Why you should rarely, if ever, use an airline or hotel credit card
Background
As you can probably tell, points and miles is my hobby. Now, it’s not my only focus. I love spending time with the family. I like to exercise. I like to read. My faith is paramount to me. I am a diehard Houston Astros fan (hopefully I didn’t lose you as a reader after that one!) However, I’m not a gamer. Lately, there’s been few shows and movies that draw me in. If you drive by our house, you will know that gardening ain’t it either. Points and miles is the nightly puzzle that I like to put together. It’s my favorite hobby.
I know the average person isn’t listening to points and miles podcasts (like Frequent Miler and the Daily Drop) on the way to work. I know that searching for award redemptions on the couch is not the average person’s idea of a good time. Nerdy or not, I like the “needle in the haystack” find. I love the reduced cost of travel we get on the other side of the hours of searching.
All that to say: I think about points and miles way more than the average person does. I am aware of this fact most acutely when I am behind someone in a checkout lane or a drive-thru. I have eagle eyes to see what card they pull out. Although I try not to judge too harshly, I definitely take mental note of who is maximizing each purchase vs. those who are leaving money and value on the table.
I know this is not an objective study, but here are the types of cards that I most see people pull out:
Debit cards (I can’t tell you how many times I have seen a Chase or Bank of America Debit card pulled out by someone! The horror!)
Cash Back cards (there are a ton that I see, but Bank of America Unlimited Cash, Citi Double Cash and Capital One Quicksilver Cash are pretty common)
Airline cards (The two biggest suspects I notice here in Indianapolis: Delta and Southwest)
Hotel cards (Anecdotally, I see Marriott cards pulled out the most)
A recent Forbes study gives a bit more quantitative data to my observations:
Only 36% of those surveyed use a credit card for purchases!
Transferable Points/Miles
Anecdotally, the credit cards that I see people pull out the least are those that I consider to be the most valuable: those that earn points/miles that can be transferred to a variety of airlines and hotel programs, often called “transferable points/miles.”
The ability to transfer these points to multiple airlines and hotels (often called "transfer partners") gives you a ton of options on how to use them, which makes them more valuable than points/miles that are tied to a specific airline.
Think of it like this: Would you rather have a gift card to AirBnB or a gift card that works at AirBnb, United, Hyatt, VRBO, American, and Hertz?
Easy answer.
The most widely known transferable points/miles programs are American Express Membership Rewards, Chase Ultimate Rewards, and Citi ThankYou points.
Let’s look at American Express Membership Rewards (“MR”) as an example.
AMEX MR points can be transferred to the following travel partners:
Meaning that any point earned with American Express Membership Rewards is potentially a point with Air France, Delta, Hawaiian, JetBlue, or any of the other 17 transfer partners listed here.
So, for example, if you are comparing 50,000 Delta miles vs 50,000 AMEX MR points, they aren’t even in the same ballpark. The Membership Rewards points are vastly more valuable because they can be utilized with so many airlines and hotels (and can be transferred to become 50,000 Delta miles anyway).
Transferable Currency cards vs. Airline/Hotel Cards
With this in mind, it rarely, if ever, makes sense to put your credit card spend on the Delta credit card vs putting it on a card like the AMEX Gold (which earns AMEX Membership Reward Points.) Why would you want to earn points that are tied only to Delta Airlines when you could earn points that can be used with Delta and 20 other travel partners?
You wouldn’t.
To clarify, there is one notable exception (and a minor exception). The notable exception is if you are trying to reach the minimum spend on an airline or hotel credit card to reach a sign-up bonus. For example, we recently were approved for the Marriott Bonvoy Business American Express Card.
Why did we open it?
Over our 10+ years of playing the points and miles game, we have predominantly stayed away from Marriott, primarily because of the constant negative reviews around their award program (especially as their new program, Bonvoy, was unveiled after their merger with SPG 5 years ago.) However, we’re really trying to increase what percentage of our travel where our lodging is covered by points and the sign-up bonus was at an all-time high.
When we applied for the card, the sign-up bonus was 125,000 Marriott points after spending $8,000 within 6 months of card opening. That means, for every dollar spent toward the minimum spend ($8k), we are earning at least 17.6 Marriott points per dollar (even more if it’s in a bonus category like restaurants or gas stations). How did I figure that out? I divided the sign-up bonus (125,000) by the minimum spend amount (8,000), which came to 15.6, and then I added the 2 points per dollar that I will get on everyday spend. Even though I only value Marriott points at 0.06 points per dollar (a little more than half a cent a point), I’m still earning over 10% back on each purchase! I can’t earn anywhere close to that on any of my other cards that I typically use for everyday spend (like the Capital One Venture X.)
A secondary reason why you might want to put everyday spend on an airline or hotel card, instead of a transferrable currency card, is because you are chasing elite status. That’s a bit complex to fully explain here, but I tend to advise individuals to really weigh the benefits of elite status (i.e. how much they will really use the status), because the opportunity cost is HIGH to lose out on accumulating transferable points vs. airline miles!
Conclusion
As you get more acquainted with reward credit cards, you’ll notice more and more that not all points and miles are created equal. That's because even though different cards offer "points" or "miles" for every dollar you spend, those points can be used for very different things, with vastly different value. One card could offer a 130k point bonus and another a 75k point bonus, and the 75k offer is actually more valuable!
With that in mind, there are few points more valuable to earn than transferable points (like Citi ThankYou points or Chase Ultimate Reward points), that can be transferred to various travel partners. Transferable rewards give you more flexibility. For instance, if you've been accruing Delta Air Lines SkyMiles on the Delta SkyMiles Business Gold American Express Card, you're confined to redeeming your miles within the SkyMiles program. If you need to fly from Detroit (DTW) to London's Heathrow Airport (LHR) on a specific date and the flight is 120,000 Delta miles, that's your redemption option. However, that same itinerary might be only 40,000 Air France/KLM Flying Blue miles! Instead of being limited to a single airline or hotel program, you can utilize a vast network of partners and select the one that offers the most value for each redemption.
