It used to be that sex and politics were the two hottest topics. Then, for many years, just sex. Now, clearly, credit cards and frequent flier miles are what get the bells ringing. Three responses worth sharing:
Martin Dauber: “Discover Card rebates up to 1% of purchases in cash at the end of the year. So the miles for your 20,000-miles-per-year reader must be worth more than the $50 annual fee plus the $175 or so that Discover gives back. On the other hand, VISA and MASTERCARD Gold cards offer certain product insurance. If this insurance has any value, this needs to be factored in. Our solution: Discover for most purchases. Gold card when we think we may need the extra protection from Mastercard’s Gold Protection. No miles!”
[If you occasionally have to fly without much advance notice, or without a Saturday night stay-over, miles can easily be worth anywhere from two cents to a nickel or more — i.e., 2% to 5% versus the Discover 1%. But if you’re invariably able to snag $279 round-trips, or can only travel during busy or “black-out” periods when the free tickets are unavailable, they’d be worth little more than a penny to you, so Discover would be just as good. — A.T.]
Jonathan Hochman: “Because of my business, I do a lot of traveling, spend a good amount on credit cards, and make plenty of international phone calls. My strategy is to convert these miles into US Savings Bonds. I know of one long distance company (AT&T) and one credit card company (Diners) that offer this type of reward. The conversion rate is between 1.25 and 2 cents per mile (I assume savings bonds are worth 50% of face value). This strategy may seem less effective than taking free airplane tickets, possibly worth up to 5 cents per mile. However, when I need airplane tickets, I can usually get a low price by shopping around, planning ahead, or else by using miles accumulated on actual flights. Free US Savings Bonds are free money. Who knows, I might even hold them for a while and earn tax deferred interest. A ‘free’ airplane ticket is a temptation to waste money on food, entertainment, rental cars, and hotels.”
Dorothy Mallonee: “Your column today was fine, as far as it went. But you ignore one of the simplest and best frequent flier programs around. Southwest Airlines’ Rapid Rewards program is based on trip segments, not miles. Every time a member flies one-way, she receives credit for one trip segment; a round-trip earns two trip segments. When the member accumulates 16 trip segments (flies 8 round-trips), Southwest sends her a free ticket good for a round-trip anywhere Southwest flies. I normally fly on business between Los Angeles and northern California (Oakland or Sacramento), but I often use my free tickets to fly from Los Angeles to Baltimore (to visit DC) and hope soon to fly from Los Angeles to Providence (to visit Boston or NY).”
[Oh, sure, Dorothy. Just wait til you see what a cab from Providence to New York costs!]
“Free tickets may be used by the member or given away; I often give them to friends or family members as gifts, and have given them to organizations to raffle off to raise money. I have seen advertisements for companies that will buy the free tickets for around $320, although I have never sold one and don’t know Southwest’s official policy on selling them. I once overheard a fellow passenger on a Southwest flight tell his companion that when he accumulates several free Southwest tickets, his travel agent will exchange them for tickets to Europe.
“Now for the part of the program relevant to today’s column: Southwest now has an affinity credit card tied to Rapid Rewards. The fee is $29 per year (waived the first year), and the member receives one trip segment for every $1000 she charges.”
[Aha! A free ticket thus costs just 16,000 dollar-credits, versus American’s 25,000, say. Of course, with American, you don’t have to take a cab from Providence.]
“Southwest also has other affinity arrangements with MCI (trip segments if you use their long distance or cellular service) and Hertz and Alamo (one trip segment each time you rent a car).”
[That works out to be a lot better than the 500 miles you typically get from the other carriers’ frequent flier programs for renting a car.]
“Between my flights, credit card purchases and car rentals, I now qualify for the Companion Pass, the ‘premium program’ which allows me to take the person of my choice free with me whenever I fly on Southwest, even if I am using a free ticket! Southwest’s routes now cover most of the continental US, and they are adding several cities per year. I know the Rapid Rewards program does not have the cachet of the programs of some of the international carriers, but it’s simple and gets you free trips fast. The major restriction is that the member must collect 16 trip segments within a year.
“I will admit that travel on Southwest is something of an acquired taste. You have to get used to the ‘airplane as bus’ concept, and long trips (e.g., LA to Baltimore) normally involve a couple of stops. And Southwest usually uses the ‘second’ airport (Midway in Chicago; Oakland in the Bay Area); that is often a blessing in disguise since the second airports usually have cheaper parking, and are often easier to get to and from. But Southwest has the best on-time record, and it’s actually kind of a hoot once you get used to it. I’ve flown United on my business routes a couple of times, and I’ll trade the Southwest peanuts and pleasantness for the surly United employees any day of the week!”
Quote of the Day
The Beardstown Ladies’ Common-Sense Investment Guide. A classic from the investment club that has outperformed Wall Street gurus three to one. ("It’s easy to get investment advice these days. But in this volatile market, it’s important to separate the faddish from the trustworthy.” The Beardstown Ladies, it turned out, had widely underperformed Wall Street.)~American Bookseller's December 1997 list of recommended investment books.
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