Deciding between, applying for, and changing between US Bank credit cards

[update 4/29/15: I just called into US Bank to ask for compensation for the loss of the last-night-free benefit on the Club Carlson Business Rewards card. Instead, the representative offered me a product change, including to the Business Edge Cash Rewards card, which earns an uncapped 3% cash back at gas stations and a 25% bonus on all cash back earned during the calendar year, which is capped at $250. A quick calculation shows that you can maximize the value of that card by manufacturing $33,334 in gas station spend annually ($2,7778 per month), yielding $1,000 in cash back and a $250 bonus, for a total of 3.75% cash back. That's a phenomenal deal.

Additionally, the offer of a product change to a proprietary rewards card from a co-branded credit card is contrary to what I reported below from the myFICO fora. I don't know whether such changes are only possible for small business credit cards, or whether personal credit cards can also be changed from co-branded to proprietary rewards programs. YMMV.]

I currently carry all three of the US Bank-issued credit cards which I consider the most valuable for my current miles, points, and cash back strategy:

• Cash+. Has historically offered 5% cash back on up to $2,000 spent in the "charity" category each quarter. If you don't have ethical problems with Kiva (many of my readers do!), you can strategize to find high-quality, short-term loans, and earn 5% cash back each quarter on loans that last 3-7 months. That can work out to quite high annualized interest rates, although you will take on the risk of your borrowers defaulting.
• Flexperks Travel Rewards Visa Signature. I write about this card all the time, since it earns two Flexpoints per dollar spent at gas stations or grocery stores each month (wherever you spend more), worth up to 2 cents each for airfare and up to 1.5 cents each for hotels.
• Club Carlson Business Rewards. Until May 28 (or May 31 — reports are mixed) offers the last night free on award reservations. After that it will continue to earn 5 Gold Points per dollar spent everywhere, and a free domestic award night after spending $10,000 on the card each year.

Getting started

Back in May, 2013, I first shared my experience freezing my IDA and ARS credit reports. In March, 2015, Kenny over at Miles4More described his experience achieving the same result through the mid-20th century magic of the telecopying transmitter-receiver (for some reason Kenny insisted on called this "the easy way").

There's no reason to believe the fundamental situation has changed: if US Bank has access to your IDA and ARS credit reports when you apply for credit through them, they will take into account factors that those agencies use and that the major credit reporting agencies do not. If US Bank does not have access to those credit reports, they'll rely on your credit report with a major credit reporting agency.

Whether that matters to you depends on your overall credit profile, but if you apply for new credits cards several times throughout the year, you'll want to freeze your IDA and ARS credit reports before applying for a US Bank credit card.

Deciding on cards

The most important thing to know about applying for US Bank credit cards is that you're eligible for as many signup bonuses as you're able to get approved for. They have somewhat vague terms and conditions prohibiting this, but my experience was those conditions are not enforced, and I haven't seen a single report to the contrary (of a signup bonus being denied for previously carrying the card).

For example, I applied for the Flexperks Travel Rewards card for the first time in the Spring of 2012, just before US Bank announced their promotion connected to the 2012 Summer Olympic Games, under a 17,500 Flexpoint signup bonus. When the promotion was announced, I applied again and was approved for what ultimately turned out to be a 33,150 Flexpoint signup bonus.

In other words, you should apply first for cards with the most valuable signup bonuses, regardless of your ultimate plans, since the total amount of credit US Bank will extend you is limited while the number of signup bonuses you can receive is not.

Applying for cards

Doctor of Credit has noted that credit reporting agencies combine same-day credit pulls that appear to them as duplicates, which US Bank credit pulls appear to do. That means there's no risk to your credit score in applying for multiple US Bank-issued credit cards in a single day (there may be a risk to your relationship with US Bank, of course).

Requesting product changes

[Please see the update at the top of this post.]

The good folks at the myFICO fora report that It appears that US Bank, like Chase but unlike, for example, Citi, will not do product changes between co-branded credit cards and proprietary rewards cards.

So product changes between Cash+ and Flexperks Travel Rewards cards are possible, while product changes between a Club Carlson co-branded credit card and either of the former are not.

Analysis

Your overall US Bank credit card portfolio has to depend on your goals.

For example, in the near term I intend to keep the Club Carlson Business Rewards credit card despite its devaluation since I take at least one weekend trip to Chicago each year; I'll certainly be able to use the free domestic award night and 40,000 Gold Point anniversary bonus at the Radisson Blu Aqua in downtown Chicago, where my partner and I have enjoyed our 3 stays so far.

If you're more interested in using credit card rewards as a way to generate cash back, redeemable each statement cycle in any amount, the Cash+ is a terrific card.

But the Cash+ card is even better if you get it through a product change from the Flexperks Travel Rewards credit card, where you'll receive a more valuable year-round signup bonus — and an even more valuable one if US Bank renews their Summer Olympic promotion in 2016.

Finally, if you tend to travel on domestic economy flights, the Flexperks Travel Rewards card gives you an opportunity to buy those tickets at a very steep discount by manufacturing spend at gas stations or grocery stores, or by making Kiva loans, which earn 3 Flexpoints (worth up to 2 cents each) per dollar lent.

Conclusion

Of course, no post about US Bank would be complete without noting that dealing with US Bank is never a walk in the park. Forewarned, forearmed, etc., etc.

Should you use super-premium cards to pay for airfare through manufactured spend?

A few months back I wrote a breakdown of three cards which earn bonused flexible points currencies at gas stations: the Chase Ink Plus (and Bold), Citi ThankYou Premier (as of April 19, 2015), and American Express Amex EveryDay Preferred.

While flexible points are terrific for short-haul Avios redemptions and long-haul premium cabin redemptions, I also like to remind readers that sometimes it makes sense to fly on revenue tickets. With the announcement of a new, 30% rebate on "Pay with Points" tickets purchased through the American Express Business Platinum card (via Twitter user @LoyalUA1K), I thought I'd revisit the subject with gas station manufactured spend squarely in mind.

Four ways to buy cheap plane tickets at gas stations

There are four methods I want to consider for buying revenue airline tickets using points earned at gas stations (four methods, and not four cards, for reasons that are about to become clear):

• Chase Ink Plus/Bold. Earns 2 Ultimate Rewards points per dollar spent at gas stations, on up to $50,000 in annual gas station purchases. Points can be redeemed for paid airfare at 1.25 cents each. $95 annual fee.
• US Bank Flexperks Travel Rewards. Earns 2 Flexpoints per dollar spent at gas stations, if you spend more at gas stations than at grocery stores or on airline tickets during that statement cycle. $49 annual fee, which can be waived if you spend $24,000 during the cardmember year.
• Citi ThankYou Premier and Prestige. Earn 3 ThankYou points per dollar spent with the ThankYou Premier, and redeem them through the ThankYou Prestige for 1.6 cents each for tickets issued by American Airlines and US Airways or 1.3 cents each for tickets issued by other carriers. $95 annual fee for ThankYou Premier and $450 annual fee for Prestige (a $350 annual fee version may be available in-branch, although getting it sounds stressful).
• American Express Amex EveryDay Preferred and Business Platinum. Earn 3 Membership Rewards points per dollar spent with the EveryDay Preferred (as long as you make 30 purchases per month), and redeem them through American Express Travel using the Business Platinum card for roughly 1.43 cents each on the same airline you designate for your $200 annual fee reimbursement. $95 annual fee for EveryDay Preferred and $450 annual fee for Business Platinum.

Now I know what you're thinking: "Free-quent Flyer, can't you show the same information in a simple chart?"

As a matter of fact, I can:

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How much paid airfare makes premium card annual fees worth paying?

Anyone who's followed my blog for long knows what I think about annual airline fee credits: they're a way for affiliate bloggers to downplay preposterously high annual fees and move more product.

Since I'm not an affiliate blogger and don't have a dog in that hunt, I treat credit card annual fees the same way I suggest my readers do: as upfront expenses that have to be justified by the concrete value delivered by a card.

By concrete value, in this case I mean the actual surplus delivered by a premium card compared to a workhorse like the Flexperks Travel Rewards card.

As the chart above shows, the minimum value of a dollar of gas station manufactured spend with the Citi ThankYou Premier and Prestige combination is almost as much as the maximum value of a dollar manufactured with the Flexperks Travel Rewards card, and assuming you're loyal to American Airlines and US Airways, you'll receive a minimum of 0.8 cents more per dollar.

With the American Express Amex EveryDay Preferred and Business Platinum combination, you'll only want to redeem Membership Rewards points for airfare on your preferred carrier, since almost all other "Pay with Points" redemptions (except for sub-$300 airfares) will be worse values than a Flexpoint redemption.

On the other hand, those card combinations come with hefty annual fees, meaning that any surplus value earned on the redemption side compared to cheaper cards has to exceed the difference in upfront costs in the form of annual fees.

To arrive at that breakeven point, first we need to find a reasonable valuation for Flexpoints, which can be redeemed in bands at 10,000 Flexpoint intervals. While it's tempting to take a simple average of the top and bottom of each redemption band (i.e. 1.67 cents per Flexpoint), in my experience it's possible to consistently land closer to the top of that range. That being the case, let's use a point three quarters of the way from the bottom, or 1.83 cents per Flexpoint (e.g. a $367, 20,000 Flexpoint redemption).

Here's how much paid airfare you need to fly annually in order to justify $545 in annual fees, compared to the waivable $49 annual fee of the US Bank Flexperks Travel Rewards card:

• Citi ThankYou Premier and Prestige. $2,294 at American Airlines and US Airways ($47,807 in annual gas station manufactured spend)
• Citi ThankYou Premier and Prestige. $8,856 at other airlines ($227,083 in annual gas station manufactured spend).
• American Express Amex EveryDay Preferred and Business Platinum. $3,711 with your designated airline ($86,508 in annual gas station manufactured spend).

Conclusion

I'm perfectly aware that these cards offer redemption options that can be more lucrative than redeeming points for airfare at privileged rates. In fact, I wrote a whole blog post comparing their transfer partners in each alliance.

I'm further aware that the super-premium $450-annual-fee cards offer benefits like lounge access, airline fee credits, and Global Entry fee reimbursement.

So any readers who are inclined to hash out the value of those benefits are welcome to do so in the comments.

But I am also certain that simply purchasing paid airline tickets is the single most common method of flying domestically for travel hackers and civilians alike, and an analysis of these cards along those lines was overdue.

Iberia Plus requires a positive points balance to search oneworld award space

Iberia and British Airways, two of the airlines that use Avios as their rewards currency, have long had a number of differences in their award charts. British Airways charged each award segment separately, while Iberia averaged the cost of each first class, business, and economy leg over the length of the entire trip (see an illustration here).

For the last few weeks, I've run into a different problem: I have been totally unable to search and price oneworld award availability using my Iberia Plus account. Here's low-level availability between Dallas and Chicago on American Airlines on April 17, 2015:

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Here's the same seat available for 7,500 British Airways Avios:

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And here's the result that kept coming up when searching in my Iberia Plus account:

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Iberia Plus won't show oneworld availability unless you have Avios in your account

After what seemed like hours of fiddling around with my Iberia Plus account, it finally occurred to me that I didn't have any Avios in the account. What if, like some other overseas loyalty programs, Iberia required a positive account balance to search for award space?

To test the proposition, I transferred 1,000 Avios from British Airways into my Iberia Plus account, and sure enough, the (somewhat overpriced) award space immediately appeared:

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Conclusion

I've been planning to explore potentially valuable Iberia Plus awards for a few weeks, but have been stymied by this problem. So now you know: oneworld award space will only appear on Iberia Plus searches if you have a positive Iberia Plus Avios balance.

If US Bank is trimming the fat, is Flexperks Travel Rewards next?

Plenty of digital ink has been spilled about the May 28/31 Club Carlson devaluation, including here, and there's not too much left to be said. However, one thing has been bugging me about the way Club Carlson has been talking about the change: they refer to it on Twitter as the "Visa announcement."

To explain why this has been nagging at me, it helps to think about how these co-branded credit card partnerships work. There are three independent corporate actors in any co-branded partnership. In the case of Club Carlson:

• Visa processes transactions. Visa owns and operates a worldwide network of point-of-sale terminals, for the use of which it charges merchants every time a Visa credit or debit card is used as a form of payment. It rebates part of those fees to US Bank in exchange for Club Carlson cards being issued on the Visa payment network.
• US Bank extends credit. US Bank timely pays merchants for the services rendered, and keeps track of customers' charges. If the customer fails to pay their balance in full and on time, they also get to charge the customer interest on those purchases.
• Club Carlson sells Gold Points to US Bank, and operates a hotel loyalty program.

With respect to the last-night-free benefit, the question is, who was paying the cost of those bonus nights?

One possibility is that Club Carlson was paying for those nights. They could have been reimbursing their participating hotels the full negotiated rate for Gold Point redemptions, and simply been eating the cost of the last-night-free benefit, in exchange for selling more Gold Points to US Bank and their customers.

The other possibility is that US Bank was paying. They may have agreed to buy additional Gold Points at whatever fixed rate they negotiated with Club Carlson, such that Club Carlson was made whole for however many last-nights-free we redeemed.

The way that the changes have been communicated, and Club Carlson's framing of the change as a "Visa announcement" leads me to believe the latter option is more plausible. And that feels like bad news.

US Bank is terrible at predicting the costs of their rewards programs

There are two ways for a bank to predict how much a rewards program will cost before launch.

One method is to look at a static picture of how your current customers spend their money. A certain amount on gas, a certain amount on groceries, a certain amount on clothes, a certain amount on tuition. You can then design a rewards structure that will be competitive with your rivals, while turning a healthy profit for yourself.

Another option is to look at the dynamic effects of the rewards program itself. It may be that offering 5% cash back in a certain category will make your customers divert more of their spending to that category than they were before the rewards program was introduced. This is much more difficult, since every bank treats information about customer spending behavior as a closely guarded, proprietary secret.

To date, US Bank appears to have exclusively used the former method. When they first introduced the Cash+ card, it had no limits on 5% cash back earnings, and no limits on the $25 bonus for redeeming more than $100 in cash back. What were they thinking? Well, they were calculating their costs based on the existing spending pattern of their customers, without taking into account the dynamic effects of 6.25% cash back in super-exploitable categories like department stores, home improvement stores, and others.

This is the best explanation of the Club Carlson devaluation

It's become a cliche that the last-night-free benefit at Club Carlson properties was "too good to last." But to a travel hacker, it's obvious that it was too good to ever get started! And yet it did. Why? Because US Bank looked at a static picture of the distribution of the length of award stays and decided they could afford to pay for the last night, without considering how that distribution would shift once the last-night-free benefit was introduced.

Once they came to terms with the fact that the number of 2-night stays shot up ten or one hundred times, they had to make a decision, and the decision was to end the benefit.

This may spell trouble for Flexperks Travel Rewards cards

I write about the US Bank Flexperks Travel Rewards card a lot because I love it: 2 Flexpoints per dollar spent at gas stations or grocery stores each month and 3 Flexpoints per dollar spent on charity, each worth up to 2 cents for paid airfare.

The trouble is that, for redemptions on airfare, it is almost mathematically impossible for US Bank to be turning a profit on this product.

Technically the worst redemption in the program would be redeeming 20,000 Flexpoints for a $201 ticket (since for cheaper tickets a 1-cent-per-point cash back redemption would be better); that would generate a hair over 1 cent per point, or a hair over 2% cash back at gas stations or grocery stores.

At 2% cash back, it's possible for the Flexperks Travel Rewards card to be turning a profit.

But besides those marginal airfare redemptions of $201 to $266, the second-worst airfare redemption in the program would be redeeming 30,000 Flexpoints for a $401 ticket, which would yield 2.67 cents per dollar spent at gas stations or grocery stores, or 4.02 cents per dollar spent on charity. And remember: that's the second-worst airfare redemption in the program. Every other airfare redemption (of points earned in bonus categories) is costing US Bank more than that.

And, as unbelievable as it sounds, if you spend at least $24,000 on the card per cardmember year, you also don't have to pay an annual fee! You'll earn 3,500 bonus Flexpoints you can redeem against your annual fee. You can even make the redemption online.

Keep your expectations low and your balances lower

I do my best to redeem my miles and points as fast as I earn them, and that's as true for US Bank Flexpoints as it is for any other rewards currency. As long as a currency is in the hands of the bank, airline, or hotel, I have no control over its value. Once I've redeemed it and, even better, once I've traveled, it's not something that can be revoked or devalued.

Note on booking Delta flights with Alaska miles

One of the great things about Alaska Airlines' Mileage Plan program is the ability to both credit paid flights operated by American Airlines and Delta Airlines, and redeem Mileage Plan miles for flights on either carrier (when low-level space is available).

I wrote back in February about free award changes and redeposits being a great benefit of Alaska MVP Gold and MVP Gold 75K elite status, since it applies to award bookings on partner airlines as well. In March, when I went to use that benefit again, I encountered an unexpected snag, one it's vitally important to be aware of if you use Mileage Plan as your primary frequent flyer program, as I do.

Delta enforces stricter fare construction rules on Alaska awards than on their own members

In the pre-2015 days of award charts and the deeply broken Delta booking engine, to piece together an international award trip you had one option: search leg-by-leg for low-level award space, then plug each leg into Delta's multi-city search tool.

With the improvements to the SkyMiles booking engine, and loss of stopovers, that's not only unnecessary, it's counterproductive. While before you could book low-level awards by stringing together low-level segments, now Delta will sometimes show different award availability for non-stop flights than for connecting itineraries. Here's an example of a flight from Boston to Detroit with availability only at the 20,000 SkyMile level:

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And here's a connecting itinerary with the same 10:30 am flight — but now it's available at the low level:

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If you want to fly to Detroit, and aren't checking a bag, you could of course book the connecting flight and get off in Detroit, although there are some risks to hidden-city ticketing. If you don't actually want to fly to Detroit, then if you're booking with Delta SkyMiles this doesn't affect you; just search for and book the connecting flight.

Here's the problem: when I attempted to book the same itinerary using Alaska Airlines Mileage Plan miles, the Alaska website returned the following error:

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When I spoke to an Alaska representative about the issue, she looked into it and explained that Alaska could only book Delta flights when there was low-level availability on each component flight of an itinerary — even if Alaska's website shows space on the composed itinerary, and even if Delta is willing to book the complete itinerary for their own members.

Conclusion

It's hard to say in the abstract how big a problem this is or will become. For now, on most flights, most of the time, Delta award space on each leg of an itinerary roughly corresponds to the award space for the entire itinerary, and this problem doesn't arise.

On some itineraries, some of the time, especially when connecting through one or more Delta hub, this will be a huge problem since it will completely prevent an award from being booked with Mileage Plan miles at any price.

In any case, it's an issue anyone using Alaska Airlines' Mileage Plan as their primary frequent flyer program should be aware of.

The May/June Club Carlson devaluation makes it just another middling hotel loyalty program

Before I get to the meat of my analysis of Club Carlson’s recently-announced devaluation, allow me to briefly mention my general approach when it comes to credit card rewards:

• I prefer cash above all other rewards currencies. I can use cash to pay my expenses, save for the future, and of course pay for travel out of pocket;
• There are times when earning rewards currencies besides cash can reduce the cost of a flight or hotel below the cost I would incur making a similar reservation with cash;
• If those situations occur frequently enough in a specific credit card rewards program, I’ll consider prospectively earning those rewards instead of cash.

The point is that my default mode when earning rewards currencies through credit card spend is cash back, and other loyalty currencies need to offer consistent, out-sized value in order to earn my business. Since the least valuable point is always the one you don’t redeem, I also make sure to redeem my hotel, airline, and proprietary credit card rewards points approximately as quickly as I earn them.

Consider the US Bank Flexperks Travel Rewards credit card. By earning 2 Flexpoints per dollar spent at "grocery stores" or "gas stations” each statement cycle, and redeeming those points for up to 2 cents each towards paid airfare, you might think that a return of up to 4% is a no-brainer (and, indeed, I do earn and redeem a lot of Flexpoints).

But last month I took a $500 voluntary denied boarding voucher on an American Airlines-operated flight. The next time I make a paid American reservation, I’ll use that voucher instead of up to 30,000 Flexpoints. Suddenly I have 30,000 more Flexpoints than I would have otherwise!

Sure, I can redeem them for 1 cent each in cash back, but that’s still a $33 loss compared to putting the same $15,000 in gas station or grocery store spend on my Barclaycard Arrival+ card (or, given the categories, another even higher-earning credit card like my Chase Ink Plus).

The Club Carlson credit cards used to offer consistent, super-sized value

The tool I use to analyze the value of hotel co-branded credit cards is the "imputed redemption value” of award reservations made with the chain: that’s the value you’re implicitly putting on a hotel redemption when you earn enough points through manufactured spend to make an award stay instead of earning cash back with the same spend. The last-night free benefit of the Club Carlson credit cards produced extremely low (that’s good, remember) imputed redemption values for stays of at least 2 nights:

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The only other hotel program which I have found to offer consistent value compared to cash back is Hilton HHonors, when you manufacture gas station and grocery store spend with the Surpass co-branded American Express card. While their 2014 devaluation dramatically raised the points cost of their properties, the exceptionally high earning rate of 6 HHonors points per dollar leaves relatively reasonable imputed redemption values, especially on stays of exactly 5 nights, when elites can take advantage of the 5th-night-free benefit:

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As I wrote on Friday, Wyndham’s new rewards program, which will, starting May 11, 2015, offer free nights at all participating Wyndham properties for 15,000 Wyndham Rewards points, has a single imputed redemption value. Manufacturing a single night at their properties will cost $166.50 in foregone cash back:

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Club Carlson’s program will be fine, if you really want to stay at Club Carlson properties

I have a commenter who always pokes fun at me when I talk about staying at dumps like the Radisson Blu es. Hotel, Rome or Radisson Martinique on Broadway just because the last-night-free benefit made them so cheap.

The fact is, I’m a poor person, so if I want to travel as much as I do, I need to do it cheaply. The Club Carlson credit card helped me do that. New York’s an expensive place to stay, and while I could always transfer Ultimate Rewards points to Hyatt and stay at one of their Manhattan properties, those points have an extremely high opportunity cost since they can also be redeemed for cash or paid airfare, or transferred to the right partner at the right moment. The Martinique made sense for me as an (admittedly run-down) alternative.

But beginning June 1, Club Carlson will not offer the outsized rewards that justified manufacturing thousands of dollars per month on their co-branded credit card. Here’s a side-by-side comparison of the imputed redemption values of Club Carlson stays and their competition, with the cheapest, second-cheapest, and most expensive stays highlighted in green, yellow, and red:

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Note: For Hilton I used a synthetic "mid tier" value of 45,000 HHonors points, which does not actually exist on their award chart; they have an even number of hotel categories.

As the chart clearly illustrates, at bottom-, mid-, and top-tier properties, Club Carlson is consistently the cheapest or second-cheapest chain to manufacture stays of less than 5 nights (top-tier, 5-night Hilton stays do clock in cheaper at $281, as shown in the chart further above), even without the discontinued last-night-free benefit.

The problem is that in exchange for your Club Carlson points, you’ll have to stay at Club Carlson properties, and many Club Carlson properties are dumps. Unless you have a clutch of Club Carlson properties you visit regularly, or a specific property you have your heart set on visiting, it no longer makes sense to manufacture large numbers of Club Carlson Gold Points speculatively.

If you feel like it, buy 3 domestic nights each year for $326.40 (or $351.40)

The Club Carlson co-branded credit cards still offer a single, specific value proposition:

• the US Bank Club Carlson Premier Rewards card has an annual fee of $85, while the Business Rewards card has an annual fee of $60;
• each year you renew your membership with either card, you receive 40,000 Gold Points;
• starting June 1, 2015, each year you spend $10,000 with the card you receive a free night at any Club Carlson property in the United States.

Since the earning rate of the card hasn’t changed, all this adds up to paying $222 in foregone cash back and a $60 or $85 annual fee, and receiving 90,000 Gold Points and a free night in the United States. Even if you have to manufacture an additional $2,000 in order to “top up” your Gold Points to 100,000 each year, you’ll end up paying $266.40 in foregone cash back, for which you’ll receive at least 3 nights at any US Club Carlson property (there are no domestic Category 7 hotels).

Since my partner and I visit Chicago at least a couple times per year, I’ll probably do exactly that, paying $108.80 per night for an annual 3-night stay at the Radisson Blu Aqua Hotel Chicago in downtown Chicago, which is a lovely hotel we’ve stayed at many times before (using the last-night-free benefit, of course).

By way of comparison, the imputed redemption value of the Hilton downtown Chicago properties (ranging from 40,000 to 60,000 HHonors points, depending on the season) is $118 to $178, while a reservation at the three Category 4 Hyatt properties in downtown Chicago would cost 15,000 transferred Ultimate Rewards points (worth $150 in cash).

Conclusion

The Club Carlson last-night-free benefit was so lucrative it justified a lot of otherwise-bizarre behavior. At the end of May, it’ll be gone, and Club Carlson will be just another middling hotel chain, packed with dilapidated, aging properties and struggling for relevance.

It sure was fun while it lasted, though!

Yes, the new Wyndham Rewards program will be great

I saw yesterday morning that Shawn at Miles to Memories had taken a crack at comparing the much-beloved Club Carlson rewards program with the just-announced changes to the Wyndham Rewards program, effective May 11, 2015.

There are many methods of comparing co-branded hotel credit cards. Personally, I prefer using a metric I call "imputed redemption values:" the amount of cash back foregone by using a hotel's co-branded credit card instead of a 2% or 2.22% cash back card.

The method isn't perfect (it ignores points earned on paid stays and elite-qualifying nights and stays) but it has two key benefits: it makes co-branded hotel credit cards directly comparable; and it gives a rough guideline for how much your typical room redemptions should cost to make hotel points worth manufacturing at the expense of cash back.

For example, here's an imputed redemption value chart for Club Carlson, in which I've helpfully included the last-night-free benefit:

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This chart illustrates the decreasing impact of the last-night-free benefit on longer stays.

By contrast, here's an imputed redemption value chart I whipped up just now for Wyndham Rewards' revalued post-May 11, 2015, program, using the Barclaycard no-annual-fee co-branded credit card earning 2 Wyndham Rewards points on all purchases:

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Stating the obvious

A glance at the charts shows that, unsurprisingly, It's still true that if you're staying exactly two nights somewhere with a Club Carlson property where you'll be happy staying, those two nights will always be cheaper if manufactured with a Club Carlson credit card than with a Wyndham Rewards credit card (or any other hotel's co-branded credit card).

Some people take vacations of more or fewer than 2 days

But if you're staying a single night, your last-night-free benefit is worthless. If you're staying more than 2 nights, and especially if you don't have a second Club Carlson account you can use to book alternating pairs of nights, the last-night-free benefit rapidly loses value.

Wyndham and Club Carlson have different property footprints

This works in two different ways. First, Club Carlson and Wyndham properties are located in different places. If you want to stay where a Wyndham property is located, you need to use Wyndham points or cash. If you want to stay where the Club Carlson property is located, you need to use Club Carlson points or cash.

Second, the distribution of properties within category bands is different. In a city with exclusively high-category Club Carlson properties, Wyndham stays are more likely to be cheaper (except on two-night stays, as mentioned above), while areas with low-category Club Carlson properties will have relatively expensive Wyndham properties.

The important thing to note here is that these distributions are not random. It is knowable (or at least predictable) in advance whether you're going to be visiting areas with relatively expensive or relatively cheap Wyndham properties (for example by looking at your travel pattern for the previous few years).

In other words, you don't need to decide between Club Carlson and Wyndham in a vacuum: you can make an educated guess about how well each program will work for you based on your actual and planned travel.

Club Carlson properties are wildly inconsistent

I'm checking in for a 2-night Club Carlson stay this afternoon. A few days ago I checked out of another 2-night Club Carlson stay. I had a 2-night Club Carlson stay in Rome in January. Last year I had several 2-night Club Carlson stays in New York City.

Suffice it to say, I love Club Carlson's program, and I love the last-night-free benefit.

With that out of the way, let's be honest: Club Carlson properties can be pretty terrible. The Radisson Blu in Rome has a great location right by the train station and a great breakfast buffet, and it costs just 44,000 Gold Points per 2-night stay (about $98 in foregone cash back per night). But I'll never stay there again; it's a dump.

Of course, readers have also shared wonderful experiences at various Club Carlson properties. The point is simply that locking yourself into Club Carlson because it's the "best" rewards program requires you to be indifferent to the quality of the properties themselves.

As travel hackers, we can hold ourselves to (at least slightly) higher standards than that!

Conclusion

The Wyndham Rewards co-branded credit card paired with the May 11, 2015, revaluation of the Wyndham Rewards program will make Wyndham Rewards stays in areas with high-category properties in other chains the cheapest or second-cheapest to manufacture, depending on the length of your stay.

However, whether it makes sense to prospectively manufacture large numbers of Wyndham Rewards points will still depend entirely on the distribution and quality of Wyndham and other hotel properties in the areas you actually intend to visit.

What's the point of class-of-service bonuses?

With the 2015 division of US airline loyalty programs into revenue-based (Southwest, Delta, United) and distance-based (American, Alaska) models, deciding on a primary carrier and loyalty program has become a game with multiple moving parts. While loyalty programs have always been confusing, evaluating a loyalty program now requires prospectively considering:

• your average cost per mile flown each year. If it's over the break-even point with Delta and United, you may be better offer continuing to credit your flights to them. If it's less than the break-even point, you'll be better off crediting your flights to a distance-based award program;
• how much of a premium you're willing to pay. How much more expensive are the typical American or Alaska flights out of your home airport? Are you willing to drive to a more distant airport in order to credit miles to a distance-based carrier?
• how much you value elite benefits. Crediting paid American and Delta flights to Alaska, as I do, means foregoing upgrades and same-day travel benefits on those flights. Likewise high-level elite status with either airline – but not Alaska – comes with regional and global upgrade certificates that can move you from economy to business class (or first class in American's case) on paid international flights.

In my case, taking all those factors into consideration, I decided to go with Alaska Airlines Mileage Plan as my primary airline loyalty program. That's principally because my flexible schedule means I'm always paying as little as possible for airline tickets, and redeeming miles for award flights whenever possible. My cost per mile flown would generate a trivial number of redeemable miles each year, while crediting flights to Alaska will continue to produce a noticeable number of miles.

All this was on my mind this week when I called into Delta to add our Alaska Airlines frequent flyer numbers to our first class tickets returning from New Orleans. In Delta's revenue-based model, those tickets would earn 1,715 SkyMiles for a general member or 2,401 SkyMiles for a Silver Medallion.

In Alaska's distance-based Mileage Plan, they'll earn 2,495 miles: 1,426 base miles and a 1,069-mile class-of-service bonus (we'll earn additional bonus miles as Mileage Plan elites, as well).

Thinking about this raised a seemingly-obvious question: what's the point of class-of-service bonuses, anyway?

Premium fares are more expensive because they're premium

In principle, passengers might be willing to pay more for premium fares for a number of reasons: full-fare economy tickets are freely changeable or refundable; business and first class fares include free checked bags, meals, drinks, and more comfortable seats or beds.

Of course at the other end of the spectrum Delta's cheapest "E" fares don't even include the ability to choose your seat.

The point is, why would airlines feel the need to bundle bonus frequent flyer miles into premium fares, when the fares are already higher because of manifest differences in the product being sold?

The way I see it, there were two possible reasons.

People are suckers

No one's ever gone broke underestimating the intelligence of American consumers. Every day I'm sure consumers buy more expensive tickets than they actually want or need in order to earn bonus frequent flyer miles, the value of which doesn't come close to making up for the difference in prices.

I bought our first class tickets using US Bank Flexpoints, so I was going to be paying the same 20,000 Flexpoints per ticket as long as the total price didn't exceed $400. Delta was selling a "G" class fare for around $300 and an "A" class fare for $392. Using Flexpoints, it was a no-brainer to choose the "A" fare, since it will earn 40% more Mileage Plan miles. I wouldn't have done the same if I were paying with cash, but are there consumers who would? Without a doubt.

People take advantage of corporate travel policies

The other explanation is that the individuals who accrue frequent flyer miles for trips paid for by their companies lobby for corporate travel policies that allow them to book premium fare classes. In other words, class-of-service bonuses pit the individuals doing the traveling against the companies that pay for it.

I'm not questioning that there are individuals who really do need fully flexible tickets. A consultant who truly has no idea how long an assignment will last springs to mind as the classic example.

But when refundable flights cost 3 or more times as much as non-refundable flights, simply not knowing if you'll have to return Friday or Monday isn't an excuse; the company would be better off booking two (or three!) non-refundable flights, while the employee doing the flying would much prefer the class-of-service bonus earned on a single changeable/refundable fare.

Enjoy class-of-service bonuses while they last!

While class-of-service bonuses are a scam, that doesn't quite do justice to the situation. Class-of-service bonuses are a scam because frequent flyer programs (and loyalty programs in general) are a scam. They exist in order to cloud consumers' judgment and earn excess profits on top of what airlines or hotels would earn providing commodity travel services.

Travel hacking has been the recognition of exploitable elements of systems designed in their turn to exploit travelers. Revenue-based programs are targeted at one of those exploitable elements (mistake fares and mileage runners), but commodifying frequent flyer programs into a simple rebate scheme will also be clarifying for passengers who mistakenly thought they were the beneficiaries of the airlines' largesse.

In the medium-term, it'll of course be interesting to see if and when American Airlines and Alaska Airlines follow suit. Until then, I'll be happily earning miles based on distance flown and enjoying class-of-service bonuses when – and only when – it makes sense to.

Onward from Madrid, Dublin, Berlin

Last week I wrote about the three transatlantic British Airways partners that, due to the distances involved and the fact that taxes and fees are low on these routes, make even post-devaluation Avios redemptions competitive with cash or (depending on your other balances) award redemptions using other loyalty currencies. Those routes again are:

• airberlin flights between New York City and Dusseldorf or Berlin, Germany;
• Iberia flights between Boston or New York City and Madrid (after transferring Avios to an initialized Iberia Plus account);
• Aer Lingus (not a oneworld member, but a British Airways partner) flights between Boston and Dublin, Ireland.

These redemptions — even post-devaluation — are great values in business class compared to cash (between 2.45 and 9.8 cents per Avios) and decent values compared to other airline miles. If nothing else, you should be aware of them because it's an additional option if you can't find award availability on your first-, second-, or third-choice airlines.

Judging by the comments to that post, you might think travel hackers are indifferent to this problem, on the grounds that it's better to build a trip around award availability on airlines you actually want to fly.

But for people with more restricted schedules (not me, but my understanding is this applies to most people in the working world), being aware of as many options as possible maximizes the chances of scoring a cheap award flight instead of being stuck paying retail to sit in economy.

A whole different problem, however, is the very real issue that you may not want to go to Ireland, Germany, or Spain!

Searching for cheap onward connections

A good first stop when thinking about Avios redemptions is the Wandering Aramean's Avios Map. Type in an airport code and you'll see all the possible non-stop Avios redemptions. Be sure to cross-check those flights with Google Flights or another flight search site, however; Seth's data are often out of date or inaccurate.

The Avios Map tool has two drawbacks: it doesn't show the taxes and fees for the route, and it only goes up to the 12,500 Avios distance band (so flights between New York and Germany don't appear, even though they're terrific values on airberlin). Still, if you're piecing together a multi-stop itinerary, you're likely sticking to shorter routes anyway, since Avios prices increase so rapidly with each additional leg and distance band.

After finding the routes you're interested in, plug them into British Airways' Avios calculator (and Iberia's if your flight is operated by Iberia) and look for the taxes and fees you'll incur. Don't forget to check the return as well; departure taxes vary wildly between airports.

This is basically brute force work, but if you're rich in Avios (or cheap Ultimate Rewards points), it's also a great way to travel around the world for next to nothing.

A few fun finds

These are literally just the first couple of options that jumped out at me in 30 minutes of clicking around using the exact procedure I described above:

• Berlin-Abu Dhabi. 12,500 Avios in economy, 25,000 Avios in business (will be 37,500). $48.24 in taxes and fees outbound, $21.78 in taxes and fees return. From Abu Dhabi, continue on Etihad virtually anywhere in the world.
• Dublin-Prague/Vienna. 7,500 Avios in economy, 15,000 (unchanged) Avios for intra-Europe business class. $51.90 in taxes and fees outbound from either, $68.25 return from Vienna, $53.86 return from Prague.
• Madrid-lots of places!

Take Iberia everywhere, but beware Iberia weirdness

Once you get to Madrid, you have a ton of great options, but you need to beware of Iberia's intense weirdness. For example, here's an Iberia-operated flight to Tel Aviv booked with British Airways Avios:

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Here's the same flight booked with Iberia Avios:

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I'm not going to get into an argument about whether 7,500 Avios are worth more or less than $45.59 (more), I'll just point out that this Iberia flight, unlike ones departing New York and Boston to Madrid, incurs more taxes and fees using Iberia Avios than British Airways Avios.

When the Iberia devaluation takes place on April 1, and the British Airways devaluation on April 28, 2015, it'll become even more important to check, every single time, which currency makes your awards cheaper overall.

Here's another cool option to Moscow's Domodedovo airport, booked with British Airways Avios:

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And the same flight booked with Iberia Avios:

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Conclusion

Obviously these flights are only a small sample of those operated out of Berlin, Dublin, and Madrid by British Airways partners, but I hope they illustrate the possibilities of plugging together Avios flights as a way to navigate to, from, and around Europe. If you spot any other long-distance, low-fee gems, feel free to share them in the comments!

Fun with post-devaluation Avios for premium cabin redemptions

In the last few years we've been flooded with airline rewards program devaluations. A few examples:

• On the earning side, we've seen revenue-based earning on Delta and United. Alaska also reduced earning on Delta-operated flights, leaving American (and for the next few weeks US Airways) and the Alaska-American partnership the last major domestic distance-based loyalty programs.
• On the redemption side we've seen increased United partner award costs, Delta's multiplication of award levels and close-in booking penalties, and British Airways' April 28, 2015, move to increase business and first class partner award redemptions from 2 and 3 times the cost of economy awards, respectively, to 3 and 4 times.

That last devaluation — increasing by 50% and 33% the cost of British Airways Avios redemptions in business and first class, respectively, got me thinking: when are Avios redemptions still cheaper than other alternatives?

The question is interesting because British Airways is by far the oneworld member it's easiest to earn miles with, as a transfer partner of both Chase Ultimate Rewards and American Express Membership Rewards, both of which offer bonus spending categories that make it easy to get big point balances with relatively little manufactured spend.

American Airlines, the other main oneworld member airline for US residents, is a transfer partner of Starwood Preferred Guest, but earning Starpoints is laborious at just one Starpoint per dollar spent with their co-branded American Express card and a transfer ratio of 1 Starpoint to 1.25 AAdvantage miles (if transferred in blocks of 20,000 Starpoints).

The big three transatlantic Avios routes

There are three transatlantic routes which, due to the distances and airlines involved, are often cited as key Avios sweet-spot redemptions:

• airberlin flights between New York City and Dusseldorf or Berlin, Germany;
• Iberia flights between Boston or New York City and Madrid (after transferring Avios to the Iberia Plus program);

• Aer Lingus (not a oneworld member, but a British Airways partner) flights between Boston and Dublin, Ireland.

All three partners charge low or no fuel and carrier surcharges, and are on the higher end of their respective Avios distance bands such that your Avios take you farther than on comparable transatlantic routes that happen to be slightly longer.

Since these three redemptions are among the most popular routes for Avios redemptions, I thought it'd be interesting to compare similar redemptions using other points currencies (and, of course, cash).

Iberia: Boston and New York to Madrid

At 3,410 (Boston) and 3,589 (New York) miles in length, economy tickets on these routes cost 20,000 Iberia Avios each direction on flights operated by Iberia. Business class tickets currently cost 40,000 Iberia Avios, but on April 1, 2015, "Off Peak Season" redemptions will go down to 34,000 Iberia Avios each way in business class, and "Peak Season" redemptions will go up to 50,000 Iberia Avios each way in business. Learn more about peak season pricing here.

Outbound award flights incur about €76.20 ($80.83) in fees and charges, and the return costs about €110.53 ($117.25) in fees and charges. A brief scan of roundtrip business class fares shows nonstop business class flights from New York costing from $2649 and from Boston costing from $4672 (one-way fares are the same or higher), so in cash terms a roundtrip Iberia Avios redemption would yield:

• BOS-MAD: 6.58 cents per Avios (Off Peak Season), 4.47 cents per Avios (Peak Season);
• JFK-MAD: 3.6 cents per Avios (Off Peak Season), 2.45 cents per Avios (Peak Season).

Those are pretty good redemptions!

Of course, it's cheating to compare these redemptions to cash fares. We're travel hackers; we don't pay retail.

From the New York area, here are the additional non-stop, roundtrip business class award redemption options:

• Delta. From 125,000 SkyMiles plus $52 in fees;
• United. From 115,000 Mileage Plus miles plus $52 in fees;
• American. From 100,000 AAdvantage miles plus $52 in fees.

From Boston, Iberia operates the only nonstop flight, so American (or, for the next few weeks, US Airways) miles are the only domestic airline miles you can redeem for that route.

airberlin: New York to Dusseldorf and Berlin

At 3,749 (Dusseldorf) and 3,968 (Berlin), these flights are knocking on the very top of the same band as the Iberia flights discussed above. They cost 20,000 British Airways Avios each way in economy, and 40,000 Avios each way in business. On April 28, 2015, business class redemptions will go up to 60,000 Avios each way.

Outbound flights incur $5.60 in fees and charges, and return flights incur $88.17 in fees and charges. Nonstop, roundtrip business class flights from New York City to Dusseldorf start at $3,067, while flights to Berlin start at $3,065. If we split the difference we get an Avios redemption rate of 2.48 cents per Avios for roundtrip itineraries in business class.

Besides Avios redemptions on airberlin, here are the other options on these routes:

• United operates a flight between Newark and Berlin. 115,000 Mileage Plus miles and $89.80 in taxes and fees.
• Lufthansa operates a flight between Newark and Dusseldorf. As a partner award, business class flights cost 140,000 United Mileage Plus miles and $91.90 in taxes and fees.
• American (on airberlin). 100,000 AAdvantage miles and $91.90 in taxes and fees.

Aer Lingus: Boston to Dublin

Sneaking in at 2,993 miles, this route is pretty much what Avios were designed for. Economy flights cost just 12,500 Avios each way, and business class flights currently cost 25,000 Avios, going up to 37,500 Avios on April 28, 2015.

Outbound flights incur $34.17 in taxes and fees, while the return flight costs $74.08 in taxes and fees. Nonstop, one-way business class fares cost from $3,709 (this is the only route of the three discussed here with one-ways for half the cost of roundtrips). That gives you an Avios redemption value of between 9.7 and 9.8 cents per Avios. That preposterously high Avios valuation is actually borne out on this route, since I could identify no other airlines operating flights on this route.

However, Aer Lingus is a partner of United, as well as British Airways, which means it's technically possible to redeem Mileage Plus miles for the same route for 70,000 miles each direction in business class. In reality, since United and British Airways are both transfer partners of Chase Ultimate Rewards, it's literally never worth transferring points to United instead of British Airways in order to book the same Aer Lingus award reservation.

Analysis

As a transfer partner of all three major flexible points currencies, we're always going to be eager to redeem British Airways (or Iberia) Avios when possible, since they're so easy to acquire. With that in mind, here's the breakdown of these three key routes to Europe (all figures are roundtrip):

• Aer Lingus between Boston and Dublin. Avios are a no-brainer, since this is British Airways' lowest transatlantic distance band, and any region-based airline partner is going to charge far more for the same flights. Even if you're flying on to mainland Europe, Dublin's a great place to start your itinerary, since you can get there for just 75,000 Avios roundtrip in business class.
• airberlin between New York City and Berlin or Dusseldorf. Unless you're flush with American Airlines AAdvantage miles from credit card applications, you'll want to take advantage of the luxury of choosing between United, Lufthansa, and airberlin availability. At 115,000, 140,000, and 120,000 Ultimate Rewards points, respectively, all are great choices on this route.
• Iberia between Boston or New York and Madrid. From Boston, this route is a no-brainer, since it's the only non-stop route to Madrid. From New York, again unless you're flush with AAdvantage miles, you'll want to look at your mileage balances and enjoy the luxury of choosing between Delta-, United-, and Iberia- operated flights between New York and Madrid, which clock in at 125,000 SkyMiles, 115,000 Mileage Plus miles, and 68,000-100,000 Iberia Avios, respectively.

Conclusion

I don't pretend that this analysis is definitive. I'm omitting important issues like transfer bonuses between Membership Rewards and British Airways that could substantially drive down the cost of even longer-haul flights on these carriers.

However, I've never seen a comprehensive analysis of the miles and cash cost of these routes before, let alone one taking into account the April, 2015, devaluations of both Iberia (April 1) and British Airways (April 28), so I'm happy to provide a first step in that direction.

Thoughts and criticism are, as always, welcome in the comments.