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Southwest Rapid Rewards points used to be worth 1.69 cents each. Starting March 31, 2014, they will be worth about 1.44 cents each.
What is the exact devaluation?
Among the Six Types of Frequent Flyer Miles, Southwest has a fixed-value program. For every dollar of the “Wanna Get Away?” base fare, you have to spend 60 Rapid Rewards for an award ticket.
So a $220 Southwest ticket with a $200 base fare would be 12,000 Rapid Rewards + $5 in taxes as an award. Here’s How to Book a Southwest Award.
For bookings made on or after March 31, 2014, the redemption rate will be 70 Rapid Rewards per dollar of base fare according to The Points Guy. That $200 base fare goes from being a 12,000 point award to 14,000 points.
Interestingly, Southwest is not just devaluing its existing points, which most of us get from credit cards. It is also devaluing flying Southwest.
You currently earn 6 points per dollar spent on Southwest “Wanna Get Away?” fares and then need 60 points per dollar to redeem those points. That works out to earning a 10% rebate on your Southwest flights through the Rapid Rewards loyalty program.
After March 31, 2014, you will still earn 6 points per dollar but need 70 points per dollar to redeem. That cuts the rebate from flying to 8.6%. I can understand a devaluation of credit card points even if I don’t like it, but I can’t see why Southwest would want to cut the rebate percentage for its flyers. I’m surprised the earning rate is not being bumped to 7 Rapid Rewards per dollar spent on Southwest base fares to keep the rebate percentage of flying constant at 10%.
This is bad news for those of us holding Rapid Rewards and Ultimate Rewards, since they transfer 1:1 to Southwest. But the bad news illustrates why holding transferable points is better than holding points from a single airline. While Rapid Rewards used past March 31, 2014 were cut in value by 17%, Ultimate Rewards used after that date have most of their uses (like transfers to United, Hyatt, or British Airways) unaffected.
This illustrates one of the main points I made in Which Miles Should You Stockpile?
How does this devaluation affect you? How big is your stash of Southwest points? Was this enough notice?
Just getting started in the world of points and miles? The Chase Sapphire Preferred is the best card for you to start with.
With a bonus of 60,000 points after $4,000 spend in the first 3 months, 5x points on travel booked through the Chase Travel℠ and 3x points on restaurants, streaming services, and online groceries (excluding Target, Walmart, and wholesale clubs), this card truly cannot be beat for getting started!
Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are the author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.
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I don’t like the devaluation, but I do think that Southwest is giving me as a customer ample notice.
I can live with the change. I still like them and their customer friendly policies in general…
I do laud the notice.
I don’t like the devaluation, but I do think that Southwest is giving me as a customer ample notice.
I can live with the change. I still like them and their customer friendly policies in general…
I do laud the notice.
One small clarification… you CAN USE the miles after March 31 and not lose value. You just have to make sure you BOOK before March 31 to avoid the devaluation.
Correct. Thanks. That means you should be able to fly through late 2014 at 60 points per dollar.
One small clarification… you CAN USE the miles after March 31 and not lose value. You just have to make sure you BOOK before March 31 to avoid the devaluation.
Correct. Thanks. That means you should be able to fly through late 2014 at 60 points per dollar.
Scott, I remember you had an article about transferring SW points to AirTrans credit and transfer it back to SW credit. Since the merger will complete pretty soon and Airtrans will probably go away, plus the deval, do you think it’s better to just transfer most of them to SW credit? Flying to Mexico and Caribbean RT will still take 19200 points right?
I did this earlier this year but don’t recommend it. For me, it seems like only 5% of routes are able to be used with SWA credits. For that reason, I would not recommend converting SWA points into credits.
Scott, I remember you had an article about transferring SW points to AirTrans credit and transfer it back to SW credit. Since the merger will complete pretty soon and Airtrans will probably go away, plus the deval, do you think it’s better to just transfer most of them to SW credit? Flying to Mexico and Caribbean RT will still take 19200 points right?
I did this earlier this year but don’t recommend it. For me, it seems like only 5% of routes are able to be used with SWA credits. For that reason, I would not recommend converting SWA points into credits.
Thanks for the advice, Grant. I noticed there are fewer availability if using credit. Probably I will only do the conversion once I make sure there’s availability for my planned itinerary.
I wouldn’t transfer speculatively. I would ensure that the routes I want are available before transferring to credits.
Massively Devalues? That seems a bit unnecessary hysterics. 15% raise in price isn’t massive in comparison to many other loyalty programs recent devaluations.
It is pretty massive when all they’re doing is reaching into our existing points banks and effectively taking 15% (actually 17%) of them away from us. In my case, they’re stealing nearly 51,000 points. And that’s before I earn another point. Massive enough?
The thing about revenue-based systems like Rapid Rewards is that they should be immune from this type of devaluation. As costs go up and fares go up, the number of points needed to book travel goes up equally. That said, their statement that “in order to continue providing these benefits, we must make changes to the Rapid Rewards Program from time to time” is bunk. This is all about avarice and greed. Two words I never thought would be used to describe Southwest Airlines.
No, not really. 50k miles is a single credit card application for just about everybody and a single month’s credit card spending for a lot of people… plus you’re getting nearly 6 months notice of the change–and therefore well over a year to use them.
Hmm… So you’re okay with them taking away every point (and more) from your most recent card opening, completely eliminiating the benefit you received? A benefit that, according to Chase’s terms and conditions, you are only entitled to receive once?
Well, I (and many others) am not.
And while I spend (or, after this debacle, used to spend) a *lot* on my Chase Southwest cards, and I never came close to 50,000 points in a single month.
To paraphrase Forrest, Forrest Gump, “Massive is as massive does.” And in practice, this is a massive devaluation — apologists aside.
I think it’s time to look closer at JetBlue. They have a similar award and earning structure and as of recently, their miles no longer have an expiration date. On some routes, they have a better selection of flights, or times, and I think the seats are a bit more comfortable. There’s not much of a credit card bonus, but you can use Amex MR points, which can be earned in bulk pretty easily.
They have much more comfortable seats with 3 extra inches of leg room, a personal TV, and live satellite TV (for a fee).
While the notice period is fair, what gets me is how soon they devalued points in their new program. It has only been a couple of years since they went with a revenue-based rewards system. Now, after just two years, they decided to reduce the value of a program that they had spent a lot of time devising?!? That really stinks, and is beneath an airline which in many ways strives to be fair to its customers.
It may well change the equation on my next round of credit card applications. I had been looking at this one closely, and will still consider it, but it may have slipped a notch or two. The bigger decision is what to do with my AirTran credits.
The free baggage and free cancellations still make this a decent program, especially for flights you want to book speculatively.
An implied rebate of up to 80% on Biz Select fares via stacked 2x promos was the harbinger of bad news for sure. So the whole idea of buying full-fare because the high rebate is dead since you can’t assume you’re banking the points @ 1.6cpm forever.
I don’t like fixed value points as they don’t let you exploit sweet spots.
These devaluations continue to make UR/MR/SPG more valuable.
In two years, I betcha they’ll drop to 50 points/dollar – just too convenient a number.
@Paul, Don’t you mean 100 points? They’re headed the other way…
While I certainly don’t like devaluations either, I don’t understand why you were surprised that the miles on base fares are not being bumped to 7%. That would be the equivalent of a region-based program increasing the number of miles awarded for miles flown in proportion to the increase in the award price, something that clearly does not happen. Indeed, with reduced minimum miles per segment and some lower fare classes earning fewer miles, the trend is the other way.
However, what is more disappointing is the “double devaluation”:
In a region-based program, periodic increases in the award chart should be expected as a response to inflation. For example, if a ticket that cost $100 or 10,000 miles in period A rises to $120 in period B, then the mileage cost should also rise by 20% to 12,000 to keep the value of the miles constant in dollar terms (here, 1 cent per mile). Any percentage increase in mileage required above the percentage increase in ticket cost is the actual devaluation.
However, with a “fixed” value award program, there is already natural inflation built into the program. A ticket that cost $100 or 6000 Southwest miles in period A would automatically cost 7200 Southwest points ($120*60) in period B. However, after the Southwest devaluation, it would instead cost 8,400 (120*70). Thus, the 15% devaluation in Southwest miles represents true devaluation, above and beyond natural inflation.
Think I’ll use up my SWA points for that expensive trip at Christmas and cancel my SWA credit card–with the annual fee, no longer worth it to me. Nice pairing of posts (devaluation plus how to fly free at Christmas) in today’s email!
Situations like this devaluation do show that stocking up transferable points is better than storing massive amounts of points in any single frequent flyer program. However, the drawback with stocking up transferable points and keeping them in the transferable points program is that there’s a risk that Chase or Amex might shut down your account and confiscate all your points, if they have any reason to suspect suspicious activity. If you transfer the points to an airline soon after earning them, then there is no such risk.
Southwest Companion Pass question (sorry if this should be elsewhere) – I have the Southwest card for 50,000 miles now (just received last week). If I apply for & receive the Southwest Business card and get 50,000 miles for that, would I qualify to receive a Companion Pass (after getting an additional 10,000 miles for a grand total of 110,000 miles) or is it per card (meaning I’d have to earn enough miles to get at least one card up to 110,000)? Also, considering it’s been two weeks since I applied for the personal SW card, would it be unwise to apply for the business card so soon or should I wait the requisite 91 days (assuming the 50,000 offer is still available)? Thanks!
110k is per account not card, so the common way to get the CP is two 50k offers and $10k total spending on the two cards. If you can time it just right, meet the spending requirements in January, so you get the 110k points in 2014 and have the CP through 2015.
I would wait until the 30 day mark since the last app to apply if I were you.
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It’s a 16.67% devaluation on top of the 20% devaluation when they switched to points/$.
That’s a total of 33% devaluation since they changed the program.
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