Airlines and credit card companies are in an arms race for customers, using ever-increasing welcome bonuses to lure in more travelers and keep profits churning.
But with each new record-setting bonus offer, the points you're earning are getting less and less valuable. You can call it a devaluation and get mad at the airlines and hotels all you want, but in reality, we have the banks to thank for this.
Look no further than *amex platinum card* for proof of what I mean. At one point, not that long ago, this card carried an annual fee of $450 and came with a respectable 60,000-point welcome offer. Nowadays, the card costs annual_fees per year (see rates & fees) and comes with a welcome offer as high as 175,000 points after spending $12,000 in the first six months.
Exactly what bonus offer you're eligible for (if any) will vary. After you submit your application – but before you accept the card (if you are approved) and your credit score is pulled – Amex will let you know the exact welcome offer you can earn.
And even with a nearly $900 price tag, this card's never had a home in more travelers' wallets than it does right now. Thanks in large part to social media influencers and (admittedly) sites like ours, using points and miles to fund lavish vacations isn't the once-niche hobby that it used to be – it's gone mainstream.
As more and more points have flooded the market through these huge credit card offers, airlines and hotel chains have responded by raising the award rates required to book their seats and rooms for free. In isolation, each increase feels like a painful targeted devaluation. But zoom out for the big picture, and it’s inflation … for credit card points.
Here's the scoop on how banks are making your points less valuable.
Sign-Up Bonuses Keep Getting Bigger
I'll let you in on a little secret: Travelers like you and I aren't the airlines' and hotels' customers – we're the product. We get sold to the banks in exchange for big, big bucks.
And what do we get in return? Monster credit card sign-up bonuses and the promise of “free” travel. Don't get me wrong, I've benefited plenty from this relationship and welcome the opportunity to earn a big, new card welcome offer at every turn – but it's important to know how we all fit into this equation.
When commercial air travel was at a standstill in the early stages of the COVID-19 pandemic, airlines mortgaged their loyalty programs to stay afloat. In doing so, they pre-sold the banks millions and millions of points and miles for a quick cash influx.
At the same time, travel rewards credit cards were a hard sell – with so many travel restrictions in place and no real end in sight, the typical sign-up bonus was no longer enough to get travelers to bite. On top of that, the banks were ultra-cautious with whom they approved for a new card, and rightfully so.
So what did the banks do with all these points and no one traveling? They raised new card welcome bonus offers to levels we'd never seen before.
What was once a standard 60,000-point welcome offer on Amex Platinum is now as high as 175,000 points after spending $12,000 in the first six months. Meanwhile, co-branded cards like the Delta SkyMiles suite of cards also saw some of their biggest-ever welcome offers emerge from the pandemic.
This started an irreversible trend toward ever-bigger welcome offers that we haven't seen slow down yet. Once you open Pandora's box, there's no going back. With banks constantly looking to one-up each other and Americans – particularly the “premium travelers” that banks lust after – hooked on bigger bonuses, how could they?
Sure, the *venture x* debuted with a bonus offer of 100,000 Capital One miles – but it also set the bar for what a new “standard” offer should be by settling in with a 75,000-mile bonus after spending $4,000 in the first three months. The fact that the bank even raised the regular *capital one venture card* to that same mark just goes to show that the landscape has changed. A 50,000- or 60,000-point bonus simply doesn't move the needle anymore.
All of this is to say that, with banks using ever-bigger offers to lure customers back in following the pandemic, a new standard was set for what a welcome offer bonus should be. In turn, the airlines and hotels are responding to this glut of points and miles by increasing rates, almost universally, across the board.
Read more: The 10 Biggest Credit Card Offers … Ever!
Do Devaluations Really Matter?
We've seen it repeatedly: Loyalty programs take travelers' favorite sweet spots and kill them off, one by one. In some cases, you'll merely see the airline or hotel chain reshuffle the award chart – the cheat sheets used to determine what a free flight or hotel night will cost. Other times, they do away with the chart altogether and move to a dynamic pricing model, leaving them free to charge whatever they want.
It's like inflation for frequent flyer miles: Airlines have raised award rates to offset the influx of points. Here's a sampling of what we've seen recently:
- Air France/KLM Flying Blue raised rates on its own flights across the Atlantic last year, promising it would lead to better availability. So far, we're still waiting … and paying higher prices in the meantime.
- The sweet spot-laden Avianca LifeMiles program has wiped away many of its best premium cabin redemptions over the past couple of years.
- Turkish Airlines was once a hidden gem for travelers looking to fly business class to Istanbul (IST) and beyond, as well as for those looking to stay closer to home with United, but this sweet spot was soured last year, with rates going up by as much as 150%.
- Emirates, Virgin Atlantic, Alaska Airlines, and countless other airlines have all raised award rates on some of their best redemptions within the last year or so.
- Even hotel chains like Hilton and our beloved Hyatt have raised rates (sometimes astronomically) at their best properties. With chains like Marriott and IHG using dynamic pricing, devaluations are harder to spot, but things have definitely gone up there, too.
With each price hike, travelers (ourselves included) have cried foul. But with record-high credit card sign-up bonuses, does it really matter?
The answer largely depends on how you're earning your points and miles. If you're opening a new travel card or two every year whenever the banks offer these big, limited-time bonuses, you're much less susceptible to these sudden devaluations.
On the other hand, if you're earning your airline miles and hotel points the old-fashioned way, by actually traveling, these sudden price hikes will be a lot more painful. Gone are the days of earning enough points and miles from work travel to be able to afford an annual vacation for the whole family – now business travelers will need to earn additional points through credit card sign-up bonuses and spending.
This is exactly what Delta showed us they care most about with their unpopular SkyMiles program changes a couple of years back. And then United followed suit earlier this year by making its co-branded credit cards essential for anyone hoping to engage with its MileagePlus program.
It also reinforces the importance of leaving your favorite U.S. airline's credit card in the drawer – not swiping it everywhere you go. Earning transferable credit card points at least gives you a fighting chance when there's a devaluation because you can always pivot to a loyalty program with better options.
Again, all this goes to show who the airlines' and hotels' real customers are: The banks. By prioritizing the financial institutions that buy points and miles in bulk over travelers, they don't even bat an eye when making these frequent and abrupt changes. But if you're the type of traveler who benefits from these ever-growing sign-up bonuses, it might not really matter.
Read more: Quit Charging Everything to Your Favorite Airline’s Credit Card
Bottom Line
In a classic case of “What came first, the chicken or the egg?” – it's quite clear that the all-too-frequent airline and hotel program devaluations are a direct result of the ever-growing credit card sign-up bonuses we crave.
If you're a traveler still earning points and miles the old-fashioned way – by flying with an airline or staying loyal to a particular hotel chain – these constant changes to award charts undoubtedly sting. Diversifying your points and miles is more crucial than ever if you want to travel for free.
This is just a very long winded description of inflation.
Ya know what other “points” are getting devalued every day? The US Dollar!
The airlines and hotels have to inflate their prices to keep up with dollar inflation, and then they have to inflate the award prices to keep up with the increased cash prices. Banks then have to issue more points to keep up and keep customers signing up for and using their cards.
The airlines aren’t to blame, the hotels aren’t to blame, the banks aren’t to blame.
The blame lies squarely on the US Government, and its out of control spending and debt, and the resulting inflation that comes with it.
Hey, Joe! Thanks for reading. I truly don’t think your point about broader inflation tells the full story here. While more and more loyalty programs have switched to dynamic pricing (loosely tied to the cash rate of the flight or hotel room), most airlines and hotels have historically used an award chart. The longer the flight or the nicer the hotel, the more you pay. And with airfare at historic lows (not accounting for the recent increase tied to the war in Iran), it’s hard to make a case that award increases over the last few years have anything to do with the cash price. The real reason (as stated in the story) is the flood of points and miles entering the rewards ecosystem through sign-up bonuses and spending on travel rewards credit cards. Back when the only way to earn miles was by flying, the airlines had more control over supply and could keep prices stable. Now, they’re quick to take the easy money from banks by selling points and have to raise award prices as a result.
You have it backwards. Credit card companies are able to “give” miles because the airlines provide (sell) the miles. Banks have no incentive to devalue points because they’ve already issued the points. The airlines have every incentive and are responsible for this very deliberate bait-and-switch con The airlines are the bait-and-switch movers since they conduct the devaluation of miles. (I suppose the argument could be made that airlines sell miles to the banks at a discount that the banks take in full knowledge of what the airlines will do to the real value of those miles, but I’m not aware of proof.) The airlines consciously decided to change from airlines into credit card companies. It’s a corrupt business model but the sort of result we can expect when an industry becomes oligopolistic run by what we used to call “bean counters.” Regulators need to get involved.
That only explains the miles and points from airlines and hotels. That does not explain the incredible flood of point currencies created by the banks themselves. Ultimate Rewards, Membership Rewards and Thank You Points are bank creations!
Hyatt is a good example. Earning by head-in-bed, is very difficult, with Hyatt. But with the huge SUBs on Chase Ink CCs, there is almost unlimited amount of points available to earn and redeem. Points are one thing, but award availability is totally another. Premium seats and award nights at aspirational properties are very difficult to book. And that is not going to change, with the on going over-the-top SUBs.
The old saying of “pigs get fed, hogs get slaughtered” is very apropos. I do blame the banks more than the travel suppliers. For years a 75K SUB earned enough points for at least a business class one way award, to just about everywhere. But now one needs at least 3 or more, 75K SUBs to earn enough points for 2 RT business awards.
This economy is not as good as the stock market makes it out to be. Banks will end their freewheeling ways, but the high award costs are here to stay. Created by the hogs!