Reward and Frequent Flyer Points: Think Of Them as Bananas
George Boelcke FCI
April 12, 2009
The deal with any reward program was always that you spend literally tens of thousands of dollars on airline tickets, or charges on your credit card. In return, you would get some free flights, or other kind of rewards, way down the road when you finally accumulated enough points.
You kept your part of the deal. You charged away, and kept flying and staying loyal to a specific airline. But right now, you´re being played, as the airlines and many other reward programs are not keeping their part of the bargain. According to the Wall Street Journal, overall reward perks dropped by 29% last year, and an IBM Global survey reports that less than 48% of us are satisfied with our airline reward program.
Should you go in arrears on your credit card, cancel it, or the business goes under, your reward points will be gone. To assure you receive at least some of the benefits of what you signed up for, forget collecting points long-term for that super expensive and cool reward. Take your points and redeem them. At least you will get something, which is a whole lot more than nothing. Read the fine print for changes or redemption fees, and watch for increased points thresholds with fewer rewards.
In the airline industry, the shrinkage of points and the growth of restrictions are the most noticeable. Start to take the convenient schedule, the direct flight and cheapest ticket. Never mind any loyalty to a particular airline that will most assuredly change the goalposts on you, way before you ever get close to a free flight.
The sharp drop in frequent flyer point values has also started to erode loyalty from customers – and rightly so. The percentage of people who are loyal to an airline is down to 25%, according to Forrester Research. And airlines have done it to themselves. The programs used to be about 2 cents per mile in these programs. Now it´s down to barely 1 cent, that´s a 50% drop in what you´re getting, and in what you´re holding in points values!
At the same time, many, or all airlines now have fees to redeem, to call them, or even just to book a flight. There will probably be fees to check a suitcase, massive extra points or surcharges for last minute bookings, and many more traps which drastically erode the value of these so-called "free" points even more.
The other big killer is that airlines make a pile of money selling their points to car rental companies, flower stores, realtors, and, well – anyone that wants to pay cash up front. Last year, United Airlines made over $800 million just selling points. At American Airlines, it was more than a billion dollars! Those are staggering amounts of points dumped into the world, and now literally billions more points chasing the same few seats. It´s supply and demand, and things will get worse.
Yet, while airlines keep selling and giving away points, they are also complaining. U.S. Airways CEO Doug Parker was quoted as saying that frequent flyer awards are hurting the industry, since airlines are giving away so many trips for free. That may be accurate, as American Airlines, for example, has over 63 million members. But the comments are also totally untrue. Airlines wanted our business and instituted the programs voluntarily. We simply signed up and used that airline, we stay loyal in spite of the crappy service, questionable fees, delays, points shrinkage, and run around. And then airlines tell us they would really rather not pay off what they signed up for?
Right now, it´s heads they win, tails you lose. Do not let your points get eaten up, wiped out, or shrink away. Make it a point to redeem what you can, and then switch to a cashback reward plan with 2% cashback that turns into real money, instead of restrictive points. Think of your current reward points more like bananas, instead of an asset! Something, sort of free today is better than potentially nothing down the road.
You kept your part of the deal. You charged away, and kept flying and staying loyal to a specific airline. But right now, you´re being played, as the airlines and many other reward programs are not keeping their part of the bargain. According to the Wall Street Journal, overall reward perks dropped by 29% last year, and an IBM Global survey reports that less than 48% of us are satisfied with our airline reward program.
Should you go in arrears on your credit card, cancel it, or the business goes under, your reward points will be gone. To assure you receive at least some of the benefits of what you signed up for, forget collecting points long-term for that super expensive and cool reward. Take your points and redeem them. At least you will get something, which is a whole lot more than nothing. Read the fine print for changes or redemption fees, and watch for increased points thresholds with fewer rewards.
In the airline industry, the shrinkage of points and the growth of restrictions are the most noticeable. Start to take the convenient schedule, the direct flight and cheapest ticket. Never mind any loyalty to a particular airline that will most assuredly change the goalposts on you, way before you ever get close to a free flight.
The sharp drop in frequent flyer point values has also started to erode loyalty from customers – and rightly so. The percentage of people who are loyal to an airline is down to 25%, according to Forrester Research. And airlines have done it to themselves. The programs used to be about 2 cents per mile in these programs. Now it´s down to barely 1 cent, that´s a 50% drop in what you´re getting, and in what you´re holding in points values!
At the same time, many, or all airlines now have fees to redeem, to call them, or even just to book a flight. There will probably be fees to check a suitcase, massive extra points or surcharges for last minute bookings, and many more traps which drastically erode the value of these so-called "free" points even more.
The other big killer is that airlines make a pile of money selling their points to car rental companies, flower stores, realtors, and, well – anyone that wants to pay cash up front. Last year, United Airlines made over $800 million just selling points. At American Airlines, it was more than a billion dollars! Those are staggering amounts of points dumped into the world, and now literally billions more points chasing the same few seats. It´s supply and demand, and things will get worse.
Yet, while airlines keep selling and giving away points, they are also complaining. U.S. Airways CEO Doug Parker was quoted as saying that frequent flyer awards are hurting the industry, since airlines are giving away so many trips for free. That may be accurate, as American Airlines, for example, has over 63 million members. But the comments are also totally untrue. Airlines wanted our business and instituted the programs voluntarily. We simply signed up and used that airline, we stay loyal in spite of the crappy service, questionable fees, delays, points shrinkage, and run around. And then airlines tell us they would really rather not pay off what they signed up for?
Right now, it´s heads they win, tails you lose. Do not let your points get eaten up, wiped out, or shrink away. Make it a point to redeem what you can, and then switch to a cashback reward plan with 2% cashback that turns into real money, instead of restrictive points. Think of your current reward points more like bananas, instead of an asset! Something, sort of free today is better than potentially nothing down the road.
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