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Update: Some offers mentioned below are no longer available. View the current offers here – Starwood Preferred Guest® Credit Card from American ExpressStarwood Preferred Guest® Business Credit Card from American ExpressBarclaycard Arrival Plus World Elite Mastercard

Both 2013 and 2014 have seen a trend in loyalty program devaluations. Hilton kicked off the devaluation parade in early 2013, followed by Delta and United over the past several months. Even Southwest devalued their Rapid Rewards program at the end of March, a challenge to their reputation as “The Friendly Airline.”

In this new climate of loyalty-currency decline, TPG reader Donald emailed me to ask:

“Now that Delta and United will be awarding miles based on money spent instead of miles flown, how do you think their point-transfer situation will play out? It seems that if the Starwood Preferred Guest American Express transfer ratio remains at 1:1, Starwood points will be even more valuable.”

While we probably haven’t seen the last of these devaluation announcements, credit card transfer ratios haven’t changed much, and  it looks as though that will be the case for some time to come. Next year will see Delta and United start awarding miles based on how much you spend, but the amount of points and miles you’ll earn with a credit card will remain the same (with a general rate of 1 mile per dollar spent) – making credit card spending even more valuable to those of use who play the points and miles game.

I believe that an IRS-proposed change to the tax code is the inspiration for those in the travel industry to devalue their loyalty programs. Historically, companies with loyalty programs have been able to award large stashes of points and miles without having to pay taxes on them until they’re redeemed, sometimes as long as 18-36 months later; however, it’s possible that any company with a loyalty program could soon get stuck paying taxes on their loyalty currency at the end of each fiscal year, regardless of whether the points and miles have been redeemed. The math behind these loyalty program devaluations is simple: if hotels and airlines award fewer points and miles, they’ll have to pay less taxes.

Though loyalty currencies have been increasingly devalued, credit cards should continue to be a valuable means of points and miles earning (Image courtesy of Shutterstock)
Though loyalty programs are increasingly devaluing their currencies, credit cards should continue to be a valuable way to earn points (image courtesy of Shutterstock).

However, using a credit card to earn points and miles – without even having to book a room or set foot on an airplane – will continue to be a viable means of gaming the system. All these loyalty program devaluations will ultimately make credit card points more valuable, because earning points and miles via hotel stays and flights will become more difficult, and we’ll have to increasingly rely on versatile points transfers like those available through Amex Membership Rewards and Chase Ultimate Rewards.

As hotels and airlines increase the amount of points and miles you need and restrict the ease with which you accrue them, it’s possible that award availability will improve, but I’m not going to hold my breath waiting for that to happen. Fortunately, I think credit cards will continue to be an easy option, because not only do they already employ a revenue-based system, but for some time now sign-up bonus offers have been remarkably high. Just this week, for instance, Capital One doubled the sign-up bonus on their Venture card to 40,000 miles. Barclaycard and Chase also have some great current offers, including 40,000 points for the Barclaycard Arrival Plus World Elite Mastercard (with a $3,000 spend in 3 months) and 50,000 points for the Ink Plus Business Card and Ink Bold Business Card (with a $5,000 spend in 3 months), and Starwood Amex has 30,000-point offers through June 30, 2014

At this point, the real way to win the game is to leverage the very best credit card deals and make sure you’re diversified rather than overexposed to one hotel or airline currency, because these will surely continue to devalue. This news may not be great for frequent flyers or loyal hotel customers, but for those of us who are credit card spenders and maximizers, the future is still bright.

Please let me know if you have other questions by messaging me on Facebook, tweeting me @thepointsguy, or emailing me at info@thepointsguy.com.

The Platinum Card® from American Express

The American Express Platinum card has some of the best perks out there: cardholders enjoy the best domestic lounge access (Delta SkyClubs, Centurion Lounges, and Priority Pass), a $200 annual airline fee credit as well as up to $200 in Uber credits, and mid-tier elite status at SPG, Marriott, and Hilton. Combined with the 60,000 point welcome offer -- worth $1,140 based on TPG's valuations -- this card is a no-brainer for frequent travelers. Here are 5 reasons you should consider this card, as well as how you can figure out if the $550 annual fee makes sense for you.

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More Things to Know
  • Earn 60,000 Membership Rewards® points after you use your new Card to make $5,000 in purchases in your first 3 months.
  • Enjoy Uber VIP status and free rides in the U.S. up to $15 each month, plus a bonus $20 in December. That can be up to $200 in annual Uber savings.
  • 5X Membership Rewards® points on flights booked directly with airlines or with American Express Travel.
  • 5X Membership Rewards points on prepaid hotels booked on amextravel.com.
  • Enjoy access to the Global Lounge Collection, the only credit card airport lounge access program that includes proprietary lounge locations around the world.
  • Receive complimentary benefits with an average total value of $550 with Fine Hotels & Resorts. Learn More.
  • $200 Airline Fee Credit, up to $200 per calendar year in baggage fees and more at one qualifying airline.
  • Get up to $100 in statement credits annually for purchases at Saks Fifth Avenue on your Platinum Card®. Enrollment required.
  • $550 annual fee.
  • Terms Apply.
  • See Rates & Fees
Intro APR on Purchases
N/A
Regular APR
N/A
Annual Fee
$550
Balance Transfer Fee
See Terms
Recommended Credit
Excellent/Good
Terms and restrictions apply. See rates & fees.

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.