Everyone knows I relish being combative, but here’s a case where I actually agree with the Conventional Wisdom. At least some of it.
Citibank has now added a 10th new transfer partner to their ThankYou Rewards program, extending their recent efforts to catch up to Chase Ultimate Rewards and American Express Membership Rewards. The Conventional Wisdom is that these 10 transfer partners make ThankYou points significantly more valuable.
I think that’s true. These particular airlines aren’t the greatest, but any new options to transfer ThankYou points at a 1-to-1 ratio are useful. Citibank deserves kudos for working hard to improve their program, even though I wrote a takedown of it a few months ago as part of my series on the downsides of flexible reward currencies (see “Just How Terrible Are Citi ThankYou Points?“) But heck, a year ago I would have played Devil’s Advocate by trying to argue how good the program was instead of how bad, so that shows you how far they’ve come.
But hang on a second. The Conventional Wisdom has also decreed that the best use of ThankYou points is to transfer them to one of these partners, most likely Air France or Singapore. That’s where the Conventional Wisdomers lose me.
Just because the transfer partners make ThankYou points more valuable doesn’t mean that’s the best value.
Around the same time Citibank was adding transfer partners, they also quietly added another method of redeeming ThankYou points. Let’s dive into this redemption option a bit, and along the way perhaps we’ll discover what it means for the future of ThankYou points. Or at least we can speculate irresponsibly about it. That’s always fun, so let’s do that.
What’s wrong with the ThankYou transfer partners?
Virgin Atlantic is the new ThankYou kid on the block, which would be tremendous news if Virgin Atlantic didn’t insist on adding ridiculous fuel surcharges to their “free” award tickets.
There are a couple decent uses for Virgin Atlantic miles such as booking flights on Delta, but we could already do that via Air France. In a few cases the Virgin Atlantic chart is slightly better for Delta redemptions than the Air France chart, but considering the number of hoops you have to jump through to get a Delta ticket booked with Virgin Atlantic miles, it’s probably not worth it.
I recently wrote a Devil’s Advocate column entitled “Why 90,000 Virgin Atlantic Miles Are Worthless. Or Priceless. I’m Not Sure.” But by the end of writing that column I was pretty sure they were worthless, so it’s hard for me to get terribly excited about this addition.
(By the way, can Australia send a couple of thugs over to Europe to “take care” of this little fuel surcharge problem like they just did with their own airlines? What would Australian thugs be like anyway? Based on my knowledge of Australia and their people — which of course comes entirely from the “Crocodile Dundee” films — I imagine they would be the most entertainingly hilarious thugs in the world.)
What about Air France? Well, Air France’s Flying Blue program also has fuel surcharges, and since Delta now allows one-way redemptions, they’ve lost that advantage too. There’s also been some recent problems with transferring points into Flying Blue. I expect that will eventually get worked out, but at the moment I can’t say I’d be eager to try an Air France redemption with ThankYou points.
Finally, there’s Singapore Airlines. This, I will admit, is a pretty good option for ThankYou transfers, as Singapore Suites is one of the best premium class products in the world. But availability can be tough and unless you’re traveling to or from Singapore (or can make use of one of their few fifth freedom routes), their usage is limited. Yes, you can also use Singapore for United redemptions by calling, but transfers from ThankYou to Singapore Airlines can take up to 36 hours, so you better hope that United award seat doesn’t disappear in the meantime.
The Citi Prestige card is the (not-so-secret) weapon.
Like other flexible currencies, ThankYou points can also be redeemed directly for airfare instead of transferring them to partners. Redeeming this way means you don’t have to worry about chart values or award availability. The number of points are tied to the price of the airfare, so if the seat is for sale, you can get it.
Naturally, the downside of burning points this way is you usually don’t get as much value. Chase gives 1.25 cents per point when redeeming for airfare. Amex offers variations of this too.
Citibank is more interesting when it comes to these direct airfare redemptions. If you have the ThankYou Preferred card with no annual fee, you get 1 cent per point. If you have the ThankYou Premier with a soon-to-be $95 annual fee, you get
1.33 cents per points. [UPDATE: Thanks to Personal Finance Digest and commenter Steven over at that great site for catching this error. It’s actually 1.25 cents per point with the Premier, and 1.33 cents per point with the Prestige on non-AA/US airfare redemptions. I regret the error and also the amount of gin I drank while trying to keep all these numbers straight. Apologies.]
But if you have a ThankYou Prestige card, you get 1.6 cents per point on all airfare redemptions on both American and US Airways. And these are revenue tickets, which means they earn both redeemable miles and elite status.
Now, are you regularly going to find a more valuable redemption than that on Air France or Virgin Atlantic?
“Oh, yeah, that’s a great idea,” drip the sarcastic voices of the Conventional Wisdomers. “Except the Prestige card is a premium card with an annual fee of $450 a year! That’s a lot of money just to get 1.6 cents per point on ThankYou points.”
True, but that $450 annual fee is misleading. The Prestige comes with a $250 annual airline fee credit, which effectively makes the annual fee only $200 per year. It’s also a calendar year benefit, which means for the first cardmember year you can actually make $50 by using the annual fee twice. That’s a great deal even if you only keep the card for one year, and I’m not even considering the signup bonus in that calculation.
In fact, I’m starting to notice more and more chatter about the Citi Prestige card overall. This isn’t a column about the Prestige versus the Amex Platinum card, but comparisons are being made between the two and often those comparisons turn out favorably for the Prestige. For instance…
- The $250 airline fee credit on the Prestige can be used directly on airline tickets. The Platinum only offers $200 and you have to play the airline gift card game if you want credit for actual flights.
- The Prestige gives lounge access at American and US Airways lounges with free guest privileges, while Delta shut down the free guest allowance on the Amex Platinum.
- There are bonus multipliers on both dining (2x) and travel (3x) with the Prestige, as opposed to no bonus categories at all on the Platinum.
I think there’s a lot of merit to this argument. I hold both an Amex Platinum and a Citi Prestige card myself, and I can tell you that at the start of the second membership year, the Prestige already got renewed while the Platinum will be dumped. Again.
I’d speculate that Citibank actually wanted to add American as a true transfer partner to the ThankYou program, but American declined (or wanted too much money). So instead Citi decided to add this benefit to their high end Prestige card for their best customers. With airlines doing well at the moment, American can afford to say no, though when the economy eventually turns again we may very well see American as a ThankYou transfer option.
But why not just get an Arrival+ or cash back card?
Since an Arrival+ card offers an effective 2.2% back on all purchases (and with only an $89 fee), isn’t that a better choice than ThankYou points even at 1.6 cents per point? Especially since Arrival points can be redeemed against any travel purchase? Or even a 2% cashback card, which doesn’t require any travel purchases at all?
Again, this isn’t a post comparing ThankYou points to other travel currencies or cash, so it may very well be the case that you’d be better off with an Arrival+ or a cash back card. But keep in mind that ThankYou points are a whole lot easier to accumulate than Arrival points or cash back. The 2x and 3x category bonuses on both the Prestige and the Premier make earning ThankYou points easy, and the upcoming expanded travel category on the Premier looks very promising with gas stations being included in travel for the first time. If you can get 2x ThankYou points for gas station purchases and those points are worth 1.6 cents each, that’s effectively a 3.2% return which beats both the Arrival+ and the best cash back cards.
The Devil’s Advocate maximizes his own ThankYou points with American and US Airways redemptions.
As the Devil’s Advocate, my role is to take the opposite side of an argument, regardless of what I personally think. But in this case, I honestly believe that the 1.6 cent redemption is the best overall value for ThankYou points.
Yes, if I’m traveling to Singapore (or maybe between New York and Frankfurt) then I’ll take a good look at the possibility of booking a Singapore Suite. But that’s going to be a very occasional trip, and Singapore is also a transfer partner of both Ultimate Rewards and Membership Rewards. So I don’t need to be saving my ThankYou points for a Singapore Suites redemption.
On the other hand, I’m going to need domestic flights a lot more often and the combined American and US Airways is about to become the world’s largest airline. With a robust route network, it’s rare that I can’t find an American or US Airways flight that works for me. That’s where my ThankYou points will go, and that’s where you should be looking too.
At least until the Australians take care of that little fuel surcharge problem.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 sending an email to firstname.lastname@example.org.
Recent Posts by the Devil’s Advocate:
- How Much is a Credit Inquiry Worth? Seriously, I’m Asking.
- Mileage Runs Are Dead, so How’d I End Up on a Flight with Frequent Miler & Heels First Travel?
- Are Loyalty Programs Without Blackout Dates Always Better?
Find the entire collection of Devil’s Advocate posts here.