Friday, 2 June 2023

Is American Advantage Elite Status Worth Earning With Credit Card Spending?

01 Jan

The American AAdvantage program is being radically transformed as of 2022, with the introduction of Loyalty Points. One of the interesting new opportunities here is to earn AAdvantage elite status exclusively through credit card spending. Since this opportunity is now “live,” I wanted to do some number crunching on the value proposition of that, and answer some of the most common questions. Should you put spending on your American Airlines credit card?

Credit card spending counts towards AAdvantage elite status
New as of 2022, American AAdvantage has introduced the concept of Loyalty Points, which will be the new sole metric by which you can earn AAdvantage elite status. Specifically:

AAdvantage Gold status requires 30,000 Loyalty PointsAAdvantage Platinum status requires 75,000 Loyalty PointsAAdvantage Platinum Pro status requires 125,000 Loyalty PointsAAdvantage Executive Platinum status requires 200,000 Loyalty points in the future the Loyalty Points program year will run from the beginning of March until the end of February of the following year, rather than following the traditional calendar year. However, this year you’ll have an extra two months to earn Loyalty Points, meaning that activity between January 1, 2022, and February 28, 2023, count towards status.

Long story short, you earn one Loyalty Point per dollar spent on an eligible co-branded Barclays or Citi American Airlines credit card. Welcome bonuses, spending bonuses, and other promotional bonuses, don’t count as Loyalty Points, for these purposes. In other words, if a card offers double AAdvantage miles for a flight purchase, you’d still only earn one Loyalty Point per dollar spent.

This means you could earn Gold status by spending $30,000 on a credit card, or you could earn Executive Platinum status by spending $200,000 on a credit card.

It’s also worth noting that in 2022, there are some opportunities to earn Loyalty Points at an accelerated rate with credit cards (we don’t know if these opportunities will exist beyond that):

For the Citi AAdvantage Executive Mastercard, you can earn 10,000 bonus Loyalty Points when you spend $40,000 in eligible purchases between January 1, 2022, and February 28, 2023For the AAdvantage Aviator Silver Mastercard, you can earn up to 15,000 bonus Loyalty Points based on eligible purchases between January 1, 2022, and February 28, 2023 — earn 5,000 Loyalty Points if you spend $20,000, earn an additional 5,000 Loyalty Points if you spend a total of $40,000, earn an additional 5,000 Loyalty Points if you spend a total of $50,000Credit card spending counts towards AAdvantage elite status which American Airlines credit cards earn Loyalty Points?
The following co-branded Barclays and Citi American Airlines credit cards earn one Loyalty Point per dollar spent:

Citi® / AAdvantage® Executive World Elite Mastercard® (review)Citi® / AAdvantage® Platinum Select® World Elite Mastercard® (review)American Airlines AAdvantage MileUp℠ Card (review) CitiBusiness® / AAdvantage® Platinum Select® Mastercard® (review)Citi AAdvantage Gold CardAAdvantage Aviator Silver MastercardAAdvantage Aviator Red MastercardAAdvantage Aviator Blue MastercardAAdvantage Aviator Business Mastercard top of that, the following card earns one Loyalty Point for every two dollars spent:

AAdvantage Aviator MastercardNote that cardmembers earn Loyalty Points based on statement close dates, so some spending in December 2021 potentially counts towards Loyalty Points qualification, as long as the statement closed on January 1, 2022, or later.

Many AAdvantage credit cards can help you earn status opportunity cost of American Airlines credit card spending
Some people are saying “well now a bunch of people is just going to spend $200,000 on their credit card to earn Executive Platinum status.” Perhaps that’s true, but I also don’t think the math checks out on that, at least on an ongoing basis. Based on my valuation of points:

American AAdvantage miles are worth 1.5 cents each point with the major transferable currencies are worth 1.7 cents each assuming you’re spending in a non-bonused category (which would generally have the lowest opportunity cost, compared to dining, groceries, or gas, for example):

You could be earning 1x AAdvantage miles per dollar spent, which I value at a 1.5% return you could be earning up to 2x transferable points on some other cards, which I value at a 3.4% return specifically, you could earn 2x transferable points with the following cards:

The Capital One Venture X Rewards Credit Card (review) offers 2x Venture miles per dollar spent, with no caps Capital One Venture Rewards Credit Card (review) offers 2x Venture miles per dollar spent, with no caps The Citi® Double Cash Card (review) offers up to 2x ThankYou points per dollar spent, in conjunction with the Citi Premier® Card (review)The Blue Business Plus Credit Card from American Express (review) offers 2x Membership Rewards points on the first $50,000 spent every calendar yearNow, people may have different valuations of points currencies, and that’s fine, as you can adjust the math accordingly. But by my math, the opportunity cost of using a co-branded American Airlines credit card is ~1.9%. In other words:

Spending $200,000 on an American Airlines credit card would “cost” me $3,800Is Executive Platinum status (and 200,000 Loyalty Points) worth $3,800?Keep in mind that you only receive Loyalty Choice Rewards (which include bonus redeemable miles, systemwide upgrades, etc.) if you also fly at least 30 segments on American AirlinesThere’s an opportunity cost to AAdvantage credit card spending hybrid qualification approach that could make sense
Like I said, on an ongoing basis I couldn’t imagine earning Executive Platinum status primarily through credit card spending:

For the $3,800 opportunity cost, you could just outright pay the fare difference for first-class on so many flights, rather than gambling with upgrades (and upgrades for Executive Platinum members are far from a sure bet)If you’re earning status entirely through credit card spending, one has to wonder how much value you’d actually get out of the status; it’s not worth inefficiently spending $200,000 on a credit card so that you can get better treatment on a few trips per year that being said, at the margins I think there could be value in spending money on an American Airlines credit card. For example, say you fly 30 segments per year with American Airlines anyway (which is probably the lower limit of where it’s even worth going out of your way to earning top-tier status).

If you usually book fairly inexpensive fares, you might otherwise earn 100,000 Loyalty Points. At that point, I think it could be worth putting some spending on credit cards to earn (or maintain) Executive Platinum status. If you’d otherwise fly 30 segments, at that point you also want to consider the value of Loyalty Choice Rewards, like getting up to five systemwide upgrades or up to 85,000 AAdvantage redeemable miles, which could have a significant value.

Status is more valuable if you can earn Loyalty Choice RewardsMy plan with the new Loyalty Points system
I’ve been an Executive Platinum member with American for years, and one way or another I intend to keep my status with the new program because I actually view the concept behind the changes as being positive.

I’m still deciding on my strategy as of now:

We’ll have at least 14 months to earn status in 2022, rather than the typical 12 months going forward business travel doesn’t recover anytime soon, I wouldn’t be surprised to see more promotions or lowered elite requirements, so I’m not really thinking much about status requalification yet I'll look forward to earning Loyalty Points in lower opportunity cost ways than credit card spending, like using AAdvantage Dining, AAdvantage SimplyMiles, AAdvantage eShopping, earning miles through the AAdvantage & World of Hyatt partnership, etc.I’ll see how my travel evolves over the coming year, and only if I’m way short of earning status would I consider spending a significant amount on an AAdvantage credit card for now I’m taking a “business as usual” approach towards status, and we’ll see how the program evolves over the coming 14 months.

I’ll try to avoid earning status with credit card spending earning elite status with credit card spending unfair?
I’ve seen comments from some along the lines of “not fair, now I’m going to be competing for upgrades with people who never fly American Airlines.” I have to strongly disagree with this logic, and I say that as someone who intends to maintain Executive Platinum status (most likely) without credit card spending:

If someone doesn’t actually fly American Airlines often but earns the same elite tier as you, they won’t pose much competition for upgrades, for example, say someone earns Executive Platinum status with credit card spending and flies just 20,000 miles per year on the airline; it would take 10 of these kinds of travelers to pose the same level of competition for upgrades as a single Executive Platinum member who earns the status by flying 200,000 miles per year so even if elite ranks were swelled significantly (which I personally don’t think will happen, especially for the higher tiers), the risk to upgrades clearing should be minimal if people aren’t traveling that muchBigger picture, while I know there’s some contention between those earning status through flying vs. credit card spending, it’s important to acknowledge that credit card agreements are where major US airlines make much of their profits. Even pre-coronavirus, Americans largely lost money actually flying planes and made billions in profits from credit card agreements.

Therefore it’s reasonable, if you ask me, that Americans would want to further incentivize this profitable behavior. And again, I say this as someone who doesn’t plan on earning airline status through credit card spending.

Upgrade competition from credit card spenders shouldn’t be that big American Airlines credit card spending FAQs
Since there have been lots of questions about the details of earning Loyalty Points for credit card spending, I figured I’d address some of the most common questions below. In no particular order…

Will American Airlines credit card spending count towards million miler lifetime status?
Nope. Lifetime status continues to be calculated based on the distance flown for American marketed flights, or base miles earned for travel on eligible partner marketed flights. Credit card spending doesn’t count towards that.

Won’t you also need 30 flight segments to earn elite status with Americans?
Not quite. You can qualify for any published American Airlines elite tier exclusively through credit card spending. However, if you want to qualify for Loyalty Choice Rewards (offered to Platinum Pro and Executive Platinum members), which includes perks like systemwide upgrades, you’d need to also complete 30 qualifying segments.

Will American Airlines' credit card spending help upgrade odds?
Yes, it will. Not only will you earn AAdvantage elite status with credit card spending, but within each elite tier, upgrades will be prioritized based on your rolling 12 month total of Loyalty Points. You’ll earn one Loyalty Point per dollar spent on an eligible co-branded card, so the more you spend, the higher your upgrade priority will be within your elite tier.

Will you need to use an American Airlines credit card to earn Loyalty Points for a flight?
You don’t, and this seems to cause some confusion. Regardless of which credit card you use, you can earn five Loyalty Points per dollar spent on American Airlines flights. If you have elite status, you can earn anywhere from 40-120% bonus Loyalty Points, for a total of up to 11 Loyalty Points per dollar spent on American Airlines flights. If you pay with an eligible American Airlines credit card, you can earn one additional Loyalty Point per dollar spent on American Airlines flights.

Understanding Loyalty Points can be confusingBottom line
New as of 2022, you can earn all published AAdvantage elite tiers exclusively through credit card spending. The catch is that if you’re a savvy credit card user, there’s a significant opportunity cost to spending money on American Airlines’ co-branded credit cards.

I calculate the opportunity cost of American Airlines credit card spending as being somewhere around 1.9%, though others may have different valuations. That means spending $200,000 on an American credit card would “cost” me $3,800, compared to the best options out there.

Personally, I couldn’t imagine earning AAdvantage status exclusively — or even primarily — through credit card spending, as I just can’t make sense of the math. Status isn’t that valuable, especially if you’re not flying all that much (which would presumably be the case if you’re earning status through spending).

As we start 2022, personally I’m taking a “wait and see” approach to the new AAdvantage program. I’ll only put spending on my American Airlines credit card towards the end of the year if I have no other options.

Do you plan on earning American AAdvantage Loyalty Points through credit card spending? If so, what’s your logic?

From World News including By: Ben Schlappig
Title: Is Earning American AAdvantage Elite Status With Credit Card Spending Worth It?
Sourced From:
Published Date: 1641042826


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