Despite 'no-blackout' promises, fliers' freebies limited
Survey finds rewards vary like the landscape under frequent fliers
By James Peter Rubin
This is the season when frequent fliers' expectations crash headlong into airline realities. While most card issuers assure their rewards-seekers that there are no blackout dates, that's not the same as a guarantee of getting a desirable holiday flight, no matter how many points you have in your rewards account.
The truth is, some major airlines allocate all their seats around Thanksgiving, Christmas and New Years for paying customers -- creating de facto blackout days for travelers who've racked up reward points through loyalty programs. Others use "capacity controls" to limit the number of seats available for travelers seeking a free flight. About 6 percent of the seats on an average flight are allocated for frequent fliers using free tickets.
So if your holiday plans include using frequent flier miles to take the family to grandma's or a popular getaway, expect a bumpy ride. While there's no real way around this, there are strategies for coping, and making the best of the rewards.
CreditCards.com surveyed 16 frequent flier programs offered by 10 leading rewards and airline-affiliated cards. The survey found both pluses and minuses.
The pluses include:
• Only 6 airline cards surveyed had any blackout dates
• Some airlines are sweetening their deals, so even if you can't get that Thanksgiving Eve flight to LaGuardia, you may be able to at least rent a car or book a room.
• Others are waiving annual fees or beefing up sign-on bonuses.
The minuses included:
• Some airlines impose caps on points, making them unattractive to the ubertraveler.
• Points can expire in some programs, reducing their value to the frequent-but-not-obsessive flier.
Consumers earn points for retail purchases with the cards and can exchange the points for tickets. Most of the cards surveyed award a point per dollar spent, although some cards use more elaborate formulas or rebate systems. Cardholders usually need 25,000 points for a free ticket.
The landscape for frequent fliers in 2007 is as varied as the one they hope to fly over. On one hand, card issuers vie for new customers by making their cards less restrictive and easier to use for other products and services, not just free tickets.
On the other, caps and expiration dates are not uncommon, and frequent fliers are vying with many other groups for seats in increasingly crowded skies.
Says Randy Peterson, the editor of Inside Flyer, a leading publication on frequent flier programs: "Where people get stuck is the fine print. The devil is in the details."
Some cards add sweeteners ...
A number of these cards have also increased the number of partnerships with major retailers and providers of luxury services, including deluxe hotels. Several cards, such as the Capital One card, are enabling customers to exchange points for cash or to apply their points at the end of a billing period toward specific purchases, including airplane tickets.
Many cards award sign-on bonuses. They include U.S. Bank Corp.'s WorldPerks Visa Signature card accounts, which gives new members 10,000 points and Citi's AAdvantage cards, which are awarding up to 40,000 bonus miles if cardholders spend at least $20,750 over two years.
Among the companies in the CreditCards.com survey, Citi promises no limits on seat availability, no advance purchase rules, limits on airline choices, blackout dates or minimum point requirements."Capital One's No Hassle Miles Rewards card advertises: "Fly any airline, anytime, with no blackout dates or restrictions." The Bank of America Rewards American Express, Discover Miles, U.S. Bank Corp. WorldPerks Visa and Chase Value Miles also promise no blackout dates. Says Jay Sorenson, the founder of the Shorewood, Wisc-based IdeaWorks Co., an airline-marketing consulting company: "There are a lot of cards out there with no blackout dates."
The CreditCards survey considered travel cards marketed by 10 financial services organizations that issue the largest volume of cards annually. Most of these firms offer multiple cards with similar conditions for spending points, but with variations in credit limits and annual fees.
Some cards waive the annual fee for a year or offer other perks. With the Bank of America Rewards American Express card, cardholders can redeem their points for hotels and rental cars. Citi PremierPass Expedia.com and Expedia.com Elite Level cards allow cardholders to apply their points for retail merchandise or use the points toward flights listed on the travel website Expedia.com.
At least one airline, Frontier Air, recently began offering more free tickets on nonblackout dates to compensate for the lack of seats in high-demand times. Randy Peterson says other airlines may follow Frontier's lead. Peterson says that's because some airlines are starting to believe that it's better to lower expectations about availability than say no all the time to fliers looking to use their mileage.
... Other frequent flier cards turn sour
Consumers seeking a quick path to free tickets, however, should read the fine print. Restrictions on rewards can make it difficult for travelers to use their points exactly when they want.
Citi's American Airlines-affiliated Platinum Select AAadvantage World Master Card and Select AAdvantage American Express Card advertise no blackout dates, but in a footnote mention that "seats for award travel are limited and may not be available on all flights" with American Airlines, American Eagle and AmericanConnection carriers. A subsequent footnote says that American Airlines can change "AAdvantage rules, regulations, travel awards and special offers at any time without notice and end the AAdvantage program with six months notice. Any such changes may affect your ability to use the mileage awards or credits that you have accumulated."
Some miles capped, others expire
Some cards in the survey cap the number of points that customers may gather or apply toward a flight. The American Express Blue Sky card redeems points in 7,500-point bundles with each increment equal to a $100 credit. Wells Fargo's Optional Enhanced Rewards Program, which caps out 60,000 points per calendar year, and the Chase Visa Platinum Card with Value Miles has monthly and yearly limits of 10,000 and 100,000 miles. In all, at least six cards in the 17-company survey capped points.
Other cards surveyed impose expiration dates. Bank of America's Rewards American Express Card and WorldPoints Platinum Points Visa cards require you to use points within five years. Discover Miles has a 36-month expiration period. Users of the American Express Delta Skymiles card must travel on Delta in the U.S. at least once over a three-year period. Citi AAdvantage card users "must redeem AAdvantage miles or earn them" at least once every 18 months. In addition, a number of travel cards require booking well in advance. The Wells Fargo Optional Enhanced Rewards and Wachovia Possibility Rewards programs require a minimum 21-day advance purchase and Saturday overnight stay.
Some experts say the value of a frequent flier mile has been nearly halved over the past five years from about two cents to 1.2 cents per mile. "They've been devaluing miles," says Harvard Business School professor Max Bazerman, who has studied loyalty programs. "Blackout days are one more way meant to devalue miles." He predicts that airlines will phase out these loyalty programs because "they're not economically feasible."
That can be an advantage during peak travel times when airlines are particularly keen to fill their flights with paying customers. Because the rewards card company buys its own tickets, it must not rely on airline policy or quotas. As long as a requested flight isn't filled, the issuer can provide the consumer with a ticket. "As long as you meet the conditions you can travel any time, provided there are seats," says Tim Winship, editor at large for Smarter Travel.
Observers of frequent flier programs say it's important to review every agreement closely. Even when a company doesn't have blackout dates, it's best to scour terms and conditions for restrictions that may include expiration dates, point caps or rebate formulas. Companies may bury vital information that isn't consumer friendly. Consumers may need to click through several Web pages and scroll through a lengthy list of items to find a key point.
In a few cases, it may be necessary to call the company directly. Keep a log of the people you've contacted and when. Jay Sorenson says it's perfectly acceptable to try out a card. If it isn't satisfying, he says, "discontinue it."
See related table: Details of airline frequent flier programs
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Published: November 6, 2007