American Express Membership Rewards Changes: Miles, Points, and Spend Strategy

What I Loved About Membership Rewards

I’ve written in the past about the American Express Premier Rewards Gold card, which I highlighted as my go-to everyday spend credit card in The Best Credit Cards for Sign-Up Bonuses and Everyday Epend. The card is great because you earn three points per dollar on airfare, two points per dollar on gas and groceries, and one point per dollar on everything else. Beyond that, if you spend $30,000 on the card in a year you get 15,000 bonus points. As a matter of fact I like the card so much that several months ago I took my previous go-to card, the Starwood American Express, out of my wallet due to lack of use.

But the real reason I loved the Premier Rewards Gold card wasn’t just because of the number of points it earned, but rather the program it accrued those points in – Membership Rewards. For a variety of reasons Membership Rewards points are incredibly valuable. The main reasons include the fact that they have a lot of great airline transfer partners that points can be transferred instantly to. The fact that it’s instant is key, given that award availability is constantly changing. I don’t want to ever transfer points out of a program like Membership Rewards unless I have a specific award redemption in mind.

So the beauty of Membership Rewards has been that I could find an award that I liked, transfer points, and book immediately, all without any risk. That’s in stark contrast to Starwood, which has dozens of airline transfer partners, though takes anywhere from a few days to a few weeks to convert points into miles in your preferred program.


The Best Membership Rewards Partners are Leaving or Devaluing

So why is the value of Membership Rewards points suddenly changing? The biggest reason is that as of September 30, Continental OnePass will no longer be a transfer partner with Membership Rewards. Right now you can convert points at a 1:1 ratio to Continental OnePass, which is a spectacular value, given that Continental has a reasonably priced award chart that gives you full access to the 25+ Star Alliance airlines. 

But that’s only one of many devaluations we’ve seen among Membership Rewards’ transfer partners over the past several months.

Back in July Air Canada’s Aeroplan, my previous favorite frequent flyer program for award redemptions, drastically devalued their award chart for many of my favorite award tickets. For example, the cost of award tickets to Australia and much of Asia went up by over 50% in first class.

Another one of my favorite redemptions was converting Membership Rewards points to All Nippon Airways, another Star Alliance member airline. My favorite redemption wasn’t actually flying on them or any of their Star Alliance partners, but rather their partnership with Virgin Atlantic. One could redeem as few as 63,000 miles for Upper Class (business class equivalent) on Virgin Atlantic between New York and London, which is an absolute bargain. While they haven’t changed the actual award cost, they have started imposing fuel surcharges on those award tickets, meaning the ticket that previously cost $150 in taxes/fees now costs closer to $800.


The final massive devaluation that’s on the way is with one of Membership Rewards’ newest transfer partners, British Airways Executive Club. They’ll be changing their frequent flyer program as of mid-November and while they haven’t formally published their new award chart, it can be inferred that we’ll see the cost of a lot of their best award redemptions go up by over 50%. For example, business class on Cathay Pacific from the US to Asia presently costs 100,000 miles, while business class on American or LAN from the US to South America presently costs 80,000 miles. Both are spectacular values that will likely drastically go up in price in a couple of months.


So it’s not that Membership Rewards inherently tried to devalue their program. Instead, many of their partners just quietly made changes that don’t change the transfer ratio one gets from Membership Rewards, but does change the cost of award tickets.


What to Do

1.    Increase spend on SPG American Express

What has all this meant for me? Well, I put my Starwood American Express credit card back in my wallet as of last week. I’m now primarily using three credit cards – the American Express Premier Rewards Gold card, the Chase Sapphire Preferred card, and the Starwood American Express credit card. 

With the American Express Premier Rewards Gold card I’m earning three points per dollar on airline tickets and two points per dollar on gas and groceries, in addition to 15,000 bonus points for spending $30,000 per year. With the Chase Sapphire Preferred card I’m earning two points per dollar on dining and hotels, and also not paying any foreign transaction fees, so it’s my go to card when traveling internationally.  Then I’m using the Starwood American Express credit card for everything else.

For example, a few days ago I purchased several hundred thousand US Airways miles through their “buy miles” promotion. In the past I would have instinctively put the purchase on my Premier Rewards Gold card (even though the purchase doesn’t qualify for triple points since it’s not technically airfare), but instead I put it on my Starwood American Express credit card, because I’m starting to value those points more again.


2.    Buy miles cheaply

Actually, this brings up another interesting thing that has changed with my strategy when it comes to earning miles – for the first time ever I’m buying miles, and tons of them. 

For the past year or so airlines have been very aggressive with selling miles. I’m talking about US Airways constantly selling miles for about 1.5 cents each, and more recently Delta offering a 100% bonus on transferred miles, whereby you can essentially earn Delta miles for 1.1 cents each.

As the cost of airfare continues to go up and my desire to “waste” time doing mileage runs domestically goes down, I’m taking advantage of the opportunity to buy miles whenever possible, given that the cost is reasonable. I’m flying exactly the amount needed to requalify for status on revenue tickets, but nothing more. I do the rest of my flying internationally on award tickets.


3.    Diversify mileage holdings to maximize award flexibility

Most importantly, I’m trying to buy miles that will help to further diversify my mileage “portfolio.” For me the Star Alliance was previously the “go to” alliance for just about everything, so I didn’t put much focus into earning miles elsewhere. Historically that has been where I keep 90% of my miles. While I still feel that the Star Alliance offers the most thorough options, I’m definitely seeing the value in having miles with SkyTeam (Delta) and OneWorld (American) as well.

Delta SkyMiles are often referred to as “SkyPesos,” and for good reason – the redemption rates to some destinations when flying on Delta are outrageous. It’s the only airline I know of that often charges close to 400,000 miles for a business class award ticket on their own flights. But Delta SkyMiles are best positioned for redemptions to some of the most difficult destinations out there. 

For example, try getting to Australia on the Star Alliance or OneWorld in first or business class using miles. It’s nearly impossible. Delta, on the other hand, as I mentioned in the 10 Best Premium Cabin Award Redemption Values, partners with Virgin Australia, which actually has fairly decent business class award availability between the US and Australia. Admittedly they do impose fuel surcharges for redemptions on Virgin Australia (somewhere in the range of $500 for a roundtrip), though it’s still an amazing value. The award costs 150,000 miles in business class, so if you can buy those miles for 1.1 cents each, you’re looking at a business class award ticket for just over $2,000 ($1,650 for the miles, plus taxes/fuel surcharges). Given how good their availability is, that’s a real bargain.

Along the same lines, SkyTeam is the only alliance that will easily get you from the US to the Seychelles or Mauritius in business class. Award availability is quite decent and they’re both destinations that are otherwise near impossible to get to.

Lastly, Delta miles leave you best positioned for award travel to Tahiti, given that they partner with both Air France and Air Tahiti Nui, the only two airlines that fly nonstop from the US to Tahiti. So in a way, my valuation of Delta miles is actually on the rise, surprisingly enough, and I can’t buy enough of them.

I’m earning plenty of miles in OneWorld through American. The huge benefit I see to OneWorld is redeeming miles for travel on Cathay Pacific. It’s the airline with by far the best first class award availability between the US and Asia, and also one of the best products. I’m earning plenty of American miles through flying with them so don’t need to buy more.

That being said, I realize not everyone flies American a whole lot, in which case your best bet is applying for one of American’s co-branded Citi credit cards, which still offer a sign-up bonus of 75,000 miles after $1,500-$4,000 of spend (depending on the version of the card you get). Applying for two of those will get you a roundtrip first class ticket to most places in the world.


4.    Transfer to Continental by September 30

If you have a lot of Membership Rewards points, I would suggest transferring at least some of them to Continental before September 30, when the option to do so disappears. While the beauty of Membership Rewards remains the flexibility of their points, there are some truly spectacular redemption opportunities through Continental, like 140,000 miles for first class from the US to Asia via Europe. That award is now substantially more expensive through Aeroplan, another one of Membership Rewards’ transfer partners.

So while I’d usually suggest keeping your points in the most “flexible” program, this is a case in which I’d transfer some points to Continental, if you have a lot with Membership Rewards – I’d transfer at a minimum enough for a first class ticket to Asia, or at most half of your points, whichever is the greater amount.


5.    Transfer to BA if you can book a single Oneworld partner award by November 15 2011

While the British Airways award chart will likely be substantially devalued for those in North America come November 15, there are still some amazing award opportunities out there, like 100,000 miles for business class, or 150,000 miles for first class on Cathay Pacific from North America to Asia. As an example, you could fly from New York to Bali via Hong Kong with a stopover there for however long you’d like. There will be fuel surcharges, so the total taxes/fees will be around $400 per ticket, but given the free stopover, the cost is still much better than the next best alternative. So if you want to fly Cathay Pacific first or business class in the next year and don’t have American miles, you might actually be best off transferring points to British Airways soon. 


6.    Transfer more Membership Rewards points to Delta using transfer bonuses

But this brings me back to American Express Membership Rewards. In the past Membership Rewards points were valuable for booking awards in all three alliances – transferring to Aeroplan or Continental for Star Alliance, British Airways for OneWorld, and Delta for SkyTeam. With Aeroplan recently devaluing their award chart, Continental no longer being a transfer partner, and British Airways devaluing their award chart, that leaves just Delta SkyMiles more or less unchanged.

And sad as it might be, for the first time ever I might just be converting Membership Rewards points to Delta SkyMiles. With the generous transfer bonuses they’re running, like their current 67% bonus it’s not a half bad value, especially when you consider that you can earn as many as three points per dollar on airfare, translating to five SkyMiles per dollar spent on airfare when you factor in the transfer bonus.


The Future of Membership Rewards

Ultimately American Express Membership Rewards will have to work hard to add some good transfer partners if they want to continue to be an industry-leading program. They just announced Virgin America Elevate will be their newest partner, though I doubt that will be a valuable partnership given that Virgin America’s redemption costs are based on the cost of a ticket (meaning there’s no way to get a great value on an award).

If I were American Express Membership Rewards I’d certainly be talking to US Airways Dividend Miles or Alaska Airlines Mileage Plan and seeing if they’re interested in joining forces. In theory adding American AAdvantage as a partner would be nice, though given their close relationship with Citi, I suspect they wouldn’t be able to enter into such a relationship.

In the meantime it’s back to giving the Starwood American Express card prime real estate in my wallet, and only using other cards for certain types of transactions. Beyond that, all of these devaluations are a great reminder that it’s all about diversification. For years I’ve hoarded British Airways miles, for example, only to now be rushing to redeem them before the upcoming devaluation.


Earn and Burn: Don’t Have More Miles in an Airline Program Than You Can Redeem Given a 6 Month Notice

But in terms of my overall mileage “portfolio,” I’m actually happy with where I stand, given that my miles are split evenly among the three alliances. I have the ability to book at least a few premium cabin awards with any alliance, though not so many miles in any program that they’re collecting dust and being devalued. I continue to live by my belief that you should never have so many miles in a single program that you couldn’t redeem them within six months notice if the program were to be devalued. The only exclusion to that are programs with lots of transfer partners (Membership Rewards, Starwood Preferred Guest, Chase Sapphire points, etc.), where the points don’t have the potential to decrease in value as quickly, and I have no problem “hoarding.”

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