Gotta Change the Subject: Hilton Award Level Changes

I’ve just got to stop reading. Regarding the new TSA rules and airport security: "All the sensible voices in the world will fall on the deaf ears of the powers at the top." Thus, on to a different topic.

Many observers of the world of reward credit cards, hotel points, and frequent flyer miles have bemoaned the new “grade inflation” of Hilton hotel’s properties. Basically, Hilton has raised the Category level of many properties, thus “costing” more HHonors points for reward stays.

We’ve frequently mentioned that using a Hilton American Express credit card to accrue HHonors points is – for us – one of the best value propositions available. Previously, we had generally valued spending on the Hilton Amex as a 5% reward, compared to a 2% reward for some cash-back-equivalent credit cards (Schwab) or if you use your credit-card-derived frequent flyer miles wisely.

Yes, the Hilton category revisions bump many properties to a higher redemption level. But we recently searched for some reward stays, and we’re still valuing our Hilton Amex spending at 3-4%. Too many commentators talk about the value of the points themselves – and maybe the actual Hilton points do have less “value” than Starwood or other points. And this may be accurate if you’re accruing points primarily from hotel stays.

But for credit-card points/miles accumulation, we still believe that Hilton offers one of the best value propositions. The once-3% Chase Freedom Visa (now only for a few categories of spending) has been emasculated; to get the equivalent of 2% with most airline cards usually entails an annual fee; and many of the 2% cash-back cards (such as Schwab) are quietly disappearing.

Do your own math, but look at the points required for a Hilton room, versus the cost of the room, and then consider your spending. We use the Hilton Amex only for spending that garners 6 points per dollar spent (currently for gas, groceries, phone, internet, drug stores, cable & satellite TV, and at Hilton hotels; 3 points other spending), and we still feel our actual reward return with those 6 points per dollar is at least 3%.

Interesting New United Visa

United Airlines has come out with what may be an enticing new Visa Select card (through United’s credit-card partner Chase, of course).

For a $130 annual fee (not waived the first year), you receive:

• 30,000 initial bonus miles
• 3 miles per $1 spent with United
• 2 miles per $1 spent with other Star Alliance airlines
• 2 miles per $1 spent on gas, groceries, dining, home improvement stores
• 1 mile per $1 for everything else
• $100 United Discount Travel Certificate.... PLUS....
• up to 5,000 EQMs (Elite Qualifying Miles) for the first $5,000 spent with United
• 5,000 annual bonus miles

The catch seems to be that you can probably get the card if you’ve had a United Visa in the past, but none of the bonuses (30K initial miles, EQM miles, 5K annual bonus) are available. (From the T&C: “This bonus offer is valid only for first-time United Mileage Plus Visa cardmembers with new accounts. Existing United Mileage Plus Visa cardmembers/accounts are not eligible for this bonus offer.”)

Nonetheless, and as much as we resist putting spending on airline cards (we do apply for them sometimes for sign-up bonuses), and also as much as we resist annual fees (unless waived for the first year), the mileage-per-spend sounds quite good, as do the other bonuses.

Warning: Pay Your Rewards Cards or Lose Points/Miles

This one is worth coming out of our slumber for. According to Yahoo Travel News/Associated Press, American Express will begin withholding rewards points/miles earned by customers who are late paying.

We’ve stressed that reward credit cards only make sense if you pay your bill in full each month, but this is onerous. According to the article, while Chase and Citi also withhold rewards on some cards for late payers, only Amex is charging a “reinstatement” fee for lost points/miles. (This fee is in addition to late-payment penalty fees and much higher interest rates on late-payment balances.)

If we didn’t enjoy the benefits of our Delta and Hilton Amex cards, we’d ditch them because of this (even though we’re never late), just on principle. (The article notes that the other two big-name Amex cards that will be affected will be the Starwood and JetBlue cards.)

So again, beware. The credit card companies do NOT have your best interests at heart.

Why Even Bother With Frequent Flyer Miles?

“The Wall St. Journal [says] American, United and US Airways [are] the most at-risk [of bankruptcy].” – Today in the Sky

“After leveraging everything from frequent-flier miles to spare jet engines, United is running low on assets that it can use as collateral.” – Chicago Tribune

“[Standard & Poor’s analyst Philip Baggaley] doesn’t rule out one or more carriers filing [for bankruptcy] as soon as this fall.” – Wall St. Journal

“At this point no one US airline is too big to die.... The industry is still too big – with too many network carriers, too many regional carriers and too many hubs.” – Swelblog

Why in the world are we (frequent or infrequent travelers) wasting time on accumulating airline frequent flyer miles? Sure, if we fly an airline and it has a mileage program (and virtually all do), we might as well accept the miles offered. But using credit cards with annual fees just for a few more miles? Deciding which car to rent based on how many miles we’ll receive? Shopping for products we don’t need to build up our mileage?

The travel/mileage blogosphere is awash in words about how to add gazillions of miles to your various airline frequent flyer mileage accounts. But nearly every method “costs” you something – an annual credit card fee; a cheaper price on a product that doesn’t offer miles; a hotel room that’s more conveniently located vs. one that gives you bonus miles. Some part of your time and your life.

Some of our favorite travel blogs are primarily concerned with ways to boost your mileage accounts. And we ourselves have probably taken nearly half our flights in the past five years on award tickets. But at what cost? And what of the future (or not) of your miles in an airline bankruptcy situation?

If you’re one of the top 1% who hasn’t been impacted by the world’s financial meltdown, maybe you don’t care about saving cold, hard cash. (But then you can pay for full-fare first class anyway.) But if you spend a dollar here and 10 dollars there just so you (we) can get a few more miles.... We’re beginning to think that’s nuts.

Yes, we’ll gladly take advantage of anything that is truly free or less expensive. There is absolutely no cost to using a cash-back credit card vs. one that has no reward scheme. There’s no reason to pay 3% for foreign purchases when some credit cards charge nothing extra. There’s no reason to pay more for an airline ticket than necessary – and there are several great airfare alert sites that offer timely fare information. Why not try for a better deal on a hotel room through an opaque booking site (if you’ll be happy with whatever hotel you end up in)? There’s no shame in wanting the most bang for your buck – the highest quality at the lowest price is our mantra.

So we’ve just about given up on bothering to collect frequent flyer miles in any way other than flying. Our world is too complicated as it is, and our time (and other ways of saving money) are more valuable than the vague intangibles of frequent flyer miles.

Loose Threads – 29 June 2009

The weird, wonderful, and hugely popular London Eye is being refurbished – one cabin at a time. The upgrade is planned to be complete by the opening of the 2012 Summer Olympic Games in London.

View From the Wing has an excellent roundup of current mileage and hotel reward credit cards.

Fitch Ratings has downgraded Delta’s credit rating – still better than its rivals, though. According to ATW News, Fitch also commented earlier this month that United, US Air, and American “could be forced to file for bankruptcy protection ‘as early as the winter if operating trends fail to stabilize.’”

We’re still not completely sure about multi-country SIM chips for GSM phones, but a new one has caught our eye. We haven’t tried it yet, but the Global Roaming chip seems to offer excellent world-wide coverage and very competitive rates.

Reward Credit Cards Redux

Just a few days ago, we posted a piece about a survey from MilesLink that said most credit card users (in their poll) strongly preferred frequent flyer miles as rewards. We tended to disagree, noting that we felt miles seldom offer the most value. A recent article by finance columnist Liz Weston quotes a J.D. Power survey about which cards and card companies users were “happiest” with. American Express was at the top of the list and HSBC at the bottom, echoing our sentiments.

Similarly, the card users in the survey strongly favored hotel rewards as the best, followed by cash back – again, our feelings and recommendations exactly. (One small but shocking tidbit in the article noted that J.D. Power said that, on average, 10% of consumers reported having problems with their account in the previous year.)

Travel rewards, annual fees, award reductions, changes in terms are rampant in today’s credit-card environment. We’ll continue to follow and comment on the latest news, especially as it relates to travel and rewards cards

Opinion: The Two Most Rewarding Reward Credit Cards

After posting several entries recently about changes in credit card rewards, we thought we’d detail our two current favorite reward credit cards. (Note that we are NOT an affiliate marketing site for any card or other product, so we have no agenda in recommending any one card over another.)

The Hilton American Express offers 6 Hilton HHonors points per $1 spent at grocery stores, gas stations, drug stores, and for phone, cable/satellite TV, and internet service; 3 points for other purchases. This card is useful primarily if you stay at Hilton properties (ranging from Hampton to Doubletree to Hilton, etc.). When we use points in lieu of payment, we generally feel we get about 1% reward per point. Thus, the Hilton Amex gives us what we think of as 6% or 3% rewards for our purchases.

The Schwab Visa offers two significant advantages: It offers 2% cash rewards on all purchases, and it does not charge any foreign-currency conversion fees (nearly every other credit card charges about 3%). So used for international travel (or any purchase in a foreign currency) the Schwab card provides the equivalent of a 5% reward. The Schwab rewards are a little awkward, in that you need to open a Schwab brokerage account for the rewards to be credited to. But there are no fees nor minimum balances for that account.

(We still have a fond spot in our hearts for the Alaska Visa, but Alaska Airlines isn’t a viable airline for many folks around the country. In addition, the card has a $75 annual fee, but you do receive an annual $50 companion ticket – a pretty good value if you use it for an $800 Hawaii ticket. And Alaska does have many airline partners, including Delta, AirFrance, American, British Airways, Qantas, LAN. Still, the card’s reward is only 1 mile per $1 spent, so you need to use your miles wisely to get a return better than 2%.)

Needless to say, within the current credit-card environment, you’ll never know in advance whether or not your card’s rewards will be changed in the future. But for now, and for most travelers, we think the Hilton Amex and the Schwab Visa are your top two bets.

UPDATE: Our friend Marcus (@CreditMatters on Twitter) reminded us that Hilton’s new fee card – Surpass – offers 9 Hilton HHonors points for spending at Hilton properties (in addition to the same other Hilton points as above), and comes with a basic membership in the Priority Pass airport lounge access program ($99 value). If you spend $20,000 per year on the card, you receive Hilton Gold status; with $40K spend you receive Diamond status. Annual fee of $75.

The Sky Is Falling (On Credit Card Rewards)

Here we go again. Both the House and Senate have quickly passed legislation that will attempt to curb some of the credit-card industry’s current practices in the areas of fees, interest rates, late-payment penalties, and the like. Of course, The Pundits are out in force, proclaiming (to paraphrase): “The end of rewards cards as we know them,” “Annual fees will reappear for most cards,” and our favorite, “Use your rewards/miles/points now before you lose them.” (Some examples: Recent articles from the Wall St. Journal, New Credit Rules, New York Times, and Barron’s.)

With enough spin from The Pundits, this might provide travelers with a new worst enemy to focus on instead of the airlines. Realistically, we expect that, yes, there will be some changes in terms and rewards. But the credit-card landscape is incredibly competitive. Despite any new legislative caps on fees or disclosure rules or other regulations, the credit-card companies will still want you to spend more and more on their cards. They only make money when you use your plastic, not when your card sits unused in your desk drawer.

Sure, some credit-card rewards may be reduced (as is apparently already happening with some cards), but we also wouldn’t be surprised to see some sweet new offers coming along. Again, compare this to the airline industry, which is now throwing frequent flyer miles around for shopping, bonuses for flying certain routes or times, signing up for newsletters – all in a competitive effort to retain and gain business.

Make no mistake, the credit-card companies do not want you to switch your spending to cash (unless you are one of their defaulting customers). They do want you to carry a balance, since even somewhat lower interest rates on outstanding balances make them lots of money.

As the Chinese proverb says: May you live in interesting times. The proverb should also add: Pay your credit-card bill in full every month.

UPDATE 5/21/09: A couple of other sensible and non-sensational views on the (proposed) new regulations on credit card companies, and what the changes mean for reward cards. View From The Wing and Upgrade: Travel Better.

UPDATE 5/22/09: Obama signed the law today, which takes effect in 9 months. It will be interesting to see which of the many viewpoints noted above turn out correct.

UPDATE: 5/23/09 A purported “expert article” on Yahoo Finance (really just a cut-and-paste roundup of other articles) offers still more views on this topic. The Words of The Pundits keep flowing.

Significant Reward Credit Card Changes

Not that we’re really surprised. In today’s credit/financial environment, change is the rule rather than the exception. We’ve received notice of (or read about) several coming changes in travel rewards credit cards that we have previously recommended.

Indications are that the popular Chase Freedom card – which offered 3% rewards in certain categories – is being eviscerated. The new scheme is apparently only 1%, with allegedly some monthly bonus categories to be announced.

The Freedom card had been one of our highly recommended cards, with its 3% rewards beating most airline mile cards. No longer, apparently. Guess we’ll now stick with the Hilton American Express (which offers good-value Hilton points) and the Schwab Visa (2% cash rewards on everything) for most of our purchases. We’ll also look more seriously into the Starwood Amex (even though it carries an annual fee).

Also, according to our latest American Express FreedomPass (Open savings) business card statement, the 3% discount for purchasing Delta tickets with the card is ending May 15, 2009. The 3-5% discounts for purchases from Marriott (many, but not all, hotel brands), Hertz (U.S. rentals), JetBlue, Hyatt (U.S. properties), and some other non-travel businesses continue in effect. (Plus, Amex is adding to the list of non-travel merchants in this discount program.)

Finally, Advanta, issuers of business credit cards (which had pretty lousy rewards anyway) is apparently ending its credit card business. This shouldn’t affect too many of our travel readers, as the card has never been a prime “travel” credit card.

Virtual Credit Cards

After suffering from one too many online credit card fiascos and ripoffs, we began researching virtual credit card numbers. (In the past month, we had a disputed charge with Earthlink, we had one of our credit card numbers used by some scumbag, and we received a letter from Batteries.com about a security breach of their computers.)

Virtual credit cards are one-time or short-term numbers that are created by your credit card company and can then be used for an online transaction. These temporary numbers can be time-limited and amount-limited.

We have found the service offered on most Bank of America credit-card accounts, and on some Citi accounts. (Discover also apparently offers the service, but we don’t have any Discover cards to test it out.) Charges on the virtual cards go right to your normal credit card statement, and carry the same purchase and fraud protections that your card offers.

Of course, this adds a small level of complexity to your online shopping, but may be worthwhile for purchases from unfamiliar merchants. Also, we see this as a way to stop unauthorized recurring billings and card-number theft, since the virtual card has a dollar limit. Once you feel confident with a new merchant, if you choose you can use your regular card number for future transactions.

You can use a virtual credit card any time you don’t have to present a physical card. Which means, of course, not to use it for airline tickets, hotels, or car rentals, as you will probably have to present your card at the counter.

Another small benefit, surprisingly, is that using a virtual credit card number requires you to log in to your card website to obtain the number. That also gives you the opportunity to check all your charges and balances more frequently – something we should all be doing more often.

New Credit Card for Old Northwest Visa Holders (and Others)

With Northwest being absorbed into Delta, the Northwest Visa that was offered by U.S. Bank will be disappearing – just like the terminals, signs, and paint jobs on anything that said Northwest. With that change, the only Delta affiliated credit card will be from American Express.

But U.S. Bank isn’t sitting still. If you’re a current Northwest WorldPerks Visa card holder, you should be receiving a new U.S. Bank FlexPerks Visa card – with the same account number (thus, no interruption in auto payments, etc.). Of course, U.S. Bank will also be offering the card to new customers.

The card is a “fake miles” card, which basically awards points you can redeem for a ticket on “more than 150 airlines.” The Signature Visa earns the equivalent of up to 2% return (“up to $400 ticket value for 20,000 miles”) and carries a $49 annual fee (waived the first year; also waived for $24K annual spending). There are also some bonus point categories and other perks/benefits. U.S. Bank also has a lower-tier Visa, with no annual fee but a reward ratio coming in at 1%. There is also a business Visa available.

It’s not clear how rewards are handled. The U.S. Bank website mentions redeeming via a user’s account page. This may mean that the card redemptions are similar to Capital One or Amex FreedomPass, where you receive a statement credit for a ticket purchase. Alternately, it may function more like the old Capital One or the current Merrill+ plans, where you need to contact the reward center to book a ticket.

Bottom line: 2% isn’t too bad, but you should be able to get that return or better with other cards. With this type of card, you generally need to redeem at the top of each reward level, or your reward percentage effectively declines. (Those 20,000 points are for a ticket “up to” $400 value. If your ticket only costs $250, you’ll still pay 20,000 points.) We’re less than impressed with these fake miles cards, but for some travelers they can be useful travel reward tools. Finally, if you’re a new customer interested in this card... wait a bit. The U.S. Bank website doesn’t yet even seem to have an application page available for this card.

Capital One Updates

We’re still not huge Capital One fans, yet we get more inquiries about their credit cards than any other topic on this blog. So we thought it was time to re-survey their offerings and post an update.

As we’ve said before, we think their reward schemes are generally unimpressive (not bad, just not great). But they are also one of a very few cards that do not add foreign-exchange fees, making them a top choice for international travel. For most purposes, that’s the only time we use our Capital One cards.

Capital One’s website lists 28 different cards (yes, 28) and most seem like pretty much their old standards, but two new (to us) cards caught our eye.

• The latest version of the No Hassle Miles Rewards card offers 2 “miles” per dollar after $1,000 a month in spending, with one mile otherwise. (Capital One “miles” aren’t real airline miles that you can transfer into an airline account. They’re simply points you can redeem for statement credit for ticket purchases.)
• The Orbitz Visa Signature offers Capital One’s usual 1 point per dollar, except it gives you 3 points/dollar for purchases from Orbitz. In general, 1 Capital One point translates to a 1% rebate/travel credit. So if you use Orbitz a lot, this would be equivalent to a 3% return – pretty good in today’s reward environment.

Many frequent-flyer commentators value traditional airline miles at about 1.5 cents each. With real airline miles, you need to make sure you maximize your miles (ie: don’t burn 25,000 miles for a $200 ticket), or you could end up having less value than Capital One’s 1%. We, however, feel we use our airline miles at about 2 cents each, so with other types of reward cards for cash or points, we look for a 2% or better return.

We’ve discussed points/miles/reward cards frequently. Browse through our archives on the topic, and you’ll also see some suggestions for cards for international travel.

New Discover Escape Card

Discover has introduced a new travel-rewards credit card. The Escape Card’s rewards are similar to many other “fake miles” cards, such as some Capital One, Merrill, and American Express cards. The Escape Card gives you 2 miles for every $1 spent – working out to a 2% reward ratio (but only 1% if you want to redeem your miles for cash instead). That’s better than some of the other cards’ reward ratios. However, like the other fake-miles cards, instead of actual air miles you are given credit that can be applied to any travel purchase made with the card.

Offsetting that 2% reward ratio is a $60 annual fee, although you receive 1,000 “bonus miles” every month for the first year. (There have been some reports of the 1,000 miles bonus for 25 months, but we can not find that offer on Discover’s website.)

But the intriguing part is the inclusion of primary car rental insurance (as well lost or damaged luggage insurance, travel delay insurance, and trip cancellation insurance). Note that for international use, Discover will be instituting a 2% foreign-currency-exchange fee in May. (Outside the U.S., Discover cards are currently only accepted in Canada, Mexico, the Caribbean, Central America, and China.)

We actually believe this type of fake-miles-reward card can be useful for some types of spenders and travelers. For infrequent flyers looking for some “incentive” to save for that basic economy ticket, these cards might be useful, and may have more perceived travel value than the same level of cash rebate.

Nonetheless, we think there are other cards with which you can usually obtain rewards that are better than 2%. If a flat 2% (for all purchases) is all you want, you can get that with the Schwab Visa (with no annual fee). Still, if you like Discover’s products, the Escape Card may be worth looking into – that primary car rental insurance is quite enticing.

ATM Foreign-Withdrawal Fees Update

Several banks actually seem to be lowering fees or reimbursing ATM-owner-imposed fees. (Isn’t competition – especially from the internet banks – a wonderful thing?) So rather than list a bunch of small banks offering 0% or 1% fees, or that reimburse ATM-owner fees, we thought we’d highlight some of the Wall of Shame Banks – banks that still charge exorbitant fees (sometimes as much as 3% plus $3 per transaction!) just so you can get your money from a wall. (Note that the high fees may not apply to all cards from these banks, and that there are generally no fees for withdrawals within each bank’s own network.) The banks to watch out for include: Chase, Citibank, Citizens, HSBC, ING, PNC, US Bank, and Wells Fargo.

There are really several types of ATM fees banks can charge:
1 – A fee from your bank (the card-issuing bank) to use any “foreign” ATM. In bank-speak, foreign means any ATM not affiliated with one of their branches. It is charged by your bank, not the ATM owner. (Some banks do not charge ATM fees for withdrawals within their “partner” networks. For example, Bank of America customers do not get charged ATM fees for withdrawals from Barclays in the UK, Deutsche Bank in Germany, and several other international banks.) A few banks do not charge any fees to use a foreign ATM.
2 – Some banks also have a “foreign”-foreign ATM fee that is higher for withdrawals from international ATMs than from domestic ATMs that are out of their network. Again, this will be a fee imposed by your bank. And again, some banks do not charge any foreign-foreign ATM fees.
3 – ATM-owner fees. These are the fees that pop up on an ATM screen saying the ATM you’re using will add a $2.50 (or whatever) fee to your cash withdrawal. Surprisingly, many international ATM machines do not impose these owner fees. These are the fees that banks like Schwab or Bank of Internet advertise they will refund to you. Most other banks do not rebate or refund these fees, so even if your bank doesn’t add any of its own fees, you could end up paying this one. (In the worst cases, you might be hit by a high-percentage fee from your bank for using a foreign ATM, plus get this ATM-owner fee added in as well. In that case, we suggest you get another bank.)
4 – Finally, there’s the possibility of a hidden “fee” you’ll never know about. That is the fact that you never really know what exchange rate a bank uses to convert your foreign-currency purchase or withdrawal into U.S. dollars. It may be the Interbank rate, or may be slightly higher.

If you’re planning on accessing cash from ATMs while traveling, and your bank charges ridiculous fees, we suggest opening an online checking account with the likes of Bank of Internet, Fidelity, Schwab, or State Farm. Make sure the online checking account has no monthly fees, and then fund that account with just enough money for your travels. This is probably much safer than carrying a debit card tied to your regular checking account (especially if you have a large balance). If your debit card were lost or stolen, your entire bank balance could be wiped out.

(This is part 3 of a short 3-part series of updates on international credit card and ATM use. Part 1. Part 2.)

Dynamic Currency Conversion

Just say no.

The practice seems most prevalent in Europe, but some merchants (anywhere in the world) will offer to charge your credit-card payment in U.S. dollars rather than in the local currency. Don’t do it. This “dynamic currency conversion” can cost you as much as 5% more for your purchase, as the exchange rate the merchant uses is usually much higher than the Interbank exchange rate. This is even worse than the 3% most Visas or MasterCards charge. Again, simply refuse. Visa representatives say that any merchant accepting their cards must allow the customer to pay in local currency.

Also watch out for international purchases through PayPal. On a recent purchase, we were offered to convert the price (in British Pounds) to U.S. dollars “at the PayPal exchange rate.” We declined, as it would have been much less favorable than using the open-market Interbank rate. On our $35 purchase, the PayPal exchange rate would have added more than $2 to our transaction. Can you spell “rip-off”? Just another reason to dislike (and avoid) PayPal. If you must use them, decline the PayPal exchange rate if possible (some PayPal merchants seem to offer this option, some don’t), and if paying with a credit card (whether through PayPal or directly) use a 0% foreign-conversion fee card such as Capital One or Schwab.

(This is part 2 of a short 3-part series of updates on international credit card and ATM use. Part 1. Part 3.)

Credit Card Foreign-Exchange Fees Update – Discover and Other Cards

Despite the fact that the Discover credit card does not have as much international presence as does Visa, MasterCard, or America Express (it’s only accepted internationally in Canada, Mexico, the Caribbean, China, and Central America), it was one of the few cards that did not add foreign currency transaction fees when converting purchases made in other currencies. No longer. According to Discover’s terms and conditions, the card will begin charging 2% beginning with billing periods ending after May 1, 2009.

Thus, the only credit cards we know of not charging any forex conversion fees (0%) are Schwab and Capital One. There are several cards from small banks and credit unions that charge 1%, but realistically for most consumers, practically all popular Visas and MasterCards charge 3%, and Amex charges 2.7%. (FlyerGuide Wiki has an overview of credit, debit, and ATM forex fees, but we have not independently verified all their information – it is a user-edited Wiki, after all.)

Technically, the 0% that Schwab and Capital One advertise means that those banks are absorbing the 1% that Visa and MasterCard tack on above the Interbank exchange rate for ALL foreign-currency conversions. Those 3% fees from most banks means that in addition to Visa/MC’s 1%, those banks are adding another 2%.

(This is part 1 of a short 3-part series of updates on international credit card and ATM use. Part 2. Part 3.)

Hilton American Express Card Changes

It looks like it’s official. The Hilton HHonors American Express card has changed its reward ratios. The new terms offer “6 points for Hilton Family Hotels, Supermarkets, Drug Stores, Gas Stations, Home & Wireless Phone, Cable & Satellite TV, and Internet Service Providers.” 3 points for other purchases. This is up from 5 points previously in several categories, but Restaurants and the Post Office have been eliminated from the higher reward tier.

This doesn’t seem like a big deal to us. We still think the Hilton Amex is one of the best reward cards available, and an extra reward point is always a nice thing. The big unfortunate change is the elimination of restaurants from the top 6-point tier. It’s getting harder to find reward credit cards offering more than 1% for restaurant purchases. (The Costco Amex and the Chase Business card both still seem to offer 3% at restaurants.)

Best Reward Credit Cards (Especially for Travel)

After our recent rant-and-rave against the so-called credit card rating websites, we figured it was time to update our list of our favorite travel/reward credit cards. There are MANY reward credit cards out there, and your personal financial situation will have an effect on the cards you choose. Remember, unless you pay off your cards every month, go for the lowest-rate credit card, and ignore reward cards (which usually have much higher APRs).

In the broadest terms, we strive for at least a 3% reward ratio for all our purchases – whether that’s cash-back, airline miles, hotel stays, or for international purchases. We have also generally refused (with one exception, see below) to pay an annual fee on any card. And although it makes for a fat wallet, we don’t mind using multiple cards for different purposes.

CASH BACK
We have three current favorites:

Chase Freedom Visa – This card offers 3% cash back on your “top 3” (from 15 different) categories of spending each month, up to $600 (after that, it’s 1%). Even when only used for the $600 spend/month, we get more than $200 in cash rewards each year.

We also have a Chase Business Visa that gives us 3% cash back at hardware/building supply stores, office supply, gas stations, and restaurants (1% elsewhere). We use it only for those purchases. (Especially as it’s getting harder to find cards that give good rewards at restaurants.)

Schwab Bank Invest First Visa – This new card (it’s only been available since November) offers 2% cash back on everything. Domestically (see also International Travel, below), we use it for purchases that don’t give us our 3% or better with some other card.

[We are somewhat concerned about the future of cash-back cards. For example, we’ve heard that new Chase Freedom card holders are seeing different reward terms than for the card we have. There was a recent Wall St. Journal article on the topic. The Schwab card is new, so we wouldn’t expect any changes soon. Nonetheless, confirm reward schemes before applying, and be ready for possible changes in the future.]

HOTEL CARDS
We still believe that the Hilton American Express is one of the best cards available. It offers 6 Hilton “points” if used in certain categories and for Hilton hotel stays, with 3 points for other spending. The way we value Hilton’s points, and based on hotel room rates, the 6-point level represents to us about a 5-6% reward. But it’s really only useful if you plan to stay in (and otherwise pay for) Hilton chain hotel rooms.

[The above has been UPDATED to reflect Hilton’s new 6-point reward level.]

We continue to hear wonderful things about the Starwood American Express card, but simply have too many other cards that we currently use to be intrigued enough yet to acquire the card (which carries an annual fee).

[An advantage of the hotel cards is that your points are held in a system that is probably more stable than an airline, and that are less likely to change in value than a bank’s cash-back structure.]


AIRLINE CARDS
We believe that signing up for airline cards can be a worthwhile deal, if you can get some big initial miles bonus and if the (usually high) annual fee is waived for the first year. The choice of card(s) will depend on the airlines or alliances you fly. Every major U.S. airline offers such a card, as do many international carriers. The value of airline miles varies by how you use your one-mile-per-dollar spent on the card. We generally value most airline miles at about 2 cents per mile, equivalent to 2%. That said, we seldom use an airline card except....

The only airline card that we’ve been willing to pay an annual fee for over the past couple of years has been the Alaska Visa, which offers a generous initial sign-up bonus; a $50 companion ticket every year; and 2,000 bonus miles every year. We’re torn about renewing it each year, though, because of the $75 annual fee. But the companion ticket seems to make the fee worthwhile, especially if you use it for something like a pair of $800-each Hawaii tickets (with the second ticket therefore “costing” only $125).

As with the Starwood card, we’re intrigued by a couple of airline cards that we don’t have – as they’re offered by airlines we fly less frequently. Those include the JetBlue Amex, the Virgin Atlantic Amex, and the Virgin America Visa. If our travel patterns change to where we fly those airlines more often, their credit cards might seem much more appealing. (The JetBlue and Virgin Atlantic cards carry annual fees.)

[There have been innumerable articles about the decline in value of airline miles. We’ve touched on the topic a few times, but it’s too long of an issue to go into here. That said, carefully evaluate the value of your miles, as well as associated redemption fees – either for “free” tickets or upgrades.]

INTERNATIONAL TRAVEL
With one exception, we only use a card that does not charge foreign-exchange fees. The best offerings for us right now are:

The Schwab Visa, mentioned above, that charges 0% forex fees, and offers 2% cash back. It’s like getting the equivalent of a 5% reward for foreign purchases (as nearly all other credit cards tack on foreign-exchange fees of 3%).

Capital One has many cards, all of which charge 0% forex fees. There are many different reward schemes (cash, miles, points – all usually translating to about 1% reward). In general, we don’t find their rewards very appealing, but with the lack of forex fees and a 1% reward, it’s still equivalent to 4% value.

The exception is the Hilton Amex (mentioned above) which charges 2.7% in forex fees, but does give us 3-6 Hilton points for purchases. But we use it internationally for one purpose – car rentals. It (and other Amex cards) has available an inexpensive car-rental insurance policy that offers primary CDW insurance. We consider the forex fees/points/insurance paradigm a worthwhile trade-off.

[As with other bank-based cards, discussed above, it seems that some of Capital One’s reward schemes may be changing.]

OTHER CARDS
In addition, we have an Amex FreedomPass Business card that has a reward ratio of only 1.33%, but offers discounts of 3-5% with JetBlue, Delta, Marriott, Hyatt, and Hertz (and quite a few other non-travel discounts, such as 5% with FedEx), simply by purchasing with the card. Those purchase categories, therefore, give us at least a 4% reward. It, too, offers the same optional primary CDW car-rental insurance coverage as does the Hilton Amex.

We still have no problem juggling cards – using one card for something and a different card for another purchase category. But, after considering all of the above, and all the various reward factors and card use for a wide variety of travel patterns (and if companies like Chase do indeed reduce their reward options), and if we were limited to only two cards, our two top choices would currently be....
Schwab Visa – No forex fees for international purchases; 2% rewards on everything.
Hilton Amex – Points go into as much of a “fail-safe” program as possible; bonus points for selected categories of spending; car-rental insurance.

There are many other cards out there. As we mentioned in our rant against the so-called card rating sites, it’s really hard to get unbiased information. So it’s doubly important for you to determine what’s important to you – cash, miles, points, other benefits. What we have presented above are only our opinions.

This photo has nothing to do with this article.

Reviewing Our Frequent Flyer Reward Programs, Travel Patterns, and Goals for 2009

As much as we complain about the decline in the value of frequent flyer miles, we have to admit they’ve worked for us. Over the last five years, just about half of our airline tickets have been obtained with frequent flyer miles. A few have been from credit card spending on “fake miles” credit cards (such as Capital One, Amex FreedomPass, or Merrill+). A few more were obtained from points in hotel programs (especially Hilton HHonors, back when you could redeem points directly for airline tickets, rather than just transferring to/from an airline program). Other tickets have been obtained directly with miles in an airline’s program (mostly United or Alaska, even if we used those miles with other airlines, such as Alaska’s partnership with American). Nonetheless, more of those miles were probably obtained from credit card sign-up bonuses and spending than by flying.

In addition, we’ve obtained about half our hotel stays over the past few years for free by using points for rooms (again, mostly Hilton points obtained from credit card spending).

We’ve been whittling down the balances in our frequent flyer accounts. Currently, we each have about 30,000 miles with Alaska; Ken has roughly 60,000 with United, 25,000 with Delta, and 30,000 with USAir (we wiped out Francesca’s United miles on our last international trip); we have a bit more than 160,000 Hilton points; plus there are some miles scattered around other airline programs.

So despite our skepticism, we still have to say that the game works. Consider getting those airline credit cards to obtain the initial bonus miles. Work the system for points with other credit cards or other points programs such as hotels. Make every purchase count – assuming you pay your card(s) in full every month, use a credit card for every purchase and either get cash back or miles/points of some sort for every dollar you spend. Work the angles for sign-up bonuses, contests, surveys, and the like – for example, every one of our combined 28,000 bmi miles have been obtained that way.

Our miles/points goals for 2009 are pretty modest: 1) bump up the Delta miles significantly, to get to the next award/upgrade level, 2) use up those USAir miles that we think of as just “sitting around,” 3) concentrate on using cash-back credit cards as much as possible, yet, 4) no matter what, continue to take advantage of every opportunity for free miles, even if we’re skeptical of their value.

As for related goals, we vow to only use 0% foreign-exchange-fee credit cards overseas (Capital One and Schwab are our current favorites); to never pay an ATM fee again (possible with several banks, especially Bank of Internet and Schwab); hopefully never fly less than Premium Economy again; and finally, for foreign travel, try to fly a “good” domestic carrier (JetBlue, Virgin America) to a U.S. gateway city, and then fly a real airline (an international carrier) overseas.

As for specific travel plans, we’ve moved to a space in our lives where we are “non-planning” more vacations, and being more spontaneous. We have our list of desired destinations, and the general timeframes when we can travel. Then, we’re going to wait for airfare deals, specials, and other offers much closer to our actual travels. For example, just in the past month we saw several incredible airfare deals to New Zealand, Scandinavia, France, and Asia. If we had been “ready” to take advantage of those offers, we could have jumped on a good deal. In general, we’ll have a few destinations in mind where we’ll be ready to pull the trigger in a 30-day window. This also makes sense with the myriad schedule changes the airlines are making nowadays. A recent trip that we planned several months in advance had more than half-a-dozen flight changes (we stopped counting) before our departure.

We’ll be traveling from Jan 1-10, and do not plan any posting or moderating comments during that time. We thank all our site visitors during 2008, who came from 88 countries this year (see map below). See you all next year.

Exposed – Credit Card “Rating” Websites

We’ve previously discussed websites that supposedly “rate” credit cards, especially reward credit cards. These sites purport to review cards, and pretend to tell you about the best card offers for cash rebates, frequent flyer miles, or other rewards. We’ve almost always felt that these were self-serving affiliate marketing sites first, and unbiased review sites a far-distant second.

For those unfamiliar with affiliate marketing, it means that every time you click on a link or ad to ABC credit card on the XYZ card review site, XYZ gets a commission for a successful transaction. (Many blogs also participate in affiliate marketing programs, yet most blogs still seem to be fairly unbiased. We do not participate in any affiliate program on this blog. Thus, we have no incentive to recommend one card – or other product – over another.) That said, in many cases affiliate marketing is a legitimate revenue source for many blogs and websites. But it has never seemed appropriate to us with the “card-rating” websites.

The reason for this post is that it now appears (according to CreditMattersBlog) that Chase, Citibank, HSBC (and possibly American Express) have pulled some or all of their card products from the affiliate marketing channels. Guess what? All of a sudden nearly all of the so-called “unbiased” card-rating sites no longer display any United Airlines credit cards (Chase), American Airlines cards (Citi), HSBC cards, and many others.

If you find a rating site that no longer shows these and similar cards, you can be assured they do NOT have YOUR best interests at heart in ANY of their recommendations. Our least-favorite, self-serving “review” site no longer even lists Chase or HSBC on their credit-card-issuer’s page – you’d think that those companies no longer issue cards. The good news is that this can be a “canary-in-the-coal-mine” test for card review sites. If a card review site still lists a full range of Chase, Citi, and HSBC cards, it may pass the unbiased test. Unfortunately, in our recent tests, NONE have passed.

We are really saddened that several sites which we had previously considered relatively unbiased have suddenly stopped listing certain cards. For example, the Chase Freedom Visa, which we have recommended several times, has disappeared from most card-rating websites. Its 3% cash rebate is still one of the absolute best returns we’ve seen, but since the affiliate-dependent sites no longer get a commission for recommending it, the card has disappeared from their reviews.

What you have, then, is another “Buyer Beware” moment. If you want unbiased credit card reviews, you have to do your homework. As of now, we have NOT FOUND A SINGLE SITE which hasn’t changed its “recommendations” since Citi, Chase, and HSBC pulled out of the affiliate channels. Therefore, there isn’t a single comparison site for reward credit cards that we can recommend. When (or if) we find a comprehensive, truly unbiased card review site, we’ll rush to post that information.

[UPDATE: 12/31/2008. The buzz over on CreditMattersBlog seems to indicate that more card issuers are pulling out of the affiliate market. According to CMB, those include most Advanta credit cards, all Bank of America cards, and Discover business cards. Already, several of those so-called unbiased credit-card “rating” websites have pulled those cards from their sites. Which obviously confirms our opinion that they do NOT have any real interest in presenting objective reviews.]