Why Diversification in Frequent Flyer Programs is a Bad Idea for Budget Travelers

Frequent Flyer ProgramsIt seems obvious to the casual observer.

Diversification is a good idea in the stock market, but it is a bad idea as far as frequent flyer programs go.

In order to maximize award travel, you need to concentrate your earning strategy on one or maybe two frequent flyer programs.

Miles and points have no value if they are not used.  Zilch.  So there is little value in gathering a few miles here and a few miles there unless you will have enough to redeem for an award ticket or hotel room.

Miles and Points Programs Are Loyalty Programs

Frequent flyer and hotel programs are loyalty programs so it stands to reason that they reward loyalty.  If you spread your spending around, the less likely you are to accrue enough points in any one program to redeem an award, or to benefit from elite status.  Now I am not one for elite status, but if you are doing a lot of traveling, and can arrange your travel to concentrate on a particular airline or hotel chain, you may accelerate your points earning as you move up the loyalty program ladder.

35,000 Miles Won’t Get Me Where I Want to Go

Let me give an example.  Last year, I opened a The US Airways Premier World MasterCard® for a bonus of 35K miles.  I thought this was a great deal because the miles were awarded after making my first purchase — there was no minimum spend requirement.  Free miles, I thought.  (The offer now is for $30K miles after your first purchase, with an annual fee of $89.)

US Airways fit into our family’s travel plans, because they had a lot of flights from Washington National (DCA) to Hartford (BDL).  The US Airways card came with two $99 companion passes, so I thought it would be a good way for our family of three to save on travel expenses.  Furthermore, it allowed award redemptions for 5,000 fewer points. (Economy awards on US Airways normally cost 25K miles, but if you have The US Airways Premier World MasterCard®, they cost only 20K miles.)

When it came time to book our travel, there was ready award availability at the “economy” level for flights from DC to Hartford.

So what’s the problem?

The flights were  routed through Philadelphia (PHL) with flight times of four hours on average.  A four hour flight to Hartford made no sense whatsoever!  By the time we drove to the airport, found parking, checked in, went through security —  you know the drill — we’d be halfway to Hartford if we had just driven!

There were plenty of seats for paid tickets on nonstop flights with fight times of just one hour, but these were “standard” awards that required 50K miles, or 45K for cardholders.  The only “economy” award seats were for the nonstop flight that left at 7:30 am, and we needed to leave in the afternoon.

In the eight months I have had The US Airways Premier World MasterCard®, I’ve managed to accumulate just 38K miles in the US Airways Dividend Miles program.  If I could get to 45K miles, maybe I would have enough for a free domestic ticket that I could actually use.  

But I am not there yet, probably because I have so many other airline-branded credit cards that I am putting spend on:  specifically United; Southwest; and American Airlines.

I don’t have enough miles in any one of these programs to book a free trip for both myself and my husband.

Pick One Frequent Flyer Program and Stick With It

A smarter strategy for someone like me would be to concentrate on one or two airlines, such as Southwest and United, along with one transfer partner such as Chase Bank’s Ultimate Rewards program, that allows you to transfer points into Southwest Rapid Rewards and United Mileage Plus.

Both of these airlines offer numerous credit card options, which would allow one to accrue massive mileage balances over time.  Southwest, for example has four different branded credit cards (two personal, and two business) that frequently offer 50K bonus miles each.  United Airlines has six different credit cards.  And there are multiple cards that earn Ultimate Reward Points that can feed in to both these programs.

The same is true for US Airways and American Airlines.  They both offer numerous credit card options, and the Amex Starwood Preferred Guest (SPG) card is a transfer partner.  I think it is best for those just starting out to pick one carrier (based on your home airport) and stick with it.

Don’t Leave Miles on the Table

I am conflicted about what to do moving forward.

One strategy might be to do another round of credit card applications to earn enough miles on American Airlines and US Airways to pay for a family trip on each airline, or in the hopes of combining the miles when the merger is complete.  The ultimate goal would be to spend down the miles, without leaving unused miles on the table.

This approach would contradict my own advice!  

On the other hand, it might make more sense for me to concentrate my earning opportunities on United Airlines.  Dulles International Airport (IAD) near my home is a hub for United, and their routings work for my business and personal travel.

This much is clear:  I don’t need to rush into a decision.  Good credit card sign up offers seem to pop up all the time.

Here’s Where I Come Out

You have to stay focused on your travel goals.

If you are new to miles and points, you can find a lot of high value opportunities with various domestic airlines.  Judiciously opening credit cards can earn you a lot of frequent flyer miles on the major carriers.

Different banks tend to represent different airlines, so you may be lured into spreading your applications out over the various banks — such as Citi, Barclays, Amex, and Chase.

Once you have experienced the opportunity to fly for free, it is easy to get sucked in to opening more and more credit card accounts for the free travel.

But if you are just starting out, you will accrue more free travel by concentrating your travel and your credit card applications on a single airline and its transfer partner.

Note:  I am not suggesting that you fly your preferred airline if you can get cheaper tickets on another carrier.  Certainly not!

Eventually, I plan to phase out the airline-specific credit cards and focus on collecting Ultimate Reward Points, which have many different redemption options, including for cash.

What is your strategy?  Do you prefer to concentrate on one program or to diversify?

Click here to compare current rewards credit card offers.

12 thoughts on “Why Diversification in Frequent Flyer Programs is a Bad Idea for Budget Travelers

  1. I agree with you there. I only “collect” American Miles and Ultimate Rewards which I use to transfer to United, Hyatt, etc. Tried to book a flight to Germany on AA. The only routing they offered was by the way of Timbucktoo. So I checked United. found a good connection. transferred UR and we were done.

  2. Interesting post! I have tended to plan a trip (in my head) and then try to get miles that would be useful for that particular trip. For example, I knew I wanted to go to Hawaii, so I collected BA and SW miles to book that trip. I have some ideas for 2015 so have to start thinking about what I might need in order to fulfill those plans.

    Then on the other hand, I have been known to do the opposite & go for the huge bonuses that appear from time to time & build a trip around those. I do wish I could take all of my random miles and pool them in to one huge pot though!

  3. Loved your post, and this is something I’ve been giving a lot of thought to lately. While I do have miles in AA, UA, and British Air (Avios) that are at levels that are useable, more and more now I am focusing on Ultimate Rewards so that I can transfer to the appropriate airline partner as needed. I recently wanted to book a trip to Seattle in August, and there was nothing on AA (and thus no way to use my Avios on American). Southwest had perfect times (and of course no luggage fees), so I transferred Ultimate Rewards and was done. I love having the flexibility of mixing and matching airlines, depending on availability and flight details, and having instant transfers with Ultimate Rewards.

    Your post applies equally to hotels. I have maybe 30K points in Club Carlson, but they don’t have hotels in locations that work for me, so the points are just sitting. I don’t travel enough for work to rack up any meaningful hotel points, so, again, my focus has been on flights.

    • I also find pretty good award availability on Southwest.

      As part of my consolidation effort, I prefer to take points from hotel stays as airline miles. For example, Starwood, Hyatt, Marriott, Choice, Wyndham, and Club Carlson will award 600 Southwest miles per stay. That’s a pretty good deal, especially if you are staying at the budget or mid-range hotels in these chains. These hotel brands have arrangements with most other frequent flyer programs as well.

  4. I am completely with you on this one F4D. As an individual with “1.5” full-time jobs my time to travel is scarce and thus racking up small amounts of points here and there like i had been previously to me is a complete waste of time, and I always regret contributing large numbers of credit card expenses split pretty much equally between 2 airline cards and a hotel card. To make things worse, I happened to fly more often on United and racked up a small amount of points on there, but didn’t even use a United card. After all that I can only say I have a free room for 2 nights at a luxury property, and 1/2 a luxury flight on each to go abroad. Useless. I might as well have put it all on a cashback card and then paid for these tickets.

    Now that I know this, it continues to be a struggle figuring out which “flexible” premium cards to use. I really like the Barclays Arrival world MC and in my mind that is my go-to for non-bonus category expenditures. I think this makes the CSP pretty useless since it covers only restaurants and travel at 2x, and I can only redeem on Barclays with travel (at least to make it worth it). However, on the other hand, transferable universal points are of very high value despite being unable to double dip on the miles earnings for redemptions. Thus, when the year is up I would be more inclined to rid myself of the CSP and keep the arrival card. Of course, retention bonuses are always welcome. I will keep the Chase Ink Bold for sure as that would yield many more points at low cost than the CSP.

    As if the barclays miles vs Chase UR conflict weren’t enough, I am still debating between amex MR vs chase UR, and as of right now I am focusing more on Chase UR, but the transfer bonuses up to 50% on amex MR makes it too hard to pass up. In one year I have learned to accumulate many more points in each category than all the accumulated airline and hotel miles I’ve accrued over the past few years.

    Ultimately I think the more you know, the harder it gets. I wish I could simplify to one program. A lot of these big bloggers tout one program over another, or they tout them all at once but I think regardless they are generating a lot of revenue or are accumulating huge numbers in every loyalty system from their frequent travel from their careers. I must admit I am envious of them but my limitations with the world outside of points prevents me from amassing huge numbers.

    I agree with your thoughts about the US airways card, but I am quite glad that they will be pooling into my AA account. No regrets for signing up for that one. I believe it was you who pointed me to the FT sign up link for that too! Since Citi AA likes to give me bonus points promotions quite regularly and waives my AF for years I will stick to AA for luxurious int’l travel, and transfer UR as needed for United economy int’l travel. Otherwise my regular priorities for now are Chase UR + barclays, with a little sprinkling of MR. I also really think the 5% CB from discover and freedom are very appealing. That being said, if you have an ingenious solution please write about it :D. A lot of these signup bonuses are too hard to pass up.

  5. I understand the dilemma. This post was intend to provide a counterpoint to mainstream bloggers who say, “Can’t decide which card to apply for? Apply for all of them.”

  6. I got a Barclays Arrival card last August and certainly have enjoyed the credits to my hotel expenses (particularly since I don’t have the hotel points). In crunching my numbers, tho, I’m beginning to think that it isn’t worth the $89 annual fee when renewal time comes. I’m the only one spending money for my points/miles, and between my Chase Sapphire Preferred and Ink Classic, I’m ultimately generating roughly the same value in Ultimate Rewards as I would Arrival points. I’ve never used my Ultimate Rewards for a statement credit, but I suppose theoretically there’s no reason not to if I don’t need them for airline tickets (I’m not at that point yet, however). Once the free year of my Arrival card is over, I’ll get the Chase Freedom card for more Ultimate Rewards.

    I’m not sure this is a perfect system, but the more I crunch numbers, the more it makes sense to me, at least right now. Of course, I reserve the right to jump into a credit card offer that I can’t refuse!

  7. When renewal time comes, it is always possible to ask for a waiver of the annual fee or a downgrade to the no annual fee version of the card, which could help increase the average age of your accounts, a factor that figures in to your credit score. The Barclaycard Arrival is a relatively new product so there is not much information yet on whether retention offers will be available.

    That said, the Chase Freedom card is an excellent product, and one that I have had for 14 years. It is a no annual fee card that offers 5x Ultimate Rewards points for purchases in select categories each quarter. The 5x categories are pretty useful, like gas purchases or restaurants. As you point out, the Ultimate Rewards Points can be taken as a statement credit, if you don’t have a particular travel purpose in mind, which makes them as good as cash.

  8. I’ve always used UR points for travel worth way more than the cash equivalent, and that’s my plan for the near future. But it was very interesting when crunching numbers to realize that, with all the bonus categories for the Chase cards, I could pretty much end up with the same statement credit value as with the Arrival card, if that was how I chose to use those points. That honestly was a surprise. Years ago, I had a lot more travel for work and racked up butt in seat miles as well as credit card charges that were reimbursed. Our company recently started with a corporate card, so those reimbursed expenses are no more. Sigh. Pretty much now my miles/points come from my own actual spend, as my work trips are only a couple each year, at most.

    I also had thought to ask about downgrading the Arrival card if they wouldn’t give a statement credit or waive the annual fee when the time comes. Can’t hurt.

  9. I have had the same issues with availability and/or indirect routing causing me grief when booking award tickets. There are a few times when I’ve paid the premium mileage to get a better flight option, other times when I’ve settled for less-than-ideal flight times, and a few times when I’ve given up and paid cash. Lately, my credit card strategy has been split between Ultimate Rewards (which implies some level of diversification) and 2% cashback, with the cash winning more and more frequently…

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