Do United's frequent-flier changes devalue its travel card?
Airline, like others, alters points rewards program to favor big spenders
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Dear Cashing In,
I just read that United is changing its frequent flier program next year. I fly several times a year, mostly to visit family, but occasionally for work. Should I cancel my United credit card? -- Marco
When airlines latch onto a money-making or money-saving idea, it spreads. Like the plague, some would say. Baggage fees, selling food, eliminating pillows and blankets ... those are all pretty much standard on U.S. airlines these days.
The latest idea to catch on in the airline industry is a move toward frequent-flier programs that offer the richest benefits for the best customers. The flip side, however, means offering the least benefits to occasional customers -- those who usually seek the lowest fares. A lot of us fit in that category.
When American Airlines started the first airline loyalty program in 1981, it was based on a simple premise: You fly 1 mile, you earn 1 point. Gather enough points, and you could earn discounts, upgrades and even a free trip.
Today, though, the airlines have figured out that their best customers are those who fly in business or first class repeatedly, and they want to hang on to those lucrative customers. Instead of how far you fly, they now are increasingly judging you on how much you spend.
Southwest, JetBlue and Virgin America have used this approach for several years, but only now are the major U.S. airlines coming along. With an announcement in February, Delta moved to a spending-based rewards plan, and United followed last week. Under its new program, which will apply to most flights departing on or after March 1, 2015, the number of miles you receive for a flight will be the fare price multiplied by a number between five and 11, depending on whether you have elite flier status. If you don't have that status, you multiply by five. If you're Premier Silver (flying at least 25,000 miles or 30 segments plus spending $2,500 a year), you multiply by seven. And so on.
This change means that most people will be earning fewer United miles through paid flights. Instead of earning 5,120 United miles (based on the distance flown), a $400 round-trip ticket between Newark and San Francisco would now earn just 2,000 miles, unless you have elite status. The people who come out ahead under the new plan are probably elite-level fliers and those who routinely pay for business- and first-class seats.
If there's an upside, it's that the new plan doesn't really affect how you earn miles with credit cards, such as Chase's United MileagePlus Explorer card ($95 annual fee, waived first year). And it doesn't affect how you redeem, either -- the mileage redemption levels for free trips are staying the same -- so people who have cards that accumulate Chase Ultimate Rewards or Starwood points can still transfer them to United and use them as before.
United says that beginning early next year, it will offer more ways to redeem miles, such as buying seats in Economy Plus and "checked baggage subscriptions," which are presumably credits to avoid checked baggage fees. One of the perks of the MileagePlus Explorer card is a free checked bag.
Marco, there's no hard and fast rule on whether you should keep the card or ditch it. If the changes are going to make you stop flying United, then the card might not be worth the $95 annual fee. But examine how much you fly, how much you project you'll fly, check out other travel cards, and make an informed decision.
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