Your Money: Why Airline Credit Cards Have an Enduring Appeal

This week, Citi, clearly feeling the competitive heat, announced plans to add goodies to one of its American Airlines cards, including double miles on all restaurant and gas station purchases. While Citi did not offer up hard numbers like Delta and Amex, the company did tell me that the growth of its American Airlines card portfolio was outpacing the predictions of overall economic metrics.

A few years ago, Barclays made an aggressive bid for the JetBlue credit card business and won it. The bank now reports that it has doubled the overall size of the business in two years.

So what accounts for the continued appeal of the airline credit card, and who ought to have one?

Some things that have always been true about these cards remain so: If you travel a lot on the same airline and spend a lot of money in your everyday life, earning the same reward currency when you travel and when you’re using your card can help you quickly earn more and better free trips.

But things have also changed. In addition to the miles, many of the mileage cards now come with privileges. You might get a free checked bag. Or you can board your flight in the fifth group instead of the seventh, thereby getting space for your carry-on in the overhead bin.

This is clever and ought to inspire some healthy cynicism. After all, the airlines created the problem that the cards are now solving by charging for checked baggage. Now, for an annual fee of $95 or $150 or $450, you can avoid multiple $25 or $35 nicks for checking bags. And even if you can’t be sure what a free flight will cost in miles, at least the baggage giveaway is something tangible.

“As points become more confusing and devalued, people turn to perks — and they are easy to see and easy to value,” said Brian Kelly, the founder of The Points Guy, a website that makes money from referrals by channeling consumers to the most useful cards. (Wirecutter, a New York Times company, has also made money this way in the past and plans to again in the future.) “The issuers are doubling down on perks, and it appears to be paying off.”

The card offerings are now complicated enough that it’s nearly impossible to offer generic advice about who ought to have one. For me, the sign-up bonuses for the Delta and American cards plus the baggage fee waivers on Delta were enough to persuade me. The top-tier American card also comes with airline lounge access, which I finally treated myself to (and deducted on my taxes) after too many years of hacking together standing desks at abandoned airport gates so I could work comfortably on my laptop.


A security checkpoint at Kennedy International Airport. In addition to the miles, many of the mileage cards now come with privileges. You might get a free checked bag. Or you can board your flight in the fifth group instead of the seventh.

Mark Lennihan/Associated Press

One bit of math should be obvious: If you’re carrying a balance and paying 18 percent annual interest, the rewards don’t come close to making that up. According to American Express, 21 percent of its outstanding credit card loans belonged to people with a Delta credit card as of the end of 2017.

Many people don’t spend or earn enough to justify switching cards. Sure, they might extract a bit more value from a simple card that refunds 2 percent of all purchases, but then they would have to change all automated payments, which is a giant headache.

It’s also possible that plenty of people simply do not know that generic points cards from the likes of Chase and its Ultimate Rewards program might offer more in the way of returns. Many bloggers offer helpful advice about this offering.

For those who don’t want to do the math themselves, Jay Sorensen did it for you. Mr. Sorensen, who runs the IdeaWorksCompany airline revenue consultancy, ran hundreds of simulations to come up with the following data for an award seat availability study he does with the rental site CarTrawler: The average value per mile redeemed for economy class travel ranges from 0.7 cents to 1.4 cents, depending on the airline. For long-distance business class seats, it ranges from 1.5 cents to 2.4 cents. So a 2 percent cash-back card would more often be a better value.

But some consumers simply do not care about the math — or perhaps are hypnotized by years of gauzy marketing and the daydreaming it inspires. “While you may be right that the value per mile has decreased, that’s a function of a lot of things,” said Denny Nealon, who runs Barclays’ United States partnerships business. “Airline miles are an incredibly aspirational and valuable currency.”

And those aspirations cement the emotional hook of credit-card airline miles: They offer the distinct possibility that you could use everyday spending to get yourself as far as possible from your everyday life.

“What we are in the business of doing is travel,” said Bridget Blaise-Shamai, vice president for loyalty and customer insights at American Airlines. “We could have this conversation 100 years from now, and it would remain relevant.”

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Your Money: Marriott’s New Loyalty Program: Not as Bad as Starwood Fans Feared

Any evaluation of a loyalty program begins with the earn-and-burn analysis: What do you get in exchange for your loyalty, and what can you trade it for when you want to redeem? According to David Flueck, senior vice president of global loyalty for Marriott, hotel guests will earn about 20 percent more points than they did previously.

That number is meaningless, however, if the points are worth less when they’re redeemed. Marriott, which completed its acquisition of Starwood in September 2016, is moving to three-tier pricing in points for free rooms — a standard price and then peak and off-peak rates coming next year. Within that kind of plan, there is a lot of room for Marriott to improve its own economics at the expense of frequent customers.


The restaurant at the Sheraton in Mendoza, Argentina. The Marriott program now covers 6,500 hotels.

Alejandro Kirchuk for The New York Times

Mr. Flueck made the following points when I pressed him on this: There are more properties where standard award pricing will fall than there are where they will rise. There will be roughly the same number of peak and off-peak nights. And he answered with a straight-up “no” when I asked him, on behalf of loyalists of the Starwood Preferred Guest program like myself, whether the changes were designed to devalue the program for Starwood members, who were often able to get up to (a quite generous) 3 cents per point in value when booking free rooms.

Loyalty brings perks in addition to points, but companies don’t want to make it too easy to earn them. Starwood members used to be able to qualify for platinum status after just 25 stays. Now, you’ll need to rack up 50 nights. The company will allow people to qualify under either the old rules or the new ones this year.

Many perks remain intact for people who reach the platinum level and higher, however, including club lounge access, upgrades to certain suites and a 4 p.m. checkout at every hotel (except resort and convention properties under some circumstances).

Also, Marriott travelers who regularly stay in lower-priced properties in parts of the country with no luxury hotels get some welcome news: The company did not follow the lead of airlines that have tied status more closely to revenue. At Marriott, a night is still a night, whether it’s at a Courtyard or a Ritz.

“For a road warrior always staying in secondary markets, we didn’t want to make it harder,” Mr. Flueck said.

Assessing the changes will be complicated enough for many travelers. But the analysis gets more confounding when you consider the various credit cards on offer. Instead of consolidating its portfolio with one card issuer, Marriott chose to maintain its relationship with both American Express and Chase. Both companies introduced new cards Monday.

The annual fee for the new Premier Plus Chase card is $10 more, though it will also offer more points than the current Premier plastic. Cardholders will need to alert the company if they want to switch.

The more interesting developments here, however, are on the American Express side. It is adding a “Luxury” American Express card that will be available in August and require a $450 annual fee. It will earn six loyalty points for every dollar spent at Marriott hotels, three at restaurants and airlines, and two points everywhere else.


The Sheraton Miyako Hotel in Tokyo. Many perks remain intact for people who reach the loyalty program’s platinum level and higher

Jeremie Souteyrat for The New York Times

While comparisons with the old program get tricky, for some time now Marriott has been allowing Starwood members to transfer their points into Marriott’s existing program at a one-Starwood-for-three-Marriott ratio. I ran my own numbers on card spending from 2017 (and made some wild guesses about future travel spending) and found that the points I earn will fall by about one-third.

At first glance, this would seem to matter a great deal, especially to people who like trading points for airline miles. While Marriott is preserving that feature and the bonus points that it sometimes gives out during the transfer, earning fewer points through card spending means fewer miles on the other side of the trade.

So who would add this card (or stick with the program at all, for that matter)? Well, consider the other perks. A $300 annual credit for any money you spend at a Marriott property brings the annual fee down to $150. Then, you get a certificate for a free night stay at all but the most expensive hotels. That could be worth that remaining $150, easy. Cardholders will also get the speediest Wi-Fi in hotels without having to pay for it.

Finally, anyone who manages to spend $75,000 per year on the card will get platinum status without even having to lay a head on a bed. That has the potential to annoy people who have to hit elite tiers the hard way, but Marriott believes that it can handle any influx of newbie platinums given the small number of cardholders who spend that much.

Current Starwood American Express cardholders will be able to count any spending from Jan. 1, 2018, onward toward the $75,000 tally if they switch to the new card this year. No change to card numbers will be required. (Also, cardholders of the old-school American Express Platinum card will continue to get automatic Marriott gold status.)

Given all that, plus a promise from American Express to give sign-up bonuses to people who upgrade to the new Starwood card, it seems that it’s worth giving the newly combined program a year or two to see how things shake out. I’m looking forward to not having to stay at inconvenient Starwoods anymore, since Marriott is bringing many more properties into the program.

Still, I’m not sure these benefits are so good that they merit switching for people who are already happy with their current earn-and-burn strategy. If you like a simple cash-back card, those products still exist (and my colleagues at Wirecutter have a guide to help you pick one of those). Cards from Chase and Capital One that offer generic points that can be used in other ways remain valuable, too.

Even after nearly two and a half years, Marriott still isn’t saying what it will call this new loyalty program, or even if it has ruled out Starriott. “We knew people were eagerly anticipating being able to earn and redeem across one program,” Mr. Flueck said. “We’ve done that as quickly as we could.”

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Credit Card Signatures Are About to Become Extinct

Target plans to eliminate them this month. Walmart considers signatures “worthless” and has already stopped recording them on most transactions, according to Randy Hargrove, a company spokesman. It will soon get rid of them completely.

Mastercard said it has been wanting to make the change for years, but held off until cards embedded with computer chips became common.

Card companies, which cover the costs of fraudulent credit card spending, starting adding the microchips more than a decade ago to reduce fraud-related losses. The chips create unique codes for each transaction, making the cards much harder to copy. The chips have long been popular in Europe and Asia but only took off in the United States three years ago, when the card networks began punishing merchants that still relied on the old card-swipe technology. At that point, signatures became largely irrelevant in resolving fraud claims.


The signature was once the way merchants tracked their customers’ promises to pay up — and verified their identities. But technology has made them largely obsolete.

Erica Berenstein

“The signature has really outrun its useful life,” said Linda Kirkpatrick, Mastercard’s head of business development in the United States.

It took nearly a century for technology to overtake the hand-scrawled name. The charge card dates back to the 1920s, when stores started issuing embossed metal plates with paper signature strips that allowed customers to add purchases to their ledger and settle the bill later.

Thirty years later, banks and merchant networks introduced cards that worked at a variety of retailers. By the late 1950s, a shopper could leave home without any cash and buy groceries, gas and dinner, secured only by a signature.

Investigators scrutinized signed credit slips to determine whether cardholders were present when transactions were made. Signatures were required on all purchases; merchants that failed to collect them generally had to absorb the losses if transactions were disputed. Retailers could also be held liable if they failed to notice that the signature on a receipt did not match the one on the back of the customer’s card.

Then online shopping took off, forcing card issuers to come up with new ways to detect and adjudicate fraud. As their forensic systems improved, signatures became a relic.

Card networks began inching toward getting rid of signatures years ago. Most stopped requiring signatures on transactions below a certain threshold, typically $25 or $50, as far back as 2010.

But old habits die hard, and the jumble of rules about which transactions required signatures and which did not — every issuer has its own policies — discouraged many merchants, especially smaller ones, from scrapping signatures altogether.

This time, though, the card networks are sending a consistent message: Signatures are obsolete.

“I think they’re done,” said Mark Horwedel, the chief executive of the Merchant Advisory Group, a trade group that represents large American retailers.

Mr. Horwedel said he expected that three-quarters of his group’s members will have stopped asking customers to sign their names on credit card receipts by the end of the year. Speeding up checkout lines is a powerful incentive, he said.


Handwritten authentications will soon be relegated to a few special circumstances, such as sealing a giant transaction like a house purchase.

Erica Berenstein

Smaller retailers will probably lag behind. ShopKeep and Square, two popular small business payment systems, said they do not plan to immediately update their systems to allow retailers to skip signatures on all transactions. (Both currently allow merchants to disable them on transactions below $25.)

“We’ll play it a little bit by ear,” said Michael DeSimone, ShopKeep’s chief executive. “Right now, I don’t think there’s a high level of awareness about this. Let’s get the changes in place and see how they work operationally, and then we’ll adapt.”

The new rules will vary at each card network. American Express is dropping its signature requirement globally, on all of its cards. Mastercard is ending the requirement only in the United States and Canada. Discover’s change applies in those countries plus Mexico and the Caribbean. Visa is making signatures optional in all of North America, but only for retailers with payment systems that read chip cards.

Some merchants are hesitant to mess with a process that customers have built into their muscle memory. Mikiah Westbrooks, the owner of Brix, a wine bar in Detroit, said she worried that skipping signatures will affect her workers’ tips.

She has also occasionally found signatures useful when fighting fraud claims. A customer who challenged a bill last summer backed off when she produced a signed receipt.

“They were lying, and I had proof,” Ms. Westbrooks said.

But others are ready to cast them aside. At Snowy Owl Coffee Roasters in Brewster, Mass., pausing for signatures noticeably slows things down at rush hour, said Shayna Ferullo, the shop’s owner.

“Any extra second is valuable,” she said. “And everyone knows the signature is a joke. No one really signs any more; it’s all scribbles and squiggles. Some people do smiley faces.”

Mark Malkoff, a New York comedian, and his friend Greg Benson posted a YouTube video that vividly illustrated just how widely ignored card signatures are. They went on a spree through a dozen Los Angeles stores, signing obviously fake names on all of their receipts: Justin Bieber, Jessica Alba, Vin Diesel, Oprah. On one bill, they went with “Mr. Fake Name.”

None were rejected.

“Fifteen years, a decade ago, they would look at your signature, they would ask for I.D. if it seemed off,” Mr. Malkoff said. “Now, no one cares. It’s the most useless, pointless thing.”

The MOST Pointless Thing About Credit Cards Prank Video by markmalkoff

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