Why changing the way you think about frequent flier programs will help you

By | September 26th, 2016

Joseph DeRanieri needs our help getting 50,000 frequent flier miles credited to his AAdvantage account.

He hasn’t flown that many miles, but Citibank advertised a promotion stating that if an invited customer opened a new checking account, deposited $50,000 into it, made requisite debit card transactions totaling $1,000 and set up bill payment for at least two consecutive months, 50,000 miles would be credited to his AAdvantage account.

A lot of hoops for 50,000 miles, don’t you think? Full disclosure: I am cautious about where I put my money. I don’t use a debit card, and I don’t link my PayPal account to my bank account. So what about the promise of frequent flier miles would make someone move $50,000 to a particular account?

Oh, right. The lure of “free” travel. The loyalty program game some call “The Hobby.”

DeRanieri’s plea for help actually sounds genuine. He explains that he has met all the offer requirements and has contacted both Citibank and American Airlines several times about the fact that the miles haven’t appeared in his account. I can’t blame him for reaching out to consumer advocates. After all, a deal is a deal, and if the company doesn’t follow through on its end of the bargain, it’s deceptive.

His case makes me wonder why anyone would believe a written offer from a business for frequent flier miles, and even more, why people go to such lengths to collect miles?

DeRanieri provided the promotion code so I could read the offer’s terms and conditions. Instead of yielding the actual promotion disclosures, my Google search turned up dozens of blog posts by travel hackers who discuss the offer and how to best take advantage of it.

And by “take advantage” of it, I mean laying siege to it.

The points collectors don’t actually deposit $50,000 into the account, presumably because people with that much cash on hand have real careers and don’t have time to play airline miles games. Instead, the hackers deposit funds from another credit card, which earns them points on that card. They only keep the new bank account open long enough to score the miles, then they close it out, drain the account, and pay back the first credit card, effectively doubling their miles windfall. This is one form of what’s commonly known as manufactured spending.

Citibank quickly caught on to what was occurring and prohibited customers from using credit cards to fund the accounts (though some hackers still recommend using checks drawn on credit accounts). Citibank then slowed down the awarding of miles to all customers, including those like DeRanieri who appear to have followed the rules.

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At the same time that DeRanieri wants help getting a credit to his AAdvantage account, so does Carol Weiss.

An elderly woman who plans to travel to France later this year, she sent us a USAir frequent traveler statement from 1996 showing a balance of 14,000 miles and asked for help getting those miles credited to her AAdvantage account following the US Airways merger with American Airlines.

I asked Weiss if she had traveled on the airline in the last 20 years. She told me that she hadn’t, but pointed out that’s irrelevant. The language on her 1996 statement reads: “Relax. Your mileage doesn’t expire. One big advantage of the USAir Frequent Traveler Program over other airlines is the fact that your miles don’t expire. The miles shown under “Current Balance” on your statement today will be available until you decide to use them, so you have plenty of time to claim your award.”

Touché.

So, I guess we’ll ask the powers that be at American Airlines if it will honor the assurances made in black and white by USAir long ago.

But you know, nothing lasts forever. USAir didn’t last, and neither did its successor, US Airways. In fact, in 1996 there were 11 major airlines in the U.S., and now we’re down to just four. The oligopoly created by a series of mergers and acquisitions has left the few remaining players with a lot of control, and folks who play by the rules and take a business at its word are bound to lose the loyalty program game.

In case you missed it, I wrote a story a few months ago about everything that’s wrong with frequent flier programs in America. And since then, very little has changed.

The Department of Transportation’s Office of Inspector General completed its audit of frequent flier programs, saying the DOT wasn’t prepared to do much but train its employees to better handle complaints about frequent flier programs. Despite having the authority to ensure fairness to air consumers, the DOT decided not to involve itself in the messy business of how travelers get miles, or in the case of DeRanieri and Weiss, how they don’t.


While most of our readers (a healthy 80 percent, thank you very much) voted that they would welcome sensible regulation of frequent flier programs, a vocal opposition made themselves known in the comments section below my article.

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Some of their observations were amusing and served to prove my points precisely. Amid a flurry of comments from airline apologists and those who hate regulation of any kind were comments from those who also dislike consumers.

Said one commenter, “Frankly, I don’t have much sympathy for someone who knows upfront that they’re playing a game and gets angry when they lose. No express promise was made, and the house came out on top.”

While I don’t think the average air traveler considers the accumulation and spending of frequent flier miles to be a “game,” I do agree that it’s a gamble and that more often than not, the house wins. Travelers with busy lives shouldn’t have to be a loyalty program expert or learn to game the system in order to benefit from what should be a simple program. When something is unnecessarily complicated by design, that’s textbook deceptive practice.

Another commenter wrote, “If people have not learned about the ins and outs of frequent flier miles programs by now, they never will. It’s a personal choice as to whether or not to participate and lots of people love them and many don’t. There is no law that says a person has to participate.”

That’s true. There’s no law at all.

Someone else wrote, “Ultimately, [the programs] are free. They cost you nothing. If you regulate them, they will go away.”

No, they’re not free, or the airlines couldn’t profit to the tune of $11 billion annually on them. Some passengers find themselves short miles for an award and purchase them, and others, like DeRanieri, modify their consumer behavior to indirectly purchase the miles that his (now) bank, Citibank, purchased in bulk. This is big business and not free by any stretch of the imagination.

And that’s to say nothing of the compromises passengers have to make when they redeem miles — taking itineraries less convenient or direct in order to use miles. With each transaction, someone is paying, and someone is benefiting. The programs are too profitable to go away, and regulation would introduce a scintilla of fairness to the way they are administered.

One clever commenter explained at length how people can game the system through manufactured spending. He summarized some of the expert strategies employed, which undermine the airline’s business while reaping benefits all the same. Another commenter followed by saying that he has used three million miles in his lifetime, and they were just like a gift that the airline didn’t have to give.

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Then, like a cherry on the cake, my manufactured spending friend responded, “No … miles have a cost. In many cases if you really look into it you can see what I mean. For example, the fine print will tell you that if you opt to collect miles for renting a car, there’s a tiny fee for that. If you get certain tickets that do not give miles on air travel, they are always cheaper than ones that do give miles. If you get a loan or bank account that gives miles, its interest rate is lower. If you book say, the Westin Grand Cayman with Starwood points, they will charge you $45 a day in resort fees. If you paid cash there is no such fee. And so on. Miles pass the cost onto somebody and often times it is you and me.”

So perhaps we shouldn’t hold our breath for any major changes in the way airlines treat us when we try to participate in the programs that generate $11 billion in profit annually for the industry. All we can control is our own thoughts and behavior, so let’s start thinking smarter about how we spend our time and money, and whether frequent flier programs are really worth trying to figure out.

I don’t accrue miles when I fly, and in the four times I traveled this summer, I flew on American, Delta, Southwest and United, respectively. I actually redeemed miles for my flight on American, but it didn’t feel like a gift when I had to pay $75 per passenger to use the miles. My choice of airline is above all based on the airline’s safety record, followed by a combination of schedule and price.

If you’re a business traveler flying every week on the same airline, undoubtedly there are program benefits awaiting you. If you fly less frequently, there is far less appeal to accumulating points, and less chance of reasonably being able to redeem the rewards you want. Unethical and borderline unlawful activity to hack the system is shameful. Don’t jump through the hoops — you’re just lining someone else’s pockets. And let’s face it, it’s just not worth it.

Put your own needs first and don’t play the loyalty program games. You can thank me later.

Would you complain to the DOT about a frequent flier program problem?

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  • Rebecca

    I’m more than a little surprised on 2 fronts here. First of all, it’s very very stupid to put $50k in a regular checking account. I worked at the bank, in the fraud department. It’s not smart. (As a side note, I recently switched my primary checking and savings accounts to Fidelity and I highly recommend it. They don’t have fees for anything, including ATMs. If you invest money, it makes everything show up in one place. And no, I don’t work for and have never worked for them. I just closed my Wells Fargo accounts and did some research. I already had 1 account there, and I was surprised what they offered.)

    Second, who keeps things from 1996? Granted I was 15, but where do these people with all this old paperwork keep it? You don’t even need to keep tax returns that old. I’m more just curious where in the world you would keep so much paperwork if you have something for a company you haven’t used in 20 years. All of my important paperwork fits in a few file folders. Do some people just have a room filled entirely with papers? I grew up with a closet hoarder, so I throw away pretty much anything I haven’t used in six months. The only rare exceptions are things like a heavy winter coat and a can of paint with the leftover that matches the current wall color.

  • Charles Owen

    “I don’t accrue miles when I fly”? This doesn’t fit with “I actually redeemed miles for my flight on American”. I fail to understand why anyone would not accrue the miles. It costs you nothing. You add the number to your ticket when you book. That’s it. We’ve made multiple trips over the years on miles and, yes, they charge a fee to use the miles but it’s still a lot less than the cost of a ticket. But, my daughter is flown maybe 3 times in the last five years. She isn’t even close to earning enough for a free ticket. So, she redeems her miles for magazines. We have a variety of major magazines we receive every month. And no, there was no fee for the magazines other than the miles and we are not committed to resubscribe in any way. So, even small numbers of miles can have a benefit.

  • doug_jensen

    Someone (like me) who flies a lot paid for by my clients is sensible in accruing miles. I have millions of butt-in-seat frequent flier miles (I don’t play the games of buying things, putting money in banks, etc. for miles). I rarely do personal travel, but recently needed to take a dental tourism trip to Costa Rica. I paid for the first class round trip with 100K miles, and no fee except the federal tax ($40). Frequent flier programs are not right for everyone, but neither should anyone issue blanket condemnation of them.

  • Bill

    Precisely … the same as the blanket statement that “No, they’re (frequent flier programs) not free. Yes, they actually are by every stretch of the imagination … all loyalty programs are, technically, free. I don’t pay anything extra to get Starbucks stars, I don’t pay anything extra to get Hilton Honors points, JetBlue points, Dick’s points, LL Bean points, cash back rebates on my credit cards, etc. Now, if individuals PURCHASE frequent flyer miles, that is a horse of a completely different color. If one CHOOSES to purchase something that is (normally) free, that is a personal choice. I, and many others, “earn” through all of these programs by behaving exactly as we would if these programs didn’t exist. And, ultimately, they cost me nothing … not a penny, a thought, a worry or a minute’s worth of sleep.

  • redragtopstl

    Rebecca, I admire you for being able to keep paperwork to a minimum.
    I, too, grew up with a hoarder, and I admit some of it has rubbed off on me, although I keep trying to fight it. For example, I still have too many clothes in my closets even though I retired 2 years ago. Time to do another closet purge and give some of that stuff away to someone who could use it…

    We did have tax returns as far back as 1978, in boxes and bags in our basement (we’ve moved at least twice since that date, and they’ve moved with us). They were kept mostly because hubby wanted to keep the records and schedules in relation to a rental property we own (depreciation, etc.). But we recently went through all that paperwork and wrote down the info we needed in case we sell it, and it’ll be put on a spreadsheet soon. We’ve now started a “to be shredded” box with all that old paper, destined for the next shredding event @ our bank in a few weeks, along with whatever else we can find to get rid of!

  • 42NYC

    I still don’t understand the hate of ff programs here. I have a ff account with every airline i’ve ever flown. When I fly, I book the airline that makes the most sense (sometimes it’s simply the lowest fare, other times I take schedule into consideration, or customer service or the connecting airport, etc…. sometimes its just based on what my company or client books me on).

    Given my travel patterns I’d say 75% of my domestic travel winds up on Delta. 20% on American and the rest on Jetblue. Haven’t flow UA or SW in years.

    So yes, I get an occasional first class upgrade on Delta and I don’t pay bag fees. I’ll even get a free flight every now and again and maybe once every several years on AA. While I enjoyed a recent free business class trip to Brazil on Delta, I still booked Jetblue for a recent trip to Vegas for no other reason than they were $120 cheaper.

    I don’t see how i’m losing or being taking advantage of.

  • disqus_wK5MCy17IP

    In this case, no, I wouldn’t report AA. But, there probably have been instances where companies have advertised a promotion for some free item or loyalty points that they either had no intention of fulfilling or made very minimal efforts to fulfill. Generally I’d say vote with your wallet and take your business elsewhere, but if it’s a case of a major advertising campaign, then I think there should be some oversight.

  • Byron Cooper

    This web site has a blanket anti-frequent flier bias. As a consumer, it can be beneficial to use the miles, especially for business or first class tickets. The frequent flier status also helps document things like Trusted Traveler numbers, if you have one. My wife and I flew to Seattle from DC. We do not have any status with Alaska Airlines. We chose them over United where we do have miles and status because Alaska flies out of DCA as opposed to Dulles and had much better flight times. I think frequent flier miles are just one factor to consider. The OP who put $50,000 in a checking account was supposed to get about $500 in frequent flier mile equivalents. Depending on how long she had to keep the money there, the “interest” in terms of FF miles may be more than what you get in a money market now a days. She probably would not have to pay taxes on it either.

  • Jessica Monsell

    The miles used for my flights on American came from purchases made with an AAdvantage credit card with an annual fee. That’s the only flight I’ve made this year on American, and you don’t earn miles on award travel.

  • Extramail

    My mother has every single check she has ever written and every single card or letter that was written to her stored in boxes in her basement. Must be her generation.

    On topic, i think of frequent flyer programs as a rebate program. My husband flies for business so might as well be signed up for their programs. I personally have not paid cash out of my pocket for a plane ticket in at least ten years but then I only fly a couple of times a year. He flies, collects the miles and I use them on a free ticket. Really quite simple.

  • John McDonald

    many people see a few 000’s on the number of frequent flyer points/miles & think they have a lot, when they don’t & then they get disappointed when they can’t get a business class seat at the time they want, on the busiest day of the year, booking 24 hours out. Why do people with a few hundred thousand points/miles think the airlines think they are special ? Used to work for a large travel wholesaler & many of our clients had a few million Qantas frequent flyer points. Good old Qantas, the airline that lets the public believe they never crash(all because of that Rainman movie). BWT Qantas has had 19 fatal crashes killing 35 people, far less than Air New Zealand & fare less than most major U.S. carriers.
    Anyway, for around 100,000 Qantas ff pts + about $700 in dodgy taxes & fuel surcharges(fuel is still very cheap) you can get a return ticket from SYD to LAX, but lately, you could get a return ticket, for not much more than the $700, without any points required. In Australia, Virgin is finally making some inroads into Qantas, who were given billions of dollars by the Australian govt.

  • MarkKelling

    Oh, but you do pay extra for every single point/mile/punch card entry. It is baked into the cost you pay when you buy anything from that company. So you might as well collect them because they are already paid for.

  • MarkKelling

    I completely agree that frequent flyer programs are bad, but only when people do crazy things to get their miles — especially when it is not enough miles to really get anything for them! Otherwise, I see absolutely nothing wrong with belonging to any of the multitude of frequent customer programs offered by the airlines, rental car companies, grocery stores, and so on.

    When I got my Continental Airlines credit card (way back last century), I got 100,000 miles to go along with it. What did I have to do to get those miles? Apply for and be accepted for the credit card. That made sense. Putting $50K in a standard checking account? Ridiculous. I would never do that even if I had the cash laying around.

    And for someone who doesn’t accrue airline miles, how were those available to you to book your flights? And how much would the flights have cost over the $75 you spent per person? If they were more than $75, you “played” the airline miles game and won.

  • Mel65

    “I actually redeemed miles for my flight on American, but it didn’t feel like a gift when I had to pay $75 per passenger to use the miles. ” Um…what would the ticket have cost if paid in full? I don’t think the airlines characterize them as gift tickets. But a savings of conceivably hundreds of dollars sounds pretty nice to me. I just sent my husband and son to Hawaii for two weeks using United miles. Not my favorite airline but we get stuck with them a lot for biz travel so we got their card. It wasn’t a crappy itinerary–it was non-stop and w booked with only 2.5 weeks notice. We paid $70 per in taxes and my husband was offered a first class upgrade at check in for something like $300. Two adults to Hawaii with one in first class for a few hundred dollars. It may not be a gift but I’ll take it.

  • Mel65

    Exactly! I have memberships in all the airline, hotel, and rental programs. We’ve used a dozen free nights, flown to Hawaii several tines, and are getting a free rental next week to drive 1000 miles to visit family in a more comfy vehicle for my 6’2 son than my Mazda:)

  • Rebecca

    I’m 100% with you about rewards programs. The trick is that it will benefit you if it’s just a consequence of something you would do anyways. If you’re going out of your way to earn miles/points, then it can actually cost you. Not that the first OP here didn’t “deserve” his bonus miles, but moving $50k to a new account, spending on a new credit card, now that’s just playing a game. If you play the game, you can always lose.

    Your example is exactly how these programs should be used. My husband also flies for business, including to Europe a few times a year. So his next trip to Europe, I cashed in and am flying with him. Since the company provides his hotel anyways, it’s an extremely cheap vacation, to somewhere that we can knock off a bucket list. We’re only paying for a few extra hotel nights out of pocket.

    I participate in a diapers program that I have really gotten some great stuff. I always buy the same brand, not because of the points, but because I genuinely like the wipes better and they almost never leak. With 2 little kids – my older one finished potty training a couple months ago – I have gotten some great, high quality toys worth over $100 (so far) and even a gift card. You don’t even pay for shipping. And I have another year of diapers and have a very significant amount of points just sitting there. There’s a toy that retails for about $150 that I’m waiting to cash in, I’ll have enough next year.

  • Rebecca

    My brother and I both throw everything away! I have found the best way to do it is to give yourself a time limit. This especially works with clothes. I donated a bunch of work clothes a couple years ago when I stopped working, and the domestic violence shelters really appreciate work clothes. Many of the women don’t have outfits they can wear to interviews. I definitely would recommend that over a place like goodwill.

  • Bill

    So, pray tell, how does my credit card, which pays me back at the rate of 1.5% (for one card) and 2% (for the other card) manage to get to every retailer where I used those cards just before me so that they can mark everything by that 1.5% or 2%. What if, horrors, they (the credit card companies) think I’m going to use the 1.5% card and I surprise them by using the 2% card? I pay not a single penny for the cards … ever. So, no extra charges baked, sautéed, fried or sweated in at all … but thank you for playing.

  • marathon man

    no comment

  • Michael Anthony

    Hawaii is a good example of the pros and cons of FF programs. It is the most frequent destination for use of miles, which is a pro, when you can get a ticket. But, it also keeps fares higher, with sales on tickets rare and when it’s on sale, the discount is small. Meanwhile, it’s also become the destination with the biggest percentage increase in amount of miles needed for regular coach. In the early 90s, a regular flier could bank enough miles to fly to Honolulu several times a year, in first class. I went 4 times a year, always in FC and always on miles. And I did that for almost 10 years. Now, it’s laughable how many miles it takes and if you rather just buy a ticket, you’d wait a long time for any reasonable sale.

  • Carol Molloy

    I think you do a disservice to people when you criticize the decision to deposit funds into a checking account, Demand Deposit Accounts come with great variety today, and there is nothing inherently risky about them. Depending on the individual’s total deposits at the bank, the funds are also insured by the Federal Deposit Insurance Corp.

    There are indeed alternatives that are more appealing than others, depending on one’s objectives.

    I will disclose that I am a regulatory compliance specialist with a large bank, with nearly forty years experience.

  • just me

    Jessica I hate to correct you again. USAir only changed name to US Airways (to match British Airways name), and now it changed name to American Airlines. It is only American Airlines that went bankrupt, and this is why it bought by US Airways. The US Airways promis “miles never expire” was never expunged by any legal process.
    This is why when you complain about you never get any answer – ANY!

  • just me

    Stop cheating yourself Bill.

  • Bill

    no kidding … but, unless we are going to revert to a completely cash society, everything you have said is irrelevant. and using debit or non-rewards cards also incur a fee, albeit a slightly smaller fee from most card processors (except square, who charges a flat fee regardless). ultimately, even if everyone on the planet stopped using credit cards (not terribly likely), the prices wouldn’t be lowered anyway due to overwhelming corporate greed.

    and, of course, nothing is free … if things were free, we wouldn’t have to work at all … we could be like all the obese chair-riders in Wall•e … wouldn’t that be nice.

    i bet that we could get retailers to lower their prices even more (yeah, right) if we completely did away with retail theft. but, again, not going to happen because (see above) … greed.

    as 42nyc and others keep pointing out … the completely irrational hatred of any kind of loyalty program is completely baffling. pricing is what pricing is and billions of people aren’t going to change their habits so we can all save 1% on retail prices. as those of us who use loyalty/frequent flyer/etc programs have already figured out, we’re using the existing systems to our best advantage … we’ll wait for the rest of you to catch up.

  • Bill

    not quite sure what you mean … probably just troll bait … and i fell for it … silly me

  • ctporter

    The frequent customer programs should not be denigrated just for being a frequent customer program. It is HOW people use them that is bad. People should be made aware of why NOT to purchase miles or points to get those perks, and instead why they should earn them through normal actions and take the extras for normal behaviors. Helping people understand how to sensibly accrue miles/points should be encouraged, it helps with all the associated costs we see nowdays. Going to bat for people that had a chance to “read the terms” but decided to ignore them is both a good and bad thing. Helping people that followed the rules and yet still did not get satisfaction is absolutely a good thing. I get more benifit out of the rules are rules crowd because I set my expections realistically and know what I need to comply with to achieve a perk or benifit, or refund.

  • MarkKelling

    That cash you receive is paid by each and every merchant to the credit card issuer. It is called interchange and is the fee every merchant pays on every transaction that is charged by every customer. If the merchants are not factoring in that cost for the prices they choose to charge, they will lose money. So not only do you and every other customer who uses a credit card pay more for their purchases, so does every cash paying customer.

    There aint’s no such thing as a free lunch. :-)

  • joycexyz

    I hate paper! Goes along with my hatred of clutter. I keep most records in digital files (backed up to a cloud account and to an external hard drive). I have a single file drawer for the other stuff, and purge it regularly. My accountant has the tax records. Yet I know people who keep receipts and cancelled checks forever! And they were very upset when the banks began truncating checks. Seriously, how many times has anyone been asked to provide a copy of a check??? And, in that rare instance, everything is available online, or just ask the bank.

  • joycexyz

    Suggestion: try watching the hoarder shows. You’ll be horrified and then inspired to get rid of stuff!

  • joycexyz

    I’m with you! If I’m buying an airline ticket, merchandise from LLBean, staying at a Hilton, etc., why wouldn’t I collect the points? They’re free, no strings attached. But I never let it become an obsession–that’s never free.

  • joycexyz

    You’re right, of course, but can we go back to an all cash economy?

  • Bill

    exactly … glad to know i’m not the only “stupid” one here (snark, snark) ;)

  • MarkKelling

    Probably not. Most of the economy is based on the promise to pay eventually. There isn’t enough cash in the world for everyone to pay for everything with cash.

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