Debunking myths about frequent flier programs
Despite the rumors, rewards programs hit all-time record in 2008
By Randy Petersen
Dear Cashing In,
Is my airline rewards card even worth having anymore? It seems to be harder and harder to redeem my rewards for free tickets, especially since the airlines keep reducing their airline schedules. Is there some other way to use my airline rewards to greater advantage? -- Peter
Part of my answer to your question involves debunking the "urban myth" that frequent flier credit cards' rewards programs are not worth the time and effort it takes to redeem miles, as well as updating you on some of the things these rascal frequent flier programs are doing to provide flexibility in award redemption.
During the past year, there actually were many pundits and rewards program members who thought that with reduced airline schedules, there would be far fewer frequent flier awards available. Frankly, it would seem to make sense, but just as we have come to expect from these programs, the unexpected happened. As it turned out, 2008 set an all-time record for award redemption.
Let's be clear: I don't think it was that the airlines were being more generous, but rather it was a combination of several things. First, members weren't redeeming awards to vacation hotspots such as Hawaii and Orlando as they might usually do. Frankly, with the questionable economy, many more members were redeeming miles to more mundane locations with the belief that it was better to save the money and use the miles.
So, whether it was redeeming miles for business travel (many entrepreneurial types use their miles to save on business travel costs), for that class reunion weekend, for sending junior out to look at colleges or for typical family emergency air travel (which is happening more frequently with our aging population), frequent fliers in the millions used their miles last year. It was one of the most trouble-free redemption years ever.
Will that last? Probably not. But the silver lining is that with the economy in the back of most reward program members' minds, awards are truly a little easier to redeem to some of the more prime-time destinations now. Does this fully explain the large jump in awards this past year? No.
Award redemption was up nearly 13 percent in 2008, and I don't think it was due to the airlines being more generous. Rather, it was that the industry has gotten better at displaying the availability of these awards. With newer releases of "award calendars" in the past year and, more importantly, rewards programs finally listing most -- if not all -- of their partner redemption awards online, the number of available award seats increased by nearly 30 percent in 2008.
Additionally, airlines have slowly (painfully slowly) introduced new ways to cash in your miles, such as allowing you to shop for rewards just as you would when buying a ticket. Both United and Delta (soon to include Northwest with their merger) allow some members to shop online for airline tickets and simply use their miles (or part cash) valued at a penny a mile to pay for the purchase price of a ticket. This is a huge advantage because you are controlling the purchase process as you see the seat availability (again, you are actually buying a ticket, not redeeming a reward) and, of course, you are seeing the price. Given that ticket prices are falling these days, these new options are one of the best things that have happened to these programs in years. They are not meant to replace your normal reward chart, but they do an excellent job of supplementing your choices. Plus, they now rival and perhaps surpass many of the other types of travel reward credit cards such as Capital One, for example.
Finally, while I truly hate to even mention this, down economies are absolutely the best time to cash in your miles. Fewer people traveling to even key destinations means less competition for you and a free seat, additional great travel values for accommodations, and there are even reward "sales." For example, United offered economy rewards to Europe, of all places, for a 15,000-mile discount.
Truly, while the urban myth is that no one can ever use their miles, the facts really are that the airlines gave away about 25 million free (OK, not so free with some of the taxes and fees being added on) tickets last year. Believe it or not, someone really is flying around out there for free.
Hope this helps and informs you why it still may be worthy for you to use the plastic to enjoy the fantastic.
See related: How the IRS treats frequent flier rewards, The evolution of frequent flier credit cards and programs, Airline frequent flier fees and rules
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Updated: August 3, 2009
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