Home > Credit Cards > Why Your Next Credit Card Rewards Trip Will Cost More

Comments 0 Comments

Two men crash their cars in accidents while driving home from work. One man returns home embarrassed to tell his wife that he wrecked the car. The other man, who happens to be in charge of an airline frequent flier program, greets his wife with enthusiasm. “Guess what honey,” he exclaims, “I implemented a major enhancement to our automotive program!”

Recent events make me believe that this story is entirely plausible. In one instance, I asked an airline executive about recent changes to his company’s frequent flier program which will require more miles and fuel surcharges from customers redeeming awards, which he called a “major enhancement.”

Then, Frontier Airlines announced it would start charging as much as $100 for a carry-on bag and $2 for drinks (other than water) to customers who didn’t purchase their tickets on its web site. In its press release, the airline declared “Frontier Enhances Services for Customers…”

How The Airlines Think

At the Third Annual Travel Executive Summit featuring a discussion among travel executives, the subject of loyalty programs requiring more points, miles and fees for the same rewards came up repeatedly. Jeff Robertson, Vice President of SkyMiles for Delta Air Lines, said that he personally hoped that fares would rise and that fees would go away. Nevertheless, he pointed out that Delta, which has not been shy about increasing fees, is on track to make a $1.2-$1.7 billion profit this year, including approximately $2.5 -$ 4.5 billion in ancillary fees. Nevertheless, he conceded that this pricing structure is “not ideal for the long term.”

In defense of Delta’s scarce allocation of rewards seats at the lowest mileage levels, Robertson was quick to say that from his perspective, the cost of rewards travel is rising due to rising airfares as a result of planes taking off with fewer empty seats. And as industry observers recognize, we are only seeing higher fares and fewer empty seats due to the series of mergers that have reduced competition.

But the key factor here is how Robertson sees the “cost” of airline rewards. In his view, frequent flier awards requiring the fewest miles should only be available for the lowest-priced seats. Therefore, Delta views rewards tickets as a way of unloading their distressed inventory, rather than a way of rewarding its loyal customers. So when an airline requires more miles for awards on all but the seats least likely to be sold, and makes greater profits from the fees it charges, you can understand why some in the airline industry views these changes as “enhancements,” and why consumers might be disappointed.

Another Perspective

Bob Crandall, the legendary former CEO of American Airlines from 1985 to 1998, was also part of this panel discussion. He heard Robertson’s remarks but was adamant that “the industry can’t have a future” if it is giving less value to its customers.

He feels that the airlines have made it harder for people to travel, such that it was as if we [the airline industry] had “invented Congress on our own.” To prove his point, he cited the major carriers that just raised their change fees to an incredible $200.

How Credit Cards Figure Into the Equation

When an airline requires more miles for rewards and increases its fees, it devalues its loyalty program. This affects frequent travelers as well as those with rewards credit cards that offer frequent flier miles. Credit card users eventually realize that these “enhancements” impact the value of their rewards, and begin shopping for different cards.

Image: iStockphoto

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team