value than you pay for. If so, good. If not, then you need to take some responsibility.
If you’re spending too much money on a credit card because you’re trying to earn more miles, don’t blame the loyalty program for that. This is a basic issue of managing your finances. Switch to cash and learn to balance a checkbook.
If you’re paying too much in annual fees, it’s okay to say goodbye. Miles already earned are generally safe. If they’re part of a bank’s program (like Ultimate Rewards or Membership Rewards) then transfer them before you cancel. You generally have a month to cancel a card even after the annual fee was charged.
If you really need the credit so you can carry a balance, I won’t judge. But don’t get a rewards card, as they have the highest interest rates. Already carry a balance? Transfer it. Chase Slate is one of the best credit cards available with no fee for balance transfers when you open an account. Unlike most travel credit cards, it is very boring …and very cheap.
