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American Airlines now lets you earn status from credit card spend – but is it a good deal?

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There is a joke in the US, which contains more than a grain of truth, that the three legacy US airlines are effectively credit card reward programmes with a few cash flights tacked on. There have even been suggestions that one of the big US banks should buy American, Delta or United purely to capture the hugely lucrative credit card contracts and to offer mileage rewards more broadly.

(This wouldn’t exactly be tricky. JP Morgan Chase is valued at 35x more than American Airlines. It would be a rounding error to acquire it.)

One day, of course, the huge fees that US retailers have to pay to accept credit cards will be cut by 80% to the levels seen in Europe and Australia. One day, US residents will also wake up and see that constant devaluations have made mileage credit cards poorer value than the 2% cashback credit cards common in the States.

American Airlines now lets you earn status purely from credit card spend

Until then, the banks will continue to see airlines as no more than a conduit for issuing the frequent flyer miles which are the No 1 carrot required to sell credit cards in the US.

American Airlines is shaking up AAdvantage

American Airlines announced a major shake-up of its frequent flyer programme last month. Nothing changed in terms of redemption costs, but there has been a cultural shift in how you earn status.

This is a radical move by American Airlines, especially as historically their management strategy has been ‘copy whatever Delta is doing but don’t execute it as well’. For once, American is taking a lead.

The reason I am writing about this for a UK audience is that you can be sure that all other major global airlines will be looking at this and wondering if it is somethng to copy.

For the first time, you can earn American Airlines status purely on the back of credit card spending. You don’t need to spend a penny (or a cent) on flights, although of course the status won’t be a lot of use to you otherwise …..

This is how it works. To earn status, you need:

  • Gold (equal to BA Bronze) – 30,000 points
  • Platinum (equal to BA Silver) – 75,000 points
  • Platinum Pro (equal to BA Gold) – 125,000 points
  • Executive Platinum – 200,000 points

You can earn points in two main ways:

  • $1 spent on an American Airlines credit card earns 1 point
  • $1 spent, excluding taxes and charges, on an American Airlines flight earns 5-12 points depending on your AA status

The devil is in the detail

There are a couple of interesting quirks:

  • If you already have status, it is far easier to retain status. If you are Executive Platinum, you’re earning 12 points per $1 spent on AA flights. This makes is FAR easier for you to hit the 200,000 points needed to retain Executive Platinum. Someone just starting out with American Airlines will only be earning 5 points per $1 spent on AA flights. In the long run, this will hurt AA because they won’t see the next generation coming through.
  • Whilst you can earn status purely on credit card spend, there are extra benefits – including, crucially, the lounge passes and the upgrade certificates which are the core of any US frequent flyer scheme – which are only unlocked by flying 30 American Airlines segments per year. We will now see mileage runs replaced by segment runs, as high card spenders look for the cheapest and quickest routings to hit their 30 annual flights.
American Airlines now lets you earn status purely from credit card spend

In truth, American Airlines has stuffed its frequent flyers

In putting together this new structure, American Airlines has sharply increased the amount of travel you need to earn status. Covid be damned.

The headline to this article is “American Airlines now lets you earn status from credit card spend”. In truth, I should have written “American Airlines now forces you to spend on an AA credit card to keep your existing level of status”.

This is bad news if you live in the UK, of course, since we don’t have an American Airlines credit card here.

For example, simplifying it slightly, pre-covid you would earn American Airlines Platinum Pro status by spending $9,000 on AA flights.

Going forward, a Platinum Pro member who spends $9,000 will only earn (9,000 x 9 per $1) 81,000 points. Because requalification now requires 125,000 points, a Platinum Pro member would need $44,000 of credit card spend to earn the additional 44,000 points to hit 125,000.

What you won’t know, reading this in the UK, is that the American Airlines co-brand credit cards in the US are poor. There is a large opportunity cost if you move spend to AA’s cards versus other cards in the market.

With various cards offering 2% cashback in the US, you can even put a firm cash value on the spend you need to divert to AA. In our example above, a Platinum Pro member who moves $44,000 of card spend to AA credit cards in order to retain status would be losing out on $880 of cashback.

Conclusion

I DO believe that status should be offered as a credit card reward.

What I don’t believe is that – as American Airlines as done – the best way to go about it is to increase the qualification levels for status and force flyers to make up the difference with card spend!

If nothing else, giving status as a credit card perk makes sense. With low profit margins on UK credit cards due to cap on interchange fees, giving out Avios or other reward points is expensive.

Offering 1 British Airways tier point for, for example, every £100 spent on the British Airways American Express card would be a game changer.

It wouldn’t even represent a huge cost to BA. By definition, anyone without a Silver card isn’t flying a huge amount so the cost of lounge access etc is minimal. At 1 tier point per £100 most people would need a mix of card spend and flying to reach Silver or Gold which may also drive additional flight bookings.

For the hotel companies, giving away status as a card perk is even more of a no-brainer. The cost of your free breakfast, upgrade, bonus points etc is paid by the franchise owner who runs the hotel you are staying at, not the brand owner.

If you really don’t believe that we will see ‘status for card spend’ in the UK, remember that BA’s sister company, Iberia, already gives away Silver status (equivalent to BA Bronze) if you spend €9,000 per year on its Icon credit card. Over in Spain, the future is already here.

If you want to learn more about the new American Airlines programme, there is a special website here.


Want to earn more points from credit cards? – December 2021 update

If you are looking to apply for a new credit or charge card, here are our November 2021 recommendations based on the current sign-up bonus

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the top current deals:

British Airways BA Amex American Express card

British Airways American Express

5,000 Avios for signing up, no annual fee and an Economy 2-4-1 voucher for spending ….. Read our full review

British Airways BA Premium Plus American Express Amex credit card

British Airways American Express Premium Plus

25,000 Avios and the UK’s most valuable credit card perk – the 2-4-1 companion voucher Read our full review

Nectar American Express

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & two airport lounge passes Read our full review

American Express Platinum card Amex

The Platinum Card from American Express

30,000 points and an unbeatable set of travel benefits – for a fee Read our full review

Earning miles and points from small business cards

If you are a sole trader or run a small company, you may also want to check out these offers.

American Express Business Gold

20,000 points sign-up bonus and free for a year Read our full review

Amex Platinum Business American Express

American Express Business Platinum

40,000 points sign-up bonus and a long list of travel benefits Read our full review

British Airways Accelerating Business American Express card

British Airways Accelerating Business American Express

30,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

Capital On Tap Business Rewards Visa

The most generous Avios Visa or Mastercard for a limited company Read our full review

For a non-American Express option, we also recommend the Barclaycard Select Cashback card for sole traders and small businesses. It is FREE and you receive 1% cashback on your spending:

Barclaycard Select Cashback Credit Card

1% cashback and no annual fee Read our full review

Comments (39)

  • Track says:

    Comment 2 of the day, what AA potentially misses here is that US card issuers can throw a tantrum, Creation-style.

    Maintaining the status stop being straightforward through flying, and depends on your credit score and if the particular lender will open you the desired credit card (you might have to sit on your hands for 2 years pretty much without credit applications if you want top United card). Or the famous, Chase 5/24 rule.

    It can also get tricky that a lender can ban you for life, for some crypto-related transaction, or a transaction at gold/coins merchant. It is the marginal group of customers, one can say, until it isn’t, given how crypto gets popular for ‘investment’ particularly in the U.S.

  • Nick says:

    I agree it’ll probably happen eventually. But with BA and Amex not even 1 year into their current 7 year contract, it’ll be some time yet before it’s even on the table to be discussed.

  • PaulLuc40 says:

    Ok, I’ll bite 🙂

    “ One day, of course, the huge fees that US retailers have to pay to accept credit cards will be cut by 80% to the levels seen in Europe and Australia”

    Where are the rumours that this will happen coming from?

    • Rob says:

      Obvious ‘innit.

      Hard to see why Joe Biden isn’t jumping up and down to do something which will decrease costs for the unbanked in the US and which has been proven to work in Europe and Australia.

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