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Yesterday we discovered about how American is radically reworking the AAdvantage program, with the introduction of Loyalty Factors. One of many fascinating new alternatives right here is to earn AAdvantage elite standing solely by means of bank card spending. On this publish I wished to do some quantity crunching on the worth proposition of that.
Bank card spending counts in direction of AAdvantage elite standing
Beginning in 2022, American AAdvantage will probably be introducing the idea of Loyalty Factors, which would be the sole metric by which you’ll earn AAdvantage elite standing. Particularly:
- AAdvantage Gold standing would require 30,000 Loyalty Factors
- AAdvantage Platinum standing would require 75,000 Loyalty Factors
- AAdvantage Platinum Professional standing would require 125,000 Loyalty Factors
- AAdvantage Govt Platinum standing would require 200,000 Loyalty Factors
Lengthy story brief, you’ll earn one Loyalty Level per greenback spent on a co-branded Barclays or Citi American Airways bank card (discover the complete record of eligible playing cards right here). Welcome bonuses, spending bonuses, and different promotional bonuses, don’t depend as Loyalty Factors, for these functions.
This implies you may earn Gold standing by spending $30,000 on a bank card, or you may earn Govt Platinum standing by spending $200,000 on a bank card.
It’s additionally value noting that in 2022, there will probably be some alternatives to earn Loyalty Factors at an accelerated charge with bank cards (we don’t know if these alternatives will exist past that):
- For the Citi AAdvantage Govt Mastercard, you may earn 10,000 bonus Loyalty Factors if you spend $40,000 in eligible purchases between January 1, 2022, and February 28, 2023
- For the AAdvantage Aviator Silver Mastercard, you may earn as much as 15,000 bonus Loyalty Factors primarily based on eligible purchases between January 1, 2022, and February 28, 2023 — earn 5,000 Loyalty Factors in the event you spend $20,000, earn a further 5,000 Loyalty Factors in the event you spend a complete of $40,000, earn a further 5,000 Loyalty Factors in the event you spend a complete of $50,000
The chance value of American Airways bank card spending
Some persons are saying “nicely now a bunch of persons are simply going to spend $200,000 on their bank card to earn Govt Platinum standing.” Maybe that’s true, however I additionally don’t suppose the mathematics checks out on that, not less than on an ongoing foundation.
Primarily based on my valuation of factors:
Assuming you’re spending in a non-bonused class (which might usually have the bottom alternative value):
- You would be incomes 1x AAdvantage miles per greenback spent, which I worth at a 1.5% return
- You would be incomes as much as 2x transferable factors on another playing cards, which I worth at a 3.4% return
Particularly, you may earn 2x transferable factors with the next playing cards:
Now, folks could have totally different valuations of factors currencies, and that’s high-quality, you may modify the mathematics accordingly. However by my math, the chance value of utilizing a co-branded American Airways bank card is ~1.9%.
In different phrases:
- Spending $200,000 on an American Airways bank card would “value” me $3,800
- Is Govt Platinum standing (and 200,000 Loyalty Factors) value $3,800?
- Take into account that you solely obtain Loyalty Alternative Rewards (which embody bonus redeemable miles, systemwide upgrades, and so on.) in the event you additionally fly not less than 30 segments on American Airways
A hybrid qualification strategy might make sense
Like I stated, on an ongoing foundation I couldn’t think about incomes Govt Platinum standing primarily by means of bank card spending:
- For the $3,800 alternative value, you may simply outright pay the fare distinction for top quality on so many flights, somewhat than playing with upgrades (and upgrades for Govt Platinum members are removed from a positive wager)
- When you’re incomes standing fully by means of bank card spending, one has to surprise how a lot worth you’d really get out of the standing; it’s not value inefficiently spending $200,000 on a bank card so to get higher therapy on just a few journeys per yr
That being stated, on the margins I believe there could possibly be worth in spending cash on an American Airways bank card. For instance, say you fly 30 segments per yr with American Airways anyway (which might be the decrease restrict of the place it’s even value going out of your approach to earn prime tier standing).
Say you normally e book pretty cheap fares, and also you would possibly in any other case earn 100,000 Loyalty Factors. At that time I believe it could possibly be value placing some spending on bank cards to earn (or preserve) Govt Platinum standing. When you’d in any other case fly 30 segments, at that time you additionally need to take into account the worth of Loyalty Alternative Rewards, like getting as much as 5 systemwide upgrades, which might have a big worth.
My plan with the brand new Loyalty Factors system
I’ve been an Govt Platinum member with American for years, and a technique or one other I intend to maintain my standing with the brand new program, as a result of I really view the idea behind the modifications as being optimistic.
I’m nonetheless deciding on my technique as of now:
- We don’t but know if AAdvantage miles earned with Bask Financial institution, Hyatt, and Rocketmiles will depend in direction of Loyalty Factors, as that is nonetheless being labored out
- If these companions do depend, that could possibly be superior; in the event you had plenty of money sitting round, you may park $200K with Bask Financial institution, and also you’d earn 200,000 AAdvantage miles plus 200,000 Loyalty Factors yearly (I don’t take into account there to be any alternative value to that for these with the money who need to preserve cash liquid, because you’re not going to discover a larger return on a versatile financial savings account)
- If Bask Financial institution and another companions don’t depend, then I might need to show to bank cards to prime off my Loyalty Factors steadiness yearly
For now I’m taking a “wait and see” strategy, since in some methods the announcement of the brand new program appears a bit untimely, as particulars haven’t totally been ironed out but.
Beginning in 2022, you’ll have the ability to earn all printed AAdvantage elite tiers solely by means of bank card spending. The catch is, in the event you’re a savvy bank card consumer, there’s a big alternative value to spending cash on American Airways’ co-branded bank cards.
I calculate the chance value of American Airways bank card spending as being someplace round 1.9%, although others could have totally different valuations. Which means spending $200,000 on an American bank card would “value” me $3,800, in comparison with one of the best choices on the market.
Personally I couldn’t think about incomes AAdvantage standing solely — and even primarily — by means of bank card spending, as I simply can’t make sense of the mathematics. Standing isn’t that invaluable, particularly in the event you’re not flying all that a lot (which might presumably be the case in the event you’re incomes standing by means of spending).
I’m positive my ideas will evolve on this over time as we study extra about which companions qualify for Loyalty Factors incomes (particularly Bask Financial institution). However that’s the place I stand as of now…
Do you propose on incomes American AAdvantage Loyalty Factors by means of bank card spending? If that’s the case, what’s your logic?