Why does Amex hate their personal cardmembers?
Earlier this week Amex rolled out another new cardmember benefit exclusively for their Business Platinum cardholders, which means it does not include their Personal Platinum cardholders. This continues a trend I remarked on a few months ago in my post “The Amex Platinum! Now Improved! But Not Really!” Because if you’re paying $450 a year for a lowly personal Amex Platinum card, you’re a useless bum who does not have the same value as other more productive members of society who own businesses. Get off the couch and create some wealth already, will you?
In any case, starting July 1, 2015, Business Platinum cardmembers will receive a 30% rebate when booking airfare directly with Membership Rewards points using the Amex Pay With Points option. This replaces the previous 20% rebate, but is also more restrictive than the old benefit since this new rebate only applies to the same airline you designate as your “airline fee credit” choice.
Overall, the reaction in the points and miles community has been… ehhhhhh.
With this rebate you’d get roughly 1.43 cents per point for your Membership Rewards points (the 30% rebate means you’re spending 70 MR points per dollar, so $1 divided by 70 points equals 1.428 cents per point). Most folks believe Membership Rewards points are more valuable than that since you can transfer them to a number of airline partners for premium award redemptions.
That may be true if you’re actually using your MR points that way, though it also assumes that you agree with me when I said that “Yes, You DID Get 10 Cents Per Mile For Your Award Redemption” in calculating the value of premium award redemptions. And let’s face it, most people would (wisely) deny ever agreeing with anything I say.
But if we dig into the math a little deeper, we just might find some reasons and opportunities to use Pay With Points with the new rebate and get better value than almost any other method.
Why would we ever Pay With Points?
The Conventional Wisdomers have pointed out that if you’re earning Membership Rewards in order to redeem them at 1.43 cents per point, you’re wasting your time because you could easily get a Barclays Arrival+ Mastercard instead and get 2.2% on all travel redemptions for every single dollar you spend. Or you can use a straight up 2% cashback card such as the Citi Double Cash card or the Fidelity Investment Rewards Amex card and still do better.
Yet the same Conventional Wisdomers have no problem suggesting that Southwest is a great transfer partner for Chase Ultimate Rewards.
That’s interesting, isn’t it? Because when you redeem Ultimate Rewards points for Southwest flights, under the new Southwest Rapid Rewards program, you can get… well, nowadays you can get an unknown value for your points that Southwest won’t reveal until it’s way too late to be useful information. They’re like Delta that way. Hey, United does everything Delta does and even they’re making money, so why shouldn’t Southwest do it too?
But putting aside that angry tangent for the moment, under the old Southwest system you’d get roughly 1.43 cents per point. Or in other words, the exact same amount you’d get with the new Amex Pay With Points rebate. And under the new Southwest Rapid Rewards program, UR points transferred to Southwest could be worth as little as 1.25 cents per point, which would make the Amex Pay With Points rebate actually better.
So why are either of these options better than a 2% cashback card?
Well, actually because with a 2% cashback card, there are never any category bonuses. All spend is worth 2%, no more, no less. But with a Chase card, you might get 2x on dining or even 5x on office supply stores. Which means even if you’re only redeeming UR points for 1.43 cents on Southwest, your 2x dining spend got you 2.86 cents per dollar in rewards, and that 5x office supply spend was worth a whopping 7.15 cents per dollar. Much better than 2% back.
The same is true of the new Amex Pay With Points rebate. While the Platinum card itself doesn’t have any category bonuses, any pooled Membership Rewards points from other cards will be eligible for this rebate as long as you book the travel with your actual Platinum card. So the 3x bonus you get on airline spend with an Amex Premier Rewards Gold card would be worth 4.29 cents per dollar if you used those MR points to Pay With Points with a Business Platinum card. Even the 1.5 cents per dollar that you can get on all spend with the Amex Everyday Preferred card turns into 2.14 cents per dollar via Pay With Points, which is still better than a 2% cashback card.
Revenue tickets have better perks.
Of course, the biggest advantage of using Pay With Points is that there are no limits on ticket availability. If a seat is available, you can have it. No crossing your fingers and hoping an award seat pops open.
But that’s just the tip of the iceberg, because another major benefit of Pay With Points is that, instead of transferring points to an airline partner and ending up with an award ticket, a Pay With Points ticket is a revenue ticket with all the usual benefits that go along with it. This means a ticket that accrues miles and elite qualification miles as well as being upgrade eligible if you have status, among other perks.
Depending on the airline you use and the route you fly, this could add substantially to the value of a Pay With Points ticket. For instance, if you chose American as your airline and purchased a $300 roundtrip JFK-LAX ticket using Pay With Points, you’d only spend 21,000 Membership Rewards miles on that ticket. That’s already less than the standard 25,000 miles it’d cost you for a domestic roundtrip economy ticket, so you’re ahead by 4,000 miles right off the bat.
Then you’d also receive 5,000 AAdvantage miles for flying the flights, which effectively brings the cost down to 16,000 miles for that ticket. Not to mention you’ll also get 5,000 elite qualification miles towards American status, which you don’t get for an award ticket.
Finally, if you’re already an American elite, you get additional bonus miles according to your status along with the opportunity to upgrade with 500-mile stickers (or a complimentary upgrade if you’re Executive Platinum). In fact, if you’re Executive Platinum and could get 10,000 redeemable miles for this sample itinerary along with the possibility of an upgrade, that would leave you with an effective cost of 11,000 points and miles for a transcontinental roundtrip with a potential free upgrade to business/first class. That’s pretty much a no brainer, which is good for people like me who don’t like to do a lot of hard thinkin’.
By the way, if you didn’t already notice, there’s one other important note here. In our example, you’re using Membership Rewards points to book American flights. Since American is not an Amex transfer partner, you’ve just opened up Membership Rewards to a whole new airline that was previously unavailable, and at a cheaper price to boot.
The Devil’s Advocate refuses to dismiss the new Pay With Points rebate.
Let’s be fair for a moment. I’ve cherry picked some examples that show Pay With Points at its best. If you book a Delta or United ticket instead of an American ticket, you won’t get anywhere near as many redeemable miles for the flights (though you’ll still get the elite miles and upgrade eligibility). And since Southwest tickets aren’t currently bookable via Pay With Points (because Southwest’s reservation system is separate from all the other airlines), it’s not clear whether you’ll be able to choose Southwest for the 30% rebate even though you can currently choose it for your Platinum airline fee credit.
But the examples also show that this new benefit shouldn’t be automatically dismissed as being “not as good” as transferring MR points to partners. In the right circumstances, Pay With Points can make sense and is worth a look.
Now, if only I was a more productive member of society instead of just being a listless Amex Personal Platinum cardholder…
Wrapping up last week’s giveaway.
Last week I celebrated the first anniversary of Devil’s Advocate with a giveaway of a pair of United Club passes to one of my Twitter followers. The contest closed yesterday at 5pm and I picked a winner by random number from my entire list of followers. That person turned out to be Krystyna F, also known as @MsKrysia, also known as the new Queen of the United Club.
Krystyna has already replied to my Twitter DM as requested and is therefore the official winner. Congrats, Krystyna!
Thanks to all of you who are followers and readers of Devil’s Advocate and remember, we are all truly winners because I am now over 150 followers ahead of my brother Curtis. So congrats to all of us, and hey, better luck next time, Curtis. Though hopefully not.Devil’s Advocate is a weekly series that deliberately argues a contrarian view on travel and loyalty programs. Sometimes the Devil’s Advocate truly believes in the counterargument. Other times he takes the opposing position just to see if the original argument holds water. But his main objective is to engage in friendly debate with the miles and points community to determine if today’s conventional wisdom is valid. You can suggest future topics by following him @dvlsadvcate on Twitter or sending an e-mail to firstname.lastname@example.org.
Recent Posts by the Devil’s Advocate:
- Devil’s Advocate Turns 1 Year Old. Let’s Give Something Away!
- It’s Time to Put the Chase Sapphire Preferred in the Sock Drawer
- Guess What, Wyndham? I’m Having More Fun Now That We’re Done.
Find the entire collection of Devil’s Advocate posts here.