United reward program changes: Should you cancel your card?

Yet another legacy carrier has broken with tradition. United has announced that, on March 1, 2015, it will switch from rewarding miles based on distance flown to rewarding miles based on ticket price. The more-money-more-miles system was pioneered by budget carriers like Jet Blue and Southwest. Delta announced in February 2014 that it, too, would be rewarding bigger spenders, leaving American Airlines as the last remaining legacy carrier to reward loyalty program members based on distance flown.photo of united airlines plane

If you have a United Airlines co-branded credit card, what does this mean for you? Although no changes have been announced for the credit card rewards program, the change in rewards structure might make your loyalty worth less. Here’s what cardholders (and anyone enrolled in United’s MileagePlus program) need to know:

The changes

Before March 1, 2015: Fliers enrolled in the United MileagePlus program earn miles based on distance flown. For example, flying New York to Los Angeles would get you more miles than flying New York to Washington, D.C. Having United Premier status lets you earn even more on long-haul flights, due to mileage bonuses of 25 percent for Silver status, 50 percent for Gold, 75 percent for Platinum and 100 percent for Platinum 1K.

After March 1, 2015: Under the new system, the number of miles you earn will be based on ticket price — and your United Premier status:

United reward miles structure (after March 1, 2015)
StatusReward earnings
No status (regular MileagePlus member)5 miles per dollar
Premier Silver7 miles per dollar
Premier Gold8 miles per dollar
Premier Platinum9 miles per dollar
Premier 1K11 miles per dollar

Winners and losers

The new system will likely favor high spenders and business travelers. Here’s why:
Under the current system, assuming no Premier status, an expensive ticket from New York to Orlando would get the flier the same number of miles as a cheap ticket because the distance from New York to Orlando does not change. However, the new system will give more rewards to the pricier ticket.

Business travelers often need last-minute flights, which tend to be pricier. Because the company is paying the bill, it’s no money out of the business traveler’s pocket, and a more expensive ticket will generate even more rewards. Other high spenders (those traveling to cities that are expensive to fly to, for example, and those who travel during the holidays) will probably get more mileage out of the new system, too.

Budget travelers, on the other hand are likely scoping out ticket prices months in advance and adjusting their travel days to snag the cheapest fare. If the flight happened to be long, they’d come out ahead under the old system, getting a lot of miles compared to the amount spent. Under the new system, their budget-hunting ways will likely penalize them.

… one more group will benefit under the new system, too – those with Premier status. As mentioned above, those with higher status earn extra points under the current system, and they’ll continue to do so under the new system. But their status will be worth more under the new system. The chart compares the percent bonus status will earn you (compared to those with no status) under the old and new systems:

Percentage bonus (over those with no Premier status)
StrongBefore March 1, 2015New system (after March 1, 2015)
Premier Silver25%40%
Premier Gold50%60%
Premier Platinum75%80%
Premier 1K100%120%

As you can see, those with premier status will see more bonus points under the new system. Those with Silver and Premier 1K status will probably be happiest with the changes.

What it means for cardholders

On the surface, nothing will change. You’ll still earn 2 miles per dollar spent on all United purchases, whether you have the United MileagePlus Explorer card ($95 annual fee) or the MileagePlus Club card ($495 annual fee).

But those bonus miles on United ticket purchases made with your card are only half the equation. You’re also earning points through being enrolled in United’s MileagePlus loyalty program (which is required when you get the card). Currently, the farther you fly, the more loyalty points you earn. After March 2015, the more you pay, the more loyalty points you’ll earn.

That’s an important aspect to consider because signing up for the card (or paying an annual fee to keep it) constitutes loyalty to United. It may influence you to fly United exclusively, even though each mile you earn is worth (at most) a few cents each – and even though you might save money by booking with another carrier. If you’re a budget traveler scrounging for cheap flights, the speed with which you rack up miles will decrease under the new system, lengthening the time it takes to earn a free reward ticket. Paying an annual fee for a card that helps you shore up your weakened rewards earnings might feel harder to justify.

On the other hand, if you fly United frequently and tend to purchase more expensive tickets, the airline’s co-branded cards will continue to be a valuable ally. And the waived-bag-fee benefit that comes with the cards can save you money.

What are your thoughts on the United changes? Are they making you question your airline loyalty – or making you consider cancelling your United credit card?

 
Comments
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Doesn’t the Miles/dollar change imply that people who purchased premium seats are better rewarded than those who purchase economy seats?

This is a great change for everyone involved…prior to this, the incentive was to purchase the highest miles/$ tickets you could. Now, people are incentivized to spend more money. The pressure to find the cheapest flight will be alleviated.