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: A $350 Million Fund Helps Many Public Servants. Meet the Ones Left Out.

I’ve heard from dozens of people like this since I wrote about the fix-it fund last week. Here are a few of their stories.

Paying Too Much

Robin White’s overpayments were purposeful. An assistant professor at Nicholls State University in Thibodaux, La., she had already worked through a different issue that disqualified earlier payments. So she eventually began doubling down on what her servicer, FedLoan, was telling her to pay via the income-based repayment program that participants in the public service loan forgiveness program must use.

“I thought that if I paid more that they were going to see that I was trying to do this as thoroughly and deliberately as I can,” Dr. White said. “I wanted to make it clear that I was not trying to take taxpayers’ money.”

But the system cares not for intent. If you don’t pay the right amount you owe, your payment that month does not count toward the forgiveness that occurs after 120 payments.

Dr. White said she would never forget when the FedLoan phone representative discovered she was in what’s called “paid ahead” status. “She said, ‘Oh, it’s this nasty little thing,’” she recalled. What followed was a Kafkaesque stretch of confusing statements and, ultimately, a double-digit number of months that did not count toward her forgiveness total.

According to Keith New, a spokesman for FedLoan, which is a part of the Pennsylvania Higher Education Assistance Agency and is the servicer for the forgiveness program, the initial confusion resulted from the fact that “information was not provided surrounding the difference in paying the installment amount versus the bill due amount and how the paid ahead status can affect qualifying payments.”

Given that FedLoan could have been clearer here, will it arrange for the payments that Dr. White made during this period of confusion to count toward forgiveness? I asked, but Mr. New did not reply.

The Wrong Employer

Only certain jobs — perhaps a quarter of all forms of employment — qualify for public service loan forgiveness. Just to be sure, everyone in the program ought to submit what’s known as an “employer certification form” each year to make sure that his or her employer qualifies or still qualifies.

Edge cases have already been the subject of litigation, as I outlined in a 2016 column. But Chris Golding, who works for the North Carolina Nurses Association in Raleigh, N.C., did not know that. Others at the association thought that it qualified, but you can’t get an instant reading on the matter in the time it takes to consider a job offer.

Alas, when Mr. Golding submitted his form, he received a reply last November saying that he was not eligible. There was no detailed explanation, and Mr. Golding said he was unable to get one when he called FedLoan.

The rules state that an employer must provide a “qualifying public service.” In Mr. Golding’s case, the governing language would appear to be a requirement that an organization’s “primary” purpose is to provide “public health” services. Mr. Golding is a registered nurse. He does not treat patients, but he does support other nurses through education.

Mr. New, the FedLoan spokesman, added a bit more detail. “While his employer is a nonprofit 501(c)(6) organization, its primary purpose is not one that would be considered as a public service,” he said. He added that FedLoan’s customer service department had consulted with its own compliance services division in making that determination.

Mr. New also said FedLoan’s phone representative had told Mr. Golding in November that he could provide documentation supporting the “purported public service his employer provides for further consideration.”

Mr. Golding said he intended to do just that, with the help of his boss and perhaps the organization’s attorney. Meanwhile, he asked me a question that has no good answer: “How is anyone supposed to make a decision about where to work if they can’t get a reading ahead of time about whether an organization is eligible?”


Chris Golding works at the North Carolina Nurses Association in Raleigh, N.C. But he only recently found out that the association has been deemed a nonqualifying employer, and he cannot get an explanation.

Travis Dove for The New York Times

The Wrong Loan

When the public service loan forgiveness program began, people who had already taken out student loans in the Federal Family Education Loan, or F.F.E.L., program were supposed to switch to something called “direct” loans to be eligible.

Many people never got the message, however, and spent years making payments only to discover that they had been in the wrong loan program. Other borrowers did not always understand what kind of federal loan they had, since statements could be unclear.

Jennifer Johnson, a Brooklyn social worker, said she had contacted Citibank, her loan servicer at the time, in 2010 in an effort to get enrolled in public service loan forgiveness. She recalled being told that she needed to be in a federal loan program to be eligible and get on some kind of an income-driven repayment plan, which she did.

During the years that followed, Ms. Johnson said, she regularly searched the web for information on the public service loan forgiveness program to make sure she hadn’t missed any other requirements. In 2015, she became aware of the existence of the employer certification forms, which did not exist when the forgiveness program began. She filed one just to have her employment on record.

Then came the reply, which indicated that none of her payments had counted toward the magic 120 number because she was in an F.F.E.L. loan. Citibank had not made her aware of this, she said.

“My first hope was that maybe it was a mistake,” Ms. Johnson said, describing an ensuing phone call to her loan servicer for clarification, which ended in her sobbing.

No one had much consolation. “They told me that it was a new program and that there wasn’t really a system for it yet,” she said.

So did Citigroup fail her, given that she is certain that she made it perfectly clear that she wanted to be in public service loan forgiveness? “While we have fully exited the student loan servicing business, we looked into this matter from seven years ago and have found no confirmation that the conversation transpired as Ms. Johnson suggests,” said Mark Costiglio, a Citigroup spokesman.

To be clear, Citigroup is not accusing her of making it up. It could not verify that its communication with her had happened as she described it. Nor could it verify that it hadn’t. But logic would suggest that if it had told her that she was in the wrong loan, she would have switched it right quick.

And if it didn’t, shouldn’t the Department of Education’s ombudsman or her congresswoman and senators take up her cause?

Confusion With the Servicer

Lawyers were early adopters of the public service loan forgiveness program, given that many of them run up six-figure law school debts and have ample opportunities to perform public service as a prosecutor, as a public defender or through other legal work.

So it was with Myles Braccio, a Phoenix prosecutor who elected to go into and stay in that line of work because it would allow him to wipe away his debt. He loved his contracts classes in law school, so he would seem to be well equipped to slay any bureaucracy.

But this week, he told me a hair-raising story of FedLoan’s giving him bad advice about loan consolidation, wiping away close to two years of qualifying payments, restoring them after he complained to the federal Department of Education’s ombudsman’s office and then taking them away again after he made another inquiry because he was so paranoid that it would mess up his payment count again.

Since then, he said, he has not been able to get straight answers from FedLoan. I asked Mr. New for a few, and he said Mr. Braccio’s account was “in review as we are working to confirm employment time-frame eligibility requirements.” He added that Mr. Braccio’s employer had provided “conflicting” information. Nonsense, Mr. Braccio replied; there is no conflicting information related to the years when he was eligible for loan forgiveness.

And why did it take my intervention to extract this explanation? “We base our life decisions off of what they are telling us,” Mr. Braccio said. “But you get one person after the other who has absolutely no idea what they are doing.”

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What Else Wall Street Can Do on Gun Sales: DealBook Briefing



Jim Wilson / New York Times

The heat on Facebook is rising, but do shareholders care?

Where to begin? The company faces inquiries from the Federal Trade Commission, the Senate Judiciary Committee, several state attorneys general and the watchdog group Common Cause. And Britain’s Parliament asked Mark Zuckerberg to testify (he’s sending a deputy).

Facebook’s stock over all is headed for its worst monthly performance in nearly five years. Yet the company’s shares recovered from another beating, closing up slightly yesterday. And just two analysts have “sell” ratings on the stock, compared to 44 who have “buy” ratings.

In Cambridge Analytica news: Did a Brexit campaign group violate election laws by not declaring some of its spending with AggregateIQ, a digital marketer with ties to Cambridge Analytica?

Critics’ corner: Nir Kaissar of Gadfly thinks that the big question is how many users value privacy more than having a Facebook account. Charlie Warzel of BuzzFeed argues the Cambridge Analytica scandal could lead to “a full-scale personal and public reckoning that looks at the way we’ve used the internet for the last decade.”


The Chinese minister of industry and information technology, Miao Wei, second from left.

Jason Lee/Reuters

A reality check on the White House’s tariff tactics

The S.&P. 500 rose 2.7 percent yesterday, its best day in nearly three years (as President Trump would be happy to tell you). Maybe it’s because, as Peter Eavis writes, the president’s threats of a trade war with China might be merely negotiating tactics.

More from Peter: According to this view, the tariff proposal was a jarring move partly aimed at getting China to see that the U.S. was serious about shifting trade terms. If China doesn’t show real signs that it will do more to open its markets, Mr. Trump could up the ante — roiling the markets again. But the White House’s more conciliatory tone yesterday after last week’s sell-off suggests there is not a strong desire for a full trade war.

But remember that Beijing is firmly committed to its industrial policy, while the U.S. is equally adamant about letting American companies operate more freely in China. (Even if G.M. and Ford, who have joint ventures with Chinese companies, wouldn’t benefit from a lower tariff on U.S. car imports.) And Stephen Roach of Yale thinks that the U.S.-China trade deficit will keep widening.

Elsewhere in trade: The U.S. is near a deal with South Korea, after winning concessions on steel exports and imports of U.S. cars. Betting on trade wars is risky. Hedge funds are taking refuge in southern European stocks. And the Western world’s economic institutions are being attacked from within.

The political flyaround

• White House lawyers are examining whether more than $500 million of loans to Kushner Companies may have violated criminal laws or federal ethics regulations. (WSJ)

• Democrats and progressive groups aren’t happy with the possibility of John C. Williams taking over the New York Fed. (NYT)

• Stormy Daniels’s interview with “60 Minutes” drew 22 million viewers, the program’s highest ratings in almost a decade. She’s suing President Trump’s personal attorney, Michael Cohen, for defamation.

• The White House’s criterion for judicial nominees: favor shrinking the federal government. (NYT)


Natalie Behring/Reuters

Arizona cracks down on Uber

The state’s governor, Doug Ducey, ordered Uber to halt self-driving car tests there after the death of a pedestrian in Tempe.

Uber’s repeated problems — even after a change in leadership — have led the journalist Steven Hill to argue that limits should be placed on the company, including caps on the number of vehicles and rules against subsidizing rides.


Elsewhere in tech

• Crown Prince Mohammed bin Salman and Masa Son of SoftBank met in New York. (@spagov)

• The F.C.C. is another regulator wary of Huawei. (NYT)

• Google, Tesla and Qualcomm are banding together to challenge SoftBank’s ARM Holdings. (The Information)

• Bitcoin fell below $8,000 after Twitter banned some cryptocurrency ads. (CNBC)

• A.I. is now coming for Hollywood special-effects producers. (NYT)

• IBM faces accusations of age discrimination. (ProPublica)


Reuters/Steve Marcus

Today in shareholder activism

Third Point: Dan Loeb’s hedge fund has built a position in United Technologies, according to an antitrust filing, following Pershing Square Capital Management. They’re both betting that the industrial conglomerate will split up.

Elliott: The firm has reportedly taken a stake in Travelport Worldwide and plans to push the company to consider selling itself.

D.E. Shaw: The hedge fund scored another win yesterday when Lowe’s said that its chairman and C.E.O., Robert Niblock, would retire. D.E. Shaw has been pressuring the retailer to expand sales more quickly and will have a say in choosing the new C.E.O. .

Barington Capital: To settle a proxy fight, the embattled cosmetics company Avon gave the activist fund a seat on its board. The fund has been pushing for a sale.


Jun Cen

The deals flyaround

• Meet HNA’s quiet power broker: Wang Wei, younger brother of the Chinese conglomerate’s chairman. (NYT)

• GlaxoSmithKline will buy out Novartis’s stake in their consumer health joint venture, which includes Sensodyne toothpaste, for $13 billion. (Bloomberg)

• Akzo Nobel has reached a deal to sell its specialty chemicals unit to the Carlyle Group and GIC of Singapore for €10.1 billion, including debt, or $12.6 billion. (FT)

• Brookfield Property Partners agreed to buy the 66 percent of GGP that it doesn’t already own for about $9.25 billion. (WSJ)

• Spotify is paying I.P.O.-level fees for its non-I.P.O. SmartSheet, a cloud-based business software company, reportedly plans to go public. Both Yeti, the maker of upscale coolers, and Gategroup, the Swiss airline catering business owned by HNA, have pulled their offerings.

• Lightspeed Venture Partners is raising $1.8 billion for new funds. Lerer Hippeau is taking over most of the portfolio companies of the embattled Binary Capital.

• How Alibaba and Tencent became Asia’s biggest deal makers. (FT)

• Why private equity hasn’t helped smaller grocery chains struggling against Walmart and Amazon. (NYT)


John Cryan

Ralph Orlowski/Reuters

Revolving door

• Deutsche Bank is reportedly seeking to replace its C.E.O., John Cryan, according to The Times of London and Financial News.

Harry Keogh, the Coutts & Company banker accused of sexual harassment, has resigned. (WSJ)

• JPMorgan Chase has named James Roddy as the co-head of its global diversified industrials investment banking team. (Reuters)

• Shell Oil plans to name Gretchen Watkins, the former C.E.O. of Maersk Oil, as president and U.S. country chair. (Houston Business Journal)

• Nickelodeon has cut ties with Dan Schneider, the producer of “iCarly” and “Kenan and Kel.” (WSJ)

The speed read

• Goldman Sachs began an investigation after a former employee wrote to Lloyd Blankfein saying that a group of colleagues attempted to rape her in 1994. (Financial News)

• Goldman is deploying investment banking partners to hubs like Atlanta, Dallas, Seattle and Toronto. (Business Insider)

• The average Wall Street banker’s bonus last year was the highest since before the financial crisis. (WSJ)

• How a tiny Latvian bank became a haven for the world’s dirty money. (WSJ)

• Cisco Systems promised to donate $50 million over five years to fight homelessness in Santa Clara County, Calif. (WaPo)

• Royal Dutch Shell has set out what it thinks it would take for the world to control climate change — including using far less oil by 2070. (WaPo)

• G.M. said its South Korean unit would file for bankruptcy if a labor union rejected a restructuring plan. (Bloomberg)

• Imagine if Gordon Gekko bought news empires. Heath Freeman is like that, only worse, writes Joe Nocera. (BloombergView)

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