How Do AAdvantage Changes Impact Value Of Citi ThankYou Points?

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Your first reaction to the headline of the post may be “wait a second, what do AAdvantage changes have to do with the value of Citi ThankYou points?” Let me explain.

The value of the Citi Prestige & Citi Premier Cards

As of last year, Citi has gotten really competitive with the value of their transferrable points currency cards, especially the Citi Prestige® Card and the Citi ThankYou® Premier Card. These cards offer the following sign-up bonuses:

Citi Prestige® Card

  • Earn 50,000 bonus ThankYou points after you spend $3,000 in purchases within three months of account opening
  • $450 annual fee

Citi ThankYou® Premier Card

  • Earn 40,000 bonus ThankYou points after you spend $3,000 in purchases within three months of account opening
  • $95 annual fee, waived the first year

Citi-Prestige-Premier

The Citi Prestige® Card is an especially compelling “premium” card, as it offers a ton of perks which more than help offset the $450 annual fee, in my opinion. These include:

The card also has a great points earning structure, which is rare for premium cards:

  • 3x points on air travel and hotels
  • 2x points on dining out and entertainment
  • 1x point for all other purchases

The Citi ThankYou® Premier Card is more of a mid-range credit card, which offers a great rewards structure for everyday spend:

  • 3x points on travel
  • 3x points on gas
  • 2x points on dining out and entertainment
  • 1x point on all other purchases

What do Citi ThankYou points have to do with American?

Citi ThankYou points can be transferred to quite a few partner airlines at a 1:1 ratio, though American AAdvantage isn’t among them. I’ve speculated that American AAdvantage will be added as a Citi ThankYou transfer partner after the devaluation, though that’s baseless speculation on my part.

But Citi ThankYou points can also efficiently be redeemed for paid travel on American:

Citi-Prestige-Points

Impact of AAdvantage changes on these redemptions

American is making some major changes to the AAdvantage program in 2016. Perhaps the most significant changes are as follows:

  • An award chart devaluation, which kicks in for bookings made as of March 22, 2016
  • Starting in the second half of the year, American will award redeemable miles based on how much you spend rather than how much you fly

Over time, award chart devaluations impact the value of accruing miles rather than “cash back” towards travel. For example, if you have AAdvantage miles, your buying power for many types of awards will decrease significantly as of March 22, 2016. However, that’s not the case if you’re paying cash. Airfare was down in 2015 compared to 2014, and it’s not looking like it will increase in 2016 either.

So the relative “value” of 1.6 cents towards travel on American is actually increasing for the average consumer, rather than decreasing, at least based on the opportunity cost of those points.

This is rather specific to Citi ThankYou as opposed to Amex Membership Rewards or Chase Ultimate Rewards, since Citi ThankYou points are the only ones which can efficiently be redeemed for revenue travel, in my opinion. While Amex and Chase points can also be redeemed as cash towards the cost of an airline ticket, the redemption values aren’t nearly as good.

I value Citi ThankYou points at ~1.6 cents each, and that’s also the rate at which those points can be redeemed towards travel on American, assuming you have the Citi Prestige® Card.

Also, as I said above, I suspect this devaluation will allow American AAdvantage to be added as a transfer partner of Citi ThankYou. It’s only speculation on my part, but Amex lets you transfer points to Delta, and Chase to United, so it’s only logical.

Bottom line

Maximizing your rewards is just as much about relative value as it is about absolute value. It can be tough to constantly change your behavior in order to maximize points, but I do think the upcoming AAdvantage changes have an impact on the value of Citi ThankYou points:

  • As the number of miles required for an award increases but the cost of paid travel stays the same, the relative value of points which can efficiently be redeemed towards the cash value of airfare increases; I still plan on requalifying for Executive Platinum status, so I might as well use each point for 1.6 cents towards the cost of travel, rather than redeeming them for ever-increasing award costs
  • I feel pretty comfortable speculating that this devaluation will make it possible for AAdvantage to be added as a Citi ThankYou partner, though that’s not based on any inside information

While I of course still love “aspirational” miles, the benefit of accruing points which can offset the cost of paid travel can’t be understated either. Between the Citi Prestige® Card and Citi ThankYou® Premier Card, I’m earning ~4.8% of value towards the cost of travel on American for all my travel and gas purchases, and ~3.2% of value for all my dining and entertainment purchases. That’s pretty tough to beat in an environment where the cost of revenue airfare isn’t up, while the cost of awards continues to be on the rise.

Do you see more value in accruing points towards the cost of revenue travel with the current trend of the cost of airfare staying the same/decreasing, and the cost of awards increasing?

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Comments

  1. @lopere You’re double-counting: you also earn miles on flights you pay for with cash. Have to compare apples to apples. In other words, in so far as miles aren’t earned on award tickets, that just reduces the value of award tickets, it doesn’t “increase” the value of cash-equivalents.

  2. @Ben, it’s not double counting. When you use TY points, you are trading in those points for AA miles + AA travel. The miles themselves are worth something. Iopere is right.

  3. You get 1.3 with the Amex plat and 1.25 with premier ur cards so there is some value there for airfare redemptions

  4. Personally I like to redeem my points for aspirational products as well but I make exceptions for TY points.Like my last trip from SYD to JFK for 34k which I was able to SWU and basically “made back” all the miles.

    Btw great meeting you on Bondi.;)

  5. Lucky just wanted to let you know that on Feb 3rd, I will be sitting in an angled flat Business Class seat from ORD-DFW for $41. Nice that the business class seats being sold as coach are only for elites 🙂

  6. If I use my TY points and redeem them for AA ticket, would it be treated as a revenue ticket to where I would earn redeemable miles AND miles towards status?

  7. How can you get Alaska involved in a 1.6 Citi redemption? Fly Alaska metal on AA codeshare and then also credit miles to AS?

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