How much would you pay to be able to book any flight on any day?

Another day, another devaluation.

Yesterday American Airlines announced the changes they'll be making to the AAdvantage program next year. You've likely already read all about them, but in summary, they are:

• Revenue-based mileage earning (beginning in "the second half of 2016");
• Award chart devaluation (effective March 22, 2016);
• Elite status devaluation (effective for qualification after January 1, 2016).

Since I credit my paid American flights to Alaska, I don't care much about the first or third points. But the award chart devaluation is real and, for premium cabin redemptions, significant.

Premium cabin awards are not cheap or easy

With yesterday's announcement, American Airlines joined Delta and United in raising mileage prices for premium cabin awards, in some cases astronomically. For example, a first class award seat on a 3-cabin aircraft to Sydney from the continental United States will cost 110,000 AAdvantage miles starting March 22, 2016, up from the 72,500 miles it currently costs, a 52% increase.

Of course, that's purely academic. There are no first class award seats between the continental United States and Sydney.

Yes, if you're flexible, if you're searching far in advance, close-in, and on every single day in between, you might be able to find one or two seats during the Southern winter. But don't hold your breath.

Premium cabin seats are (not that) expensive

For a lot of people, "travel hacking" is synonymous with "loyalty program hacking." And indeed, historically the loyalty programs operated by hotels and airlines have been a great source of outsized value for people willing to dedicate the time and attention to maximizing the value of their miles and points.

But those airline award seats we hunt down so diligently are also available on the open market! Believe it or not, the airlines just sell them. Of course, in exchange for the flexibility buying revenue tickets grants, you're going to pay a little more.

Or a lot more. That 220,000-mile roundtrip first class award ticket American promised you might cost $10,000 or $15,000 if you choose the flexibility of a revenue ticket.

Well, it might cost someone $15,000. But it doesn't have to cost you $15,000, because you're a travel hacker.

The revenue premium may be smaller than you think

A $15,000 first class flight to Sydney will give about 6.8 cents per AAdvantage mile in value after the March 22 devaluation (if you could find first class award space).

Since the Citi Prestige card allows you to redeem ThankYou points for 1.6 cents each on American-marketed flights, you'd need about 938,000 ThankYou points to purchase your first class revenue ticket. That's a lot of points, but the ThankYou Premier card earns 3 ThankYou points per dollar spent at gas stations, so you'd only need to manufacture $312,666 in gas station spend to make your redemption. That's obviously not something you'll be able to do in a weekend, but it might be a reasonable goal if spread out over a year or two.

Since the Citi and Barclaycard AAdvantage co-branded credit cards earn just one mile per dollar spent everywhere, you'd need to manufacture $220,000 on those cards to make your first class award redemption. In other words, the revenue premium — the additional manufactured spend required to book any seat on any flight — in this case is about 42%.

The $15,000 flight has the additional advantage of earning an Executive Platinum 165,000 AAdvantage miles, enough for another roundtrip to Sydney (albeit in business class instead of first).

Conclusion

Most people aren't going to manufacture enough spend to pay what American is asking for a first class ticket to Australia. Those who do probably don't value a first class ticket to Australia at $15,000, and would rather redeem their fixed-value points for the domestic economy flights they'd book anyway. That's a perfectly reasonable point of view.

The point I want to make is that while I sometimes say that cash is a superior earning choice for manufactured spend unless you have a particular, high-value redemption in mind, it may be a superior earning choice even if you do have a particular, high-value redemption in mind!

In other words, it's not enough to say that an award redemption will get you more value per dollar in manufactured spend than earning a currency like Ultimate Rewards (1.25 cents per point), Flexpoints (up to 2 cents per point, redeemed in tiers), Membership Rewards (1.43 cents per point with the American Express Business Platinum), or ThankYou points. You also have to be willing to redeem your loyalty currencies exclusively on the dates, flights, and times that the airlines choose to make award seats available, and put the time into learning the intricacies of each alliance and each airline.

If you don't find that fun or interesting, you may well be better off saving your time and paying the revenue premium instead.

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.

Evaluating point transfers to airlines by alliance

Last month I wrote that the addition of gas stations to the Citi ThankYou Premier "travel" bonus category, and raising that bonus to 3 ThankYou points per dollar, had leveled the playing field between that card, the Chase Ink Plus, and American Express Amex Everyday Preferred, all three of which will have $95 annual fees starting April 19, 2015, when the ThankYou Premier card's annual fee is lowered from $125.

Of course, the definition of a card that earns flexible points is the ability to transfer those points to airline and hotel partners. So which airline transfer partners are best for each of the three rewards currencies?

SkyTeam

Chase Ultimate Rewards. Here you have just one transfer partner, Korean Air. The good news is, they have a pretty decent, zone-based award chart for SkyTeam partner awards:

View fullsize

The bad news is, they pass along fuel surcharges on their own flights and SkyTeam partner flights. For flights to South Korea from the United States, one interesting option is paying 35,000 Delta SkyMiles and $24 for your outbound ticket, since Delta doesn't pass along fuel surcharges on Korean Air flights, and using SKYPASS miles for the return on Korean Air, where you'll pay just 83,100 Korean Won (about $75) in taxes and fuel surcharges. That's about $266 less than you'd pay booking the entire trip with SKYPASS miles, and only $14 more than you'd pay booking the entire trip with SkyMiles.

American Express Membership Rewards. Membership Rewards points transfer to Delta and a number of other SkyTeam carriers: AeroMexico, Air France KLM, and Alitalia. For most redemptions from the United States, you'll be best off redeeming Delta SkyMiles, unless you want to book First Class tickets, since Delta doesn't have access to those seats (they don't operate a First Class cabin themselves).

For redemptions originating outside the United States, you'll need to consider another carrier (or more realistically, another alliance), since Delta passes along fuel surcharges on those flights. Air France KLM and Alitalia charge punishing fuel surcharges even on their own flights.

Aeromexico is an interesting case. I was unable to price out any SkyTeam partner awards using their online booking engine, so I don't know if they pass along fuel surcharges, although that's my impression from the little information I was able to gather. If any readers have experience booking SkyTeam awards through Aeromexico, I'd love to hear it!

Citi ThankYou. In addition to Air France KLM, here you have the unique transfer partner of Garuda Indonesia. To quote from the GarudaMiles website: "Award Tickets redemption for any of Garuda Indonesia partner airlines, including Air France & KLM, can only be conducted at Garuda Indonesia Sales Offices." Unfortunately, that's not going to be very useful for most people, so your best best will likely still be Air France KLM.

oneworld

Chase Ultimate Rewards. British Airways is your only option here, and you know what that means: domestic economy flights on American Airlines or US Airways, transatlantic flights on Aer Lingus and air berlin, and transfers to Iberia Avios for redemptions on their own flights.

American Express Membership Rewards. Here you can choose between Cathay Pacific and British Airways (or Iberia) Avios. While both programs are distance-based, and both pass along fuel surcharges from partners, Cathay Pacific's award chart is based on the total distance traveled on an award itinerary, rather than the length of each segment, which should make awards that require connections cheaper. Additionally, on April 28, 2015, Avios redemptions for most long-haul segments in premium cabins will increase by 50% (Business) and 33% (First). That'll increase the value of Cathay Pacific miles compared to Avios. For example, a First Class redemption on American Airlines between JFK and LAX will cost 50,000 Avios (currently 37,500), but just 40,000 Asia Miles, as a "single carrier award." There's additional value in Cathay's multi-partner awards, though you'll see excessive fuel surcharges on many of those awards.

Citi ThankYou. Here you can choose between Cathay Pacific, Malaysia Airlines, and Qatar. Qatar Qmiles appear to be completely worthless. Malaysia Airlines has a distance-based award chart with fairly steep single-partner award redemptions (JFK-LAX on American Airlines would cost 132,000 Enrich Miles in First!), but much more reasonable multi-partner awards. Drew at Travel is Free has looked at a number of routes where Malaysia Airlines miles are competitive, particularly on their own flights, so I'll call this a tie between Malaysia Airlines and Cathay Pacific.

Star Alliance

Chase Ultimate Rewards. Between United and Singapore Airlines, you'll typically want to transfer your Ultimate Rewards points to United, since they don't pass along fuel surcharges on partner awards. The most popular exception is if you're committed to redeeming Ultimate Rewards points for Singapore Airlines Suites Class redemptions, since you may find KrisFlyer miles more useful because of their increased access to those seats.

American Express Membership Rewards. With the same caveat as above, Air Canada Aeroplan miles will usually be more valuable than Singapore Airlines miles, since they don't pass along fuel surcharges on many of their partners, although ANA can make sense on Star Alliance routes with fuel surcharges where their distance-based award chart requires fewer miles than Aeroplan, or on United, where ANA passes along low or no fuel surcharges.

Citi ThankYou. Citi has two unique transfer partners in Star Alliance, Thai Airways and EVA Air, in addition to Singapore. Thai Airways recently gutted their award chart, and EVA Air passes along fuel surcharges, so if you have to redeem ThankYou points for Star Alliance travel, Singapore is likely to be your best bet.

Conclusion

The point of this post is to emphasize that bonused earning rates, like those at gas stations, change the value calculus of various loyalty programs.

Much hay is made of the fact that Starwood Preferred Guest Starpoints have a 20% transfer bonus when transferred in increments of 20,000, or that Membership Rewards points can sometimes be transferred to British Airways with a 40% bonus.

But if you're earning 2 Ultimate Rewards points, or 3 Membership Rewards or ThankYou points, per dollar spent at gas stations, you should be putting equal weight on the 100% or 200% "transfer bonus" that category spend gives you; after all, the Starwood Preferred Guest American Express earns just 1 Starpoint per dollar spent everywhere.

Finally, this is not encouragement to sign up for all three cards that earn bonus, flexible points at gas stations. On the contrary, it's an invitation to take a look at your upcoming trips, the award reservations you intend to make, and the loyalty currencies that can make that possible. Then find the credit cards that offer bonus points in the categories that are going to get you those points as easily and cheaply as possible. If you have access to cheap gas station manufactured spend, it might be one of these cards. If you don't, then you'll need to keep looking!

Travel notice, and dining bonuses after Chase Sapphire Preferred

[update 1/18/15: Reader Ted reminded me of the American Express SImplyCash Business Credit Card which offers 5% cash back at office supply stores and 3% cash back on up to $25,000 in annual purchases in a single category of your choice, with a list of options including restaurants and gas stations. The card currently has a $250 signup bonus after spending $5,000 within 6 months.]

Traveling for the next 24 days

This is what it's all about, right? We hustle all year not just to pad our bank accounts, but to redeem our miles and points for travel with our loved ones. I'll be bouncing around the country for the next few weeks before heading to Italy for a 10-day caper in Milan, Venice, Florence, Rome, and Naples.

There's always a lot to write about and I don't anticipate much changing around here during my travels, but you should probably expect fewer datapoints that involve in-person experiments and more analysis, news, signup links, and that kind of thing.

I always find spending time with family to be exhausting and unexpectedly time-consuming (but meaningful!), so posting frequency will probably drop to 2 or 3 times per week from my usual 3-5 post frequency until I get back in the middle of January. I don't expect any extended blackout, so don't hesitate to reach out to me in the comments, by e-mail, and on Twitter.

Dining Bonuses after Chase Sapphire Preferred

Having finally thrown off the yoke of Chase's over-priced and under-performing Sapphire Preferred card and embraced the Ink Plus as my source of flexible Ultimate Rewards points, I was left with a serious question: which card should I use for my routine purchases that previously fell under the Sapphire Preferred's "dining" bonus category?

First let me stress that unless you have a lot of reimbursable travel expenses or you manufacture spend, this question shouldn't interest you: you should put all your everyday expenses on a 2% cash back, no-annual-fee credit card like the Citi Double Cash or Fidelity Investment Rewards American Express and never think about it again. Even a person who spends an above-average amount every year is unlikely to recoup the cost of an annual fee in the difference between the value of their spend on a premium credit card and the 2% they would earn on a no-annual-fee card.

If you do manufacture spend, on the other hand, your new "dining" credit card will ideally be one you already carry, either in order to manufacture spend or because it doesn't have an annual fee. Here are the obvious candidates:

• Sam's Club MasterCard. Both travel hackers and civilians already carry this no-annual-fee credit card because it gives 5% cash back on up to $6,000 in gas station spend each year (the site doesn't make clear whether this is calendar or cardmember year). If you do, you may want to use it at restaurants as well, where it earns 3% cash back, 50% more than a 2% cash back card. Note that rewards earning is capped at a total of $5,000 in cash back per year.
• Chase AARP Rewards Visa. A lower, but unlimited, 3% cash back earning rate at gas stations may make this card worth carrying if you manufacture a lot of spend at gas stations. If that's the case, it's probably also your best bet for restaurant spend, likewise earning unlimited 3% cash back with no annual fee.
• Ink Cash. If you already completed your first year with a premium Ink credit card like Ink Plus or Ink Bold, you may have requested a product change to the no-annual-fee Ink Cash. If so, you're in luck: it earns 2 non-flexible Ultimate Rewards points per dollar spent at restaurants. If you have a spouse or domestic partner who still carries a premium Ultimate Rewards card, you can transfer your non-flexible points to their account and keep the ability to transfer them.
• Hilton HHonors Surpass American Express. Now we're getting into more speculative territory, so we need to be careful: the Surpass card has an annual fee of $75, so this is definitely not a card you should carry just for restaurant spend. But if you already carry it, in order to earn 6 HHonors points per dollar spent at gas stations and grocery stores and Hilton Diamond elite status after spending $40,000 on the card in a calendar year, then you're already implicitly valuing the 6 HHonors points you earn per dollar spent at restaurants at more than roughly 0.36 cents each, after accounting for the annual fee (if you spend exactly $40,000 on the card each calendar year, that's the valuation that recoups both the $800 you could earn with a 2% cash back card and your $75 annual fee).
• Citi ThankYou Premier. I don't pay $125 annual fees, and don't suggest my readers do so either. But there are a (vanishingly small) number of situations where it might make sense to have a ThankYou Premier card. For example, if you are still sitting on a huge balance of ThankYou points from the days of ThankYou Preferred bonus earning at gas stations, drug stores, and grocery stores, you may have signed up for a ThankYour Premier card in order to increase the value of that stockpile. In that case, why not take advantage of the card's 3 ThankYou point per dollar earning rate at restaurants?

The rest of the bunch

There are other credit cards that earn as much as 3% cash back at restaurants. The problem is there's no reason you would ever have one of these cards, and it's unlikely to be worth a "hard" credit pull to apply for one:

• Santander Bravo. Earns 3 points per dollar at gas stations, supermarkets, and restaurants, but a low signup bonus, $49 annual fee, and all bonus earning is capped at $5,000 in spend per calendar quarter.
• Huntington Voice. Earns 3% cash back with no annual fee, but with no signup bonus and bonused earning capped at $2,000 in spend per calendar quarter.

A possible exception is the PayPal Extras MasterCard, which you may well carry for other reasons. The trouble is that you're likely to easily max out the 50,000-point cardmember-year earning limit without spending a dime at restaurants, so using the card there doesn't offer any marginal value over the cards I described above.

Any I missed?

What's your favorite card for legitimate restaurant spend? Did I miss any lesser-known gems? See you in the comments.

Finding myself 1,582 MQM short (and making it up)

I mentioned all the way back in June that I was planning on making Delta Platinum Medallion this year thanks to the 200% MQM I'll earn on a First Class ticket operated by Alaska Airlines this Christmas. Oddly, while only "full fare" First and Business class tickets earn 200% MQM on Delta-operated flights, Alaska Airlines only has one First Class fare class, and that fare class earns 200% MQM on Delta, even when it's only trivially more expensive than Coach (as it was on this itinerary).

Then, the unthinkable happened: I decided to spend New Year's Eve in Portland, Oregon, instead of flying back to New England on December 30. Crucially, that meant my final first-class leg, PDX-BOS, would be credited to the 2014 program year, instead of the 2013 program year. That would leave me 1,582 Medallion Qualification Miles short of Delta Platinum Medallion, which is the best Delta Medallion status, since it gives you unlimited free award changes and redeposits, allowing you to grab low-level award seats as they become available.

I'm never one to shy away from a spontaneous vacation, but unfortunately I needed to fly on paid tickets in order to earn MQM, which meant I needed to think strategically. I thought I'd walk through my decision-making for my readers, in case they find themselves in a similar situation.

The Options

When trying to piece together a last minute mileage jaunt like this, you need to evaluate all the options. There are three important dimensions to look at right away.

• Are one-way tickets more expensive than round-trip tickets? If not, you can use different methods to buy each ticket, as I ended up doing in this case.
• Are first-class tickets (much) more expensive than economy tickets? I only needed 1,582 MQM, which thanks to the 500-mile minimum on Delta works out to 4 segments. If, however, I'd needed 2,582 MQM, then I could book my tickets in First Class and with the 50% class-of-service bonus those same 4 segments would earn 3,000 MQM.
• What kinds of points do you have available? This is obviously key if we're trying to earn these miles as cheaply as possible.

The Solution

It turned out that for the flights I had in mind, one-way tickets were half the price of round-trip, with each direction costing about $180 in economy.

On the flights I was looking at, first-class tickets were only about $100 more in each direction.

Finally, I had about 16,000 ThankYou points left over after my last student loan rebate redemption, and those points can be used at full value (1 cent each) for travel reservations made through the ThankYou booking tool. I also had a $50 Delta transportation voucher from a broken reading lamp a few trips ago.

With all that in mind, here's what I ended up doing:

• Ticket #1: Since I didn't have enough ThankYou points to cover the entire $180 ticket, I spent just 15,500 TY points, leaving me with $25 to pay with my Barclaycard Arrival World MasterCard, which will allow me to redeem my Arrival miles against the purchase.
• Ticket #2: I used my $50 transportation voucher against the $180 ticket and paid for the remaining $130 with my Arrival MasterCard.

After redeeming my Arrival miles against the purchases, my total cost for this roundtrip will be about $81.38: $23.75 for the ThankYou points and $57.63 for the Arrival miles (assuming I'm paying 0.75 cents per dollar in manufactured spend). That's a no-brainer for Platinum Medallion status, which also comes with a Medallion Choice Benefit (I picked the 20,000 bonus miles last year).

An Alternative

Interestingly, since First Class tickets were only slightly more expensive than Coach, there was another solution: I could redeem my Skymiles for 1 cent each against a First Class "pay with miles" ticket, which unlike economy redemptions do earn MQM and redeemable Skymiles. I have enough Skymiles that I could have redeemed them for the entire cost of one or both tickets. I considered doing this, but there are a few reasons why I decided not to go that route:

• Delta transportation vouchers can't be used in conjunction with a "pay with miles" redemption, and just like miles and points, the least valuable travel voucher is the one you don't use;
• ThankYou points are worth a maximum of 1 cent each, while Skymiles are worth a minimum of 1 cent each. I can use my Skymiles for premium-cabin international trips, while the best alternative use of my ThankYou points is for student loan rebate checks, where I'm also getting 1 cent in value per point.

And that's how I'm going to earn Platinum Medallion for (probably) the last time, before switching to Alaska Gold MVP+ at the end of next year and earning hyper-valuable Alaska Airlines Mileage Plan miles instead.