Delta changes award program; should you change your card?
With airlines altering rewards, it's a good time to evaluate credit-card options
Ask a question.
Dear Cashing In,
I have a Delta American Express card and am disappointed to see the change to the Delta SkyMiles program. I am wondering if it's time to switch to another rewards card -- especially since my annual fee is coming due. I live near a major hub, so I'm not married to Delta. But are the other carriers also going to be moving to this "revenue-based" strategy? -- Ben
These are changing times for people who participate in airline frequent-flier programs. You've probably read about how airlines and hotels have been increasing the number of miles and points needed for free flights and hotel rooms.
Delta has announced those kinds of changes in recent months, but what Delta announced in late February is entirely different. It's an overhaul of how customers who fly on Delta earn frequent-flier miles. Instead of basing the number of miles earned on the distance of the flight, Delta will start awarding miles earned based on the fare paid, beginning Jan. 1, 2015.
Say, for example, you pay $400 for a round-trip flight from New York's John F. Kennedy International Airport to Los Angeles. Currently, you receive 4,950 Delta SkyMiles, because the distance traveled is 4,950 miles. Under the new rules, though, typical Delta customers would earn just 2,000 SkyMiles -- your $400 fare multiplied by five. The multiple can increase to as high as 11 miles per dollar if you are an elite-level frequent flier (determined by a combination of number or distance of flights plus a minimum spending amount).
So in this example, under the old structure, you would hit 25,000 miles -- the lowest level to redeem for an award ticket -- after a little more than five of those flights, which cost a total of $2,000. Under the new structure, you would need more than 12 such flights (totaling $4,800) for the lowest-level award ticket.
This sounds like a bad deal compared to what it was, but it will be worse for some people than others. Business travelers accustomed to paying higher fares because they book at the last minute could come out ahead. Remember that the purpose of a loyalty program is to reward a company's best customers.
Getting poll results. Please wait...
It's important to note here that the SkyMiles you earn from your American Express Gold Delta SkyMiles card ($95 annual fee, waived first year) do not change. You earn 1 point per dollar spent, or 2 points on Delta purchases. You also continue to receive perks such as a free checked bag, priority boarding and in-flight food and beverage discounts. If you earn most of your Delta miles through credit card spending, as opposed to flying on Delta, these changes might not affect you too much.
One area Delta has not spelled out is changes on the redemption side. For years, fliers have complained about stingy award availability on Delta flights at the lowest redemption levels. In surveys, Delta typically ranks at or toward the bottom for making award seats available.
In announcing the new earning system, Delta promised that it would make available more award seats at the lowest levels.
It's hard to say whether these sorts of changes will catch on, but cost-cutting or moneymaking ideas have a way of spreading in the airline industry. Not so long ago, free meals on domestic coach flights and free checked bags were commonplace. Now, you pay for those services.
Southwest, JetBlue and Virgin America have made similar changes. In those programs, you earn miles based on how much you spend, and the number of miles required for a free flight depends on the cost of the ticket. That structure is similar in concept to some credit card travel reward programs such as the Barclays Arrival card or Capital One Venture card, which let you redeem points based on the cost of the ticket you buy. Those kinds of cards can provide ultimate flexibility, and they don't lock you in to any particular airline.
Neither do cards that reward you with Chase Ultimate Rewards or American Express Membership Rewards. Points on those cards can be transferred to many different airline and hotel partners.
There's no doubt that airlines are trying to clamp down on the Wild West atmosphere that's pervaded miles redemption for a while now. It might be financially smarter and help you sleep better to just use a cash-back card instead of gambling that you can get seats for a family vacation to Hawaii with your miles.
But as someone who is planning a family vacation to Hawaii this summer entirely on rewards earned from credit cards (chiefly sign-up bonuses), I personally find travel-specific rewards to be a better value, and am willing to take that risk.
It just depends what you want and how much time you're willing to invest in keeping up with rewards and all the changes underway. As always, evaluate your options, study the current deals and see what works best for you given your spending and travel preferences. With these programs changing, a lot of travelers will find value in flexibility.
Meet CreditCards.com's reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Are credit card referral bonuses subject to taxes? – Credit card rewards are usually not taxable if you had to spend in order to earn them. That's why referral bonuses might be subject to taxes. Here's what you should know ...
- Should I sell my frequent flyer miles to an online miles broker? – Selling miles comes with risks and is not allowed by frequent flyer programs; these are your options ...
- Is the Mastercard Black Card worth it? – The Mastercard Black Card bills itself as a luxury card charged with premium benefits – and a hefty annual fee. Is it worth it? Read on to see if the Mastercard Black Card is right for you ...