Changing Credit Card Strategy Due To United Devaluation?

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Yesterday I shared what I consider to be the best uses of Chase Ultimate Rewards points post-February 1, 2014, in light of United’s massive award chart devaluation that kicks in then.

There’s no doubt the value of the Chase credit card rewards points have decreased as a result of these changes, and based on my initial, “rough” valuation I’d say the value of Ultimate Rewards points has gone from 1.8 cents per point to 1.6 cents per point. Ultimately there are still many potentially good uses of Chase rewards points for travel, including:

  • Hyatt Gold Passport redemptions, especially for their top properties, which go for 22,000 points per night
  • Korean Air SkyPass redemptions, given that they have reasonable first class redemption rates for travel to Asia and amazing award availability
  • United MileagePlus redemptions, since their award chart for travel on United hasn’t actually gone up that much
  • Southwest Rapid Rewards redemptions, since transferring points to them gets you 1.67 cents per point towards “Wanna Get Away” fares (they’re devaluing their program in April, and the value per point will go down to 1.43 cents)
  • British Airways Executive Club redemptions, which can be a great value in some markets due to their distance based award chart

So while I value Ultimate Rewards points less than I did before the change, at the end of the day I don’t think these changes substantially alter the value proposition of cards that accrue Chase Ultimate Rewards points.

Given that, here are my recommendations for an overall spending strategy:

The Barclaycard Arrival World MasterCardStarwood Preferred Guest® Credit Card from American Express, and Starwood Preferred Guest® Business Credit Card from American Express remain the best cards for everyday spend

If you’re spending money in a category that isn’t otherwise eligible for bonus points, just as before the above cards remain your best options.

  • The Barclaycard Arrival essentially earns you the equivalent of 2.1% cashback towards travel (you earn two miles per dollar, each mile can be redeemed for one cent towards the cost of travel, and you get a 5% refund when making redemptions)
  • I value Starpoints at 2.2 cents each, so the SPG American Express cards remain a great value
  • Both cards have reasonable annual fees as well, which are waived for the first year

Beyond that, these are probably the two lowest risk points currencies out there. I can’t imagine the Barclaycard Arrival will switch from their “one point gets you one cent” model anytime soon, and similarly Starwood has so many airline transfer partners that even if one were to devalue, it wouldn’t drastically change the value of those points.

The Chase Sapphire Preferred® Card remains the best “all in one” card

Despite the devaluation, there’s still not really any card that can compete with the Chase Sapphire Preferred® Card:

  • You earn 2x points on dining and travel (and while there are other cards that offer bonus points on airfare and hotels, for example, this card has a much more liberal interpretation of travel, as it includes parking, train tickets, etc.)
  • The card has no foreign transaction fees

So for spend in a category that otherwise doesn’t accrue bonus points the Barclaycard Arrival or Starwood American Express Cards are still your better options, but that has always been the case. Every traveler should have a card with no foreign transaction fees, and the double points on dining and all travel expenses are pretty unique to the Chase Sapphire Preferred.

The Ink Plus® Business Credit Card, Ink Bold® Business Charge Card, and Ink Business Cash℠ Credit Card Cards offer the single most compelling category bonuses

The Ink Cards have some of the most lucrative category bonuses out there:

  • 5x points on spend at office supply stores, and on cellular phone, landline, internet, and cable TV services
  • 2x points on spend at gas stations and on hotels

Everyone has to crunch the numbers for themselves as to whether they do enough spend on the cards to justify the annual fee, but whether the points earned are worth 1.6 or 1.8 cents doesn’t materially alter the value proposition of these cards, in my opinion.

For big spenders the Premier Rewards Gold Card from American Express can be very lucrative

In terms of the ability to earn points, the only American Express card that can compete with the Chase Sapphire Preferred is the Premier Rewards Gold Card, which offers the following category bonuses:

  • 3x points for flights booked directly with airlines
  • 2x points at US restaurants, US gas stations, and US supermarkets

If the annual fee were $90 lower I’d say it would be great competition for the Chase Sapphire Preferred for just about anyone.

For the average consumer, however, it’s probably not great beyond that.

So while these devaluations are discouraging and frustrating, for the most part you’re still better off accruing a points currency than cash back, unless you can tailor that to specific bonus categories as well.

Big picture the devaluation changes very little on the credit card spend front

Chase has been gaining market share like crazy over the past few years, and justifiably so, since their co-branded Ultimate Rewards cards really are that good. Ultimately that hasn’t changed, even if their value goes down by ~10%. So as a general rule of thumb I wouldn’t be switching credit card spend strategies.

As always, I think it’s important for everyone to decide what they’re looking to get out of their points, because there’s no “one size fits all” points currency. If you like to redeem your miles for domestic trips or international economy redemptions, it’s tough to beat a card like the Barclaycard Arrival, where you’re earning the equivalent of 2.2% cash back towards travel.

Meanwhile if what you really want to do is redeem your miles for Singapore A380 Suites Class, you’re best off focusing on a card like the Premier Rewards Gold Card, given that Membership Rewards points can be transferred to Singapore’s KrisFlyer program at a 1:1 ratio.

So you should never blindly follow advice as there’s no program that’s perfect for everyone. But in terms of the overall value proposition, I don’t think it has changed all that much for Ultimate Rewards cards.

Is there an alternative to MileagePlus for premium cabin redemptions?

One question I’ve been getting a lot is “which Star Alliance frequent flyer program should I switch to for premium cabin redemptions?” I’ve given it some thought, and I think the reality is that there’s no stable mileage currency in Star Alliance that really stands out for first and business class partner redemptions:

  • US Airways Dividend Miles will likely be leaving the Star Alliance soon and already blocks many premium cabin redemptions, including Lufthansa first class
  • Air Canada Aeroplan imposes huge fuel surcharges on award redemptions, and their rates aren’t great either
  • AviancaTaca Lifemiles has good redemption rates in theory, but they have a history of devaluing their program without any advance notice, and have some ridiculous award rules (like not being able to mix first and business class on a single award)

So I really don’t think there’s any Star Alliance program to switch to that offers an especially compelling value proposition. I certainly think it’s more tempting to purchase AviancaTaca Lifemiles now when they go on sale for 1.5 cents each, though only with short term redemptions in mind, given their award chart changes without any advance notice.

Will you be changing your credit card strategy as a result of the United devaluation?


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Comments

  1. In a word, no.

    As you point out, there aren’t really better options than UA for redeeming on *A, and the other alliances aren’t as good. So, while the huge partner award price increases hurt, TPAC business class awards (what I usually use miles for) were definitely due for an increase in price.

  2. I decided not to renew my CSP after the United devaluation (still will keep my Ink Bold though). Previously, I valued United miles (and hence UR’s) at 1.5 cents, but now I value them at 1.1 cents.

  3. Absolutely i will. I spend 300K+ each year between my UA club card and sapphire preferred…likely to go back to amex

  4. Not at all. As we spend most of our time overseas the foreign transaction fees are a killer if we use the wrong card. So CSP will be getting most of our spend in 2014 just as it did in 2013.

  5. I absolutely will not. Can’t beat United’s routing and change rules. Also, what other good option is there for *A? Everyone else has convoluted programs that charge fuel surcharges. Skyteam sucks, and it’s hard to accrue a lot of miles for Oneworld premium, except through Citi AA churning, which will go on as always.

  6. ..correction, USAir is better for premium, for now, but hard to accrue meaningful files there through regular spending.

  7. I don’t plan on changing my credit card strategy at all. I value SPG points at a much lesser value than you do. I appreciate the transfer capabilities to many airlines and I think that’s great. However, I feel as if their points are incredibly difficult to earn and becoming increasingly difficult to burn!

  8. You didn’t mention the Platinum AMEX. I got it this year when they offered the 100,000 points, but I don’t know if i should keep it next year or get another card.

  9. Singapore KrisFlier miles are at least worth mentioning, as you can get them from SPG or Amex rewards transfers. They have good availability on their own metal in premium cabins (which is a great product), although they do have fuel surcharges.

  10. What about the UA Club (1.5x on everything) card which I got free for one year? I don’t see what else to use for non bonus spend.

  11. rick b- “Can’t beat United’s routing and change rules.” Doesn’t United charge $75 now for even minor changes to award tickets for nonelites? ABSOLUTELY RIDICULOUS. After they did this I stopped flying United. Now the major devaluation.

  12. @ Lynn — The American Express Platinum Card is great for the benefits (lounge access, $200 airline fee credit, $100 Global Entry credit, etc.). But for everyday spend it’s really not an especially worthwhile card since you get a flat point per dollar spent. The American Express Card with much better earning abilities is the Premier Rewards Gold Card.

  13. I’m going to diversify my card usage so that I have sufficient miles available for at least one-way business tickets to Asia and Australia. Given where my accounts are at present that means more charge on BA and Amex Gold card, and much less on Sapphire and Ink. If no other options are available, I’ll fy United metal, but personally I’d rather fly across the ocean in Cathay Pacific business than in United First.

  14. @ Al — Good point, that card can make a lot of sense if you’re a big spender, but the high annual fee makes it tough to justify if you’re not otherwise taking advantage of the benefits of the card in my opinion.

  15. For what I use my miles for, the Hyatt and Southwest transfer partners via Chase UR dominate. It’s still fairly easy to earn UR points and burning them at Category 6 Hyatt hotels provides insane value. With Southwest, I am hoping to get the Companion Pass in early January 2014 (Thru December 31, 2015)…and being able to transfer UR points will provide great value there as well!

  16. @lucky . . . much of my CSP foreign currency spending will probably just shift to the Ink Bold card, as most of that spending supports my sole proprietorship. Most of my USD CSP spending will probably shift to Amex SPG or other hotel cards (I’m starting to put more non-bonus spending on the Club Carlson card). Also, I’ll probably shift much of my $10-$20 spending from my Chase Freedom card (I still get 10 bonus UR’s per transaction) to hotel cards. . .

  17. No change for me. I don’t have an interest in redeeming UA miles for partner premium cabin flights. The remaining changes aren’t significant enough to impact me.

    I wouldn’t yet say that it’s “likely” US will be leaving *A. They may, but too much is still in flux at this moment.

  18. How about miles and more, except the 3 region awards are a killer, but it isn’t bad except that. It has the lowest number of points in any alliance for transcontinental business class (35,000), but kris flyer might be good, except they have seperate award charts like united.

  19. Great analysis! As far as the program, Some time ago I had decided to look for another program in case something like this would occur, and have had some real success with Avianca´s Lifemiles promotion. As you say, short term redemptions… nevertheless, it´s an option.

  20. @John – true, but it’s still a bargain compared to being stuck with a fixed ticket. This summer I flew to Asia and Europe on one ticket. Could only get coach for my dates, so I only spent about 65-70k miles for what would have cost well over $2k to buy, and a typhoon in HKG prompted me to rearrange my flights on 2-day notice. Hard to beat that kind of value, so I value them at least 2-3 cents.

    And if you look at it objectively, Chase cards still beat others for fast miles accrual. Sure, I’ll continue to get other bonuses but for daily spend I’m not switching anything.

  21. KA has great award availability, but you failed to mention the astronomical YQ. Do you value miles so much with UR that you would rather spend higher fees than just burn more miles on *A?

  22. @ Adam — Korean Air has an astronomical YQ? Roundtrip between Los Angeles and Seoul in first class it’s $300. I’d call that pretty reasonable, compared to flights between the US and Europe, where it’s usually triple that.

  23. @Lucky, that’s very surprising. I once booked a JFK-ICN-SYD-NAD-ICN-JFK in coach! for 2 people and it was over $1k in taxes.

  24. I can’t believe you still value United miles at 1.6 cents per mile. Would this be the case if your business didn’t depend on Chase?

    Realistically, I valued United miles at 1.5 cents per mile before… so now that some awards are 87% more expensive, 0.8 cents per mile is much more like it.

    I’ll be switching most of my spend to Alaska and some to Amex biz gold.

  25. I second, Al on the United Club card. I got it free for the first year, and I kept it because they offered me 15K MP miles (before the devaluation notice) or $150 to keep the card. Not only does it earn 1.5 miles per dollar on purchases, it includes Avis Preferred, Hyatt Platinum and many benefits when flying United (business class check in, priority security, priority boarding, and two free bags).

  26. @ Lantean — I don’t value United miles at at 1.6 cents each, but rather Hyatt points at that (and they’re another Ultimate Rewards transfer partner).

    That being said, do you really value United miles at 0.8 cents now? They will charge 115,000 miles for business class to Europe and have a flat bed product, so do you value a business class ticket to Europe at $920?

  27. My bad, I didn’t read it correctly… so how much do you value United miles now?

    That business class ticket to Europe example is irrelevant to most of us. United serves very few destinations there. most likely you’ll have to connect and take at least one leg on Lufthansa, Austrian, etc (in which case it’s probably nicer to make the whole trip on a partner)… so you’ll end up paying 140k miles plus about $100-200 in fees, so about $1,300 total (at 0.8 cents per mile). that’s a pretty fair value considering you can BUY a biz class ticket to Europe over Thxgiving for the same amount (and earn miles on it).

    And we both know that biz class is hardly an aspirational product… maybe except the novelty of Austrian (even tho their amenity kit looks like something I’d give to a homeless person).

    It’s the first class that is lost to us now and that’s what hurts the value of their miles.

  28. @ Lantean — I probably value United miles at 1.4 cents each now.

    Keep in mind United actually has a pretty extensive route network to Europe, and you can include intra-Europe segments on Star Alliance partners on a United award, assuming those segments are in coach (which intra-Europe there’s not a huge difference between coach and business class).

  29. @ James — I’ll have an updated valuation soon, though last time I valued them I said 1.8 cents each, and I don’t think their value has changed substantially since then.

  30. @ JB — Tough to say. I’d say probably about 1.5 cents each right now given their current chart, though they devalue without notice, so tough to give them a long term value.

  31. @Lantean

    I happen to agree with Lucky regarding the UA valuation. You knock his analysis because of the huge increase in partner F mileage requirements. One thing you are missing is that partner F really isn’t all that available. TATL, you’re generally talking LH, who is stingy with advanced availability. TBH, I like to “set it and forget it” so if I have a decent J routing locked in, then so be it.

    TPAC, you’re talking NH primarily, and OZ secondarily, and the former definitely doesn’t have a ton of award space, although I’m not so sure about the later.

    So generally speaking, it’s hard to justify knocking UA as much as you do.

    I did fly CX F once (well twice, if you include the r/t) and I gotta be honest, I didn’t think it was all that. It was nice, sure, but if I’ve got a place I want to go (and I always got a place I want to go, it’s why I travel) and flat-bed J is available on my preferred dates and F isn’t, then flat-bed J it is.

  32. @lucky

    There’s a difference between Y and J on intra-European flights? I had no idea 😉

    (Just to be clear, I’m joking. I know exactly what the difference is. It’s so trivial I don’t know why they bother.)

  33. I am staying with Chase. I will use UA on UA metal and to Europe only.

    I disagree with Starwood, I value these points much lower. SPG could devalue them by extending the UA model ( 1:2) to all airlines coded as (1:1). That would be brutal but not impossible.

    I value Avianca a lot now, that small quirky program has a lot going for it. As far as those quick deval. back in May, I was explained that it had to be done this way to combat fraud in some markets.

    The good thing about UA is that it should be quiet ( probably) over there for some time. But just in case, I will be using my AA Sign. visa with chip much more now..Hilton Honors Reserve will be axed in March before my anniversary.

  34. Lucky, —IF— you never use UA miles for travel on UA metal, but ONLY for access to *A awards, is it still the best program to go with vs any other alliance, or *A carrier…???Is switching to OneWorld or another program within * worth considering if redemptions ON UA are not your goal…???

  35. @ SEM — Given what they’ve announced it definitely won’t be. American, US Airways, and even Delta for that matter, have much more lucrative charts. That being said, I’m not sure it’s worth switching to any of those programs, since it’s likely only a matter of time before they devalue their charts further.

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