The Delta Platinum American Express annual fee is going up because it has always been too low

You may have heard that for Delta Platinum American Express applications received after May 1, 2014, the card will carry a $195 annual fee, rather than the current $150 annual fee. I'm not going to tell you that's some kind of good thing, but it's obvious why it's happening: under the right conditions, the card offers one of the best value propositions in the miles and points space.

For this analysis, I will assume the cardholder spends exactly $25,000 or $50,000 on the card, since those are the spend thresholds that unlock this card's real value.

Companion Ticket

Each year you renew the card, you'll earn a domestic companion ticket. According to the terms and conditions, redeeming the ticket costs "from $22.00 to $68.00 for itineraries with two to four flight segments" for taxes, fees, surcharges and so on.

The companion ticket is non-mileage-earning, but if it's redeemed for a flight that costs over $300 or $400, this benefit alone easily pays for the card's annual fee, whether it's $150 or $195.

Nothing's Free

I got into a discussion with a colleague yesterday about the Southwest Companion Pass. I said that I was glad I'd found a gas station that was willing to play along, so I could get a 75%+ discount on paid airfare by using my US Bank Flexperks Travel Rewards card. He replied that he wasn't interested, since he doesn't pay for his airfare, by which he meant that he manufactures spend on his Chase Southwest Visa cards, then redeems his points for travel using his Southwest Companion Pass.

I had to break it to him that while he was enjoying a very healthy discount on his travel, it wasn't free: every dollar he spent on his Southwest Visa cards could be spent on a 2% or 2.22% cash back card. That foregone cash back was the price he was paying for his family's travel: $110,000 in spend would earn $2,200 – $2,442 in cash back or Barclaycard Arrival travel redemptions.

Let's apply the same logic to the Delta Platinum American Express. After spending $50,000 on the card, a cardholder will have foregone $1,000 – $1,110 in cash back or Arrival redemptions, plus either the annual fee (vs. a $0 annual fee, 2% cash back card) or the difference in annual fees (vs. the $89 annual fee, 2.22% Barclaycard Arrival). That brings the total cost to $1,195 – $1,216. We can call that $1,200.

What does that $1,200 buy you?

Bonus Skymiles

First of all, you'll receive 70,000 redeemable Skymiles, which (as an American Express cardholder) can be redeemed for $700 in Delta airfare (non-mileage-earning in Economy class, mileage-earning in First, Business and BusinessElite classes). Obviously the points can be redeemed for more value than that on premium cabin international travel, but that's the minimum value of the miles.

Bonus Medallion Qualification Miles

At this point the cardholder will still be $500 in the hole. However, at the same $50,000 spend threshold, they'll also have earned 20,000 Medallion Qualification Miles (and be exempt from Medallion Qualification Dollar requirements); they'll pay 2.5 cents per Medallion Qualification Mile.

Is it worth it?

2.5 cents per elite qualifying mile can be absurdly cheap or absurdly expensive: it depends on your travel goals.

I believe the two situations where it's absurdly cheap are if you need the Medallion Qualification Miles to reach Platinum or Diamond Medallion status, or plan to roll over extra Medallion Qualification Miles in order to achieve Platinum or Diamond in a future program year.

While there is one big benefit of reaching Gold Medallion instead of Silver Medallion (100% bonus Skymiles instead of 25% on paid flights), if you're not going to reach Platinum Medallion you shouldn't be crediting your flights to Delta in the first place: you should be crediting them to Alaska's Mileage Plan, where you can redeem your miles for Delta and American Airlines flights.

That's because only at the Platinum Medallion level can you change and redeposit awards for free, which is absolutely essential to redeeming your Skymiles for "Saver" level awards.

Finally, the Platinum and Diamond Medallion Choice Benefits are each worth $200 or more, which strengthens the value proposition of this card — if and only if it helps you make it to Platinum or Diamond Medallion.