The coronavirus has caused a serious impact on nearly every facet of our lives. In particular, the travel/hospitality industry has been hit hard by the crisis. It is estimated that there will be a $500 billion decline in travel, resulting in a $1.2 trillion loss in economic output. These financial losses are putting large travel brands on the brink of bankruptcy.
Though the situation seems unique, a similar economic downturn in 2008 almost put companies like Delta Air Lines out of business. In the case of Delta, American Express came to their rescue by purchasing $1 billion worth of Delta SkyMiles to use as part of their credit card offerings.
As we wait to see whether airlines survive the current downturn, you may be wondering: What happens to all those miles if the airline goes bankrupt? For customers of these brands with heaps of travel rewards in accounts, it can be concerning not knowing what may happen to those rewards.
In this article, we will detail what to do with your points and miles to ensure that your rewards are protected during these unprecedented times.
What to do with your points and miles during the coronavirus
Because of COVID-19, your points and miles are most likely not being redeemed. While they are sitting, there are a few things you can do to protect them.
Keep an eye on them. Just like your checking account balance, your travel rewards should be something you check regularly. There are many cases of people hacking into consumers’ rewards accounts, grabbing the points and either redeeming them or reselling them on the dark web. If this happens to you, be sure to contact customer service immediately.
Some rewards programs are less likely to refund your points than others, especially if the points were stolen months prior to you contacting them. Unfortunately, the program may offer no recourse to get your rewards back, so it is also a good idea to maintain strong passwords on your accounts.
Re-strategize for the future. Travel will resume at some point, so now is the perfect time to strategize for your next adventure. Create a list or spreadsheet of the rewards you currently have, and the estimated points needed for your next trip.
Maybe you need to switch from earning airline miles to hotel points, or vice versa. Or it may be time to sign up for a new travel rewards credit card to earn a sign-up bonus.
The key to a points strategy is “reverse engineering.” Picture the trip you want, and work backward to figure out what points and miles you need.
Get rid of brand-specific points quickly, but efficiently
While the Sept. 11 terrorist attacks and the financial collapse of 2008 left the travel industry in shambles, COVID-19 is looking to surpass both. Airlines around the world have ceased operations and are filing for bankruptcy. With these bankruptcies, consumers’ rewards are in jeopardy of disappearing. And as airlines attempt to save their businesses, consumers are left with little information about the status of their rewards.
If you have just a few thousand points with an airline program, such as Delta SkyMiles or United MileagePlus, don’t stress too much. However, if you have a substantial amount of points with a specific airline, it may be in your best interest to use those points for other redemptions.
Let’s say you are sitting on 100,000 Delta SkyMiles right now. These airline points are worth an estimated $1,400. While it is unlikely that Delta will go bankrupt and not come back, it’s risky to leave such a valuable allotment of miles in limbo.
In this case, you should evaluate the likelihood of the airline going under. If the likelihood is strong, begin researching alternative ways to redeem your rewards. With Delta SkyMiles, you can use your rewards toward:
- SkyMiles Experiences
- SkyClub membership
- Rental cars
- Hotel rooms
While many of these redemptions are far below the value of Delta SkyMiles, it is better than potentially losing the points altogether. Of these options, purchasing a SkyClub membership will be your best redemption at 1 cent per point. Keep in mind that you can have a complimentary Delta SkyClub membership through a travel rewards credit card, such as the Delta SkyMiles Reserve American Express Card or The Platinum Card from American Express.
See if your status is extended
If you are a frequent traveler who has status with either a hotel or airline, chances are your status has been extended. Nearly every large hospitality brand has released the details for their elite members about keeping their status.
|Brand||Details of holding/earning status||Link|
|Alaska Airlines||Extended through Dec. 31, 2021||https://blog.alaskaair.com/coronavirus/frequently-asked-questions/|
|American Airlines||Extended through Jan. 31, 2022||http://news.aa.com/news/news-details/2020/American-Airlines-Thanks-its-Frequent-Fliers-with-Extended-Elite-Status-and-Other-Rewards-OPS-DIS-04/default.aspx|
|Delta||Any status earned for 2020 will be extended for the 2021 Medallion year, which ends Jan. 31, 2022||https://news.delta.com/delta-extends-medallion-status-club-memberships-and-more-support-skymiles-members-future-travel|
|Hawaiian Airlines||Elite qualifications will be reduced to qualify for 2021||https://www.hawaiianairlines.com/hawaiianmiles2/program-updates|
|JetBlue||No announcements made yet||https://www.jetblue.com/travel-alerts|
|Southwest||Status extended through June 30, 2021||https://www.southwest.com/rrcoronavirusupdates/|
|United||Status extended through Jan. 31, 2022||https://hub.united.com/united-mileageplus-premier-status-extension-2645643749.html|
|Hilton||Status extended to March 31, 2021 (those with status in 2019) or March 31, 2022 (those with status in 2020)||https://www.hilton.com/en/corporate/coronavirus/|
|Hyatt||Status extended through Feb. 28, 2022||https://help.hyatt.com/en/faqs/world-of-hyatt/covid-19.html|
|IHG||Status extended through January 2022||https://www.ihg.com/content/us/en/customer-care/travel-advisory|
|Marriott||Status extended through February 2022||https://marriott-re-2019ncovc.com/|
What to do with your travel rewards credit cards during the pandemic
In addition to your rewards, you should decide what to do with the travel rewards credit cards you currently have in your wallet. While traveling is on hold, your travel credit cards are still financial tools to keep track of.
From credit card theft to cards being shut down for inactivity, plenty can happen to your credit cards while they aren’t being actively used. Here are a few tips on handling your cards:
Keep an eye on your credit limits
In difficult economic times, lenders become stricter on their lending practices. One of their practices is reducing credit limits for personal and business credit cards — and without having to inform you. A reduced credit limit may negatively impact your credit score, since it can increase your rate of credit utilization — a major factor in credit scoring.
Let’s say you have $30,000 in credit issued to you from multiple credit card issuers, and you’re carrying $5,000 in credit card debt. You are currently using 16% of the credit issued to you, which isn’t bad. However, if a credit card issuer reduces the limit on one of your cards by $10,000, your credit utilization will increase to 25%. If you’re carrying a larger balance, a credit limit decrease can push you over the recommended ratio of 30%. You could even end up with a larger balance than your new credit limit. Sudden changes like this can significantly lower your credit score, which can make it harder to qualify for additional credit.
You should take inventory of your credit cards and your current credit limits. If you see a reduction in credit, be sure to give your credit card issuer a call to see why your limit was reduced.
Start accruing bank points
Sometimes referred to as “transferable points,” points awarded by bank-affiliated credit cards like the Chase Sapphire Preferred Card are much more stable than points with airlines or hotels. While banks aren’t invincible to bankruptcy, they offer a safer route to earning travel rewards.
What’s more, transferable points can also be cashed in for gift cards or statement credits. If you need to unload points from these cards, you can often redeem them for statement credits at a value of 1 cent per point.
Eliminate your high annual fee credit cards if they are going unused
High annual fee cards, such as The Platinum Card from American Express, come with a robust list of benefits. Unfortunately, many of these benefits are closely tied to traveling, and aren’t useable during the coronavirus outbreak. Paying upward of $500 a year for benefits you can’t use isn’t the financially smartest option.
If your annual fee payment is coming up and you don’t plan on traveling, consider canceling the card or downgrading to a less expensive card. Once traveling opens up again, you can always reapply for the card. However, you most likely won’t be able to earn the sign-up bonus.
Consider switching to cash back cards
Travel credit cards can provide tremendous benefits and point-earning opportunities. However, earning points and miles may not be the best option at this time.
If the coronavirus situation has left you in a financially vulnerable position, it may be advantageous to transition to a cashback credit card. Cash back is far more flexible than travel rewards (you can possibly use your rewards to help cover your bills). Also, many of these cards don’t have an annual fee.
Cashback credit cards will either give you a flat or tiered rate of cash back for your purchases. However, each card comes with specific requirements for redeeming your cash back. So before you select a card, check its policies on how cash back can be redeemed.
What to do once you can travel again
Unfortunately, traveling looks to be far in the future. Countries are starting to announce their plans for reopening, with some saying normal tourism will not occur until 2021. Events planned toward the end of the year like Oktoberfest are also being canceled.
There are opportunities to jump on great deals toward the end of 2020 as travel brands hold on to hope. However, brands are slashing inventory and/or raising prices for travelers wanting to use points for travel. This is to encourage travelers to pay cash and/or eliminate more rewards that consumers have. In any case, you should consult with a medical professional before you book your trip and check the U.S. Department of State website for travel warnings leading up to your departure.
Once traveling opens up again, follow these tips to ensure you have a safe and enjoyable trip:
Have travel insurance
Travel insurance can be handy if things derail during your travels. With the average cost of a vacation upward of $3,000 for international trips, having travel insurance can help you recover those costs. There are a few ways to get travel insurance, such as:
- Buying travel insurance from a provider like Allianz
- Purchasing a policy from your travel providers
- Opening a travel rewards credit card with travel insurance
Apply for TSA PreCheck/Global Entry
TSA PreCheck and Global Entry are programs that enable travelers to have expedited security screenings at hundreds of airports. Not only will you save time, but you will spend less time waiting in crowded security lines, helping you avoid any illnesses going around.
Each program gives you membership for 5 years, and the application process is simple, requiring a short in-person interview to secure your membership. TSA PreCheck and Global Entry both have modest prices to enroll at $85 and $100, respectively. And many travel credit cards, such as the IHG Rewards Club Premier Credit Card, offer up to a $100 statement credit to enroll in either program.
Credit cards are financial tools that can earn great cash back or travel rewards. However, it isn’t advantageous for consumers to hold onto these rewards. Points and miles are consistently devalued as brands look for ways to ensure less risk and more profitability. And now during the outbreak of coronavirus, possible bankruptcies of travel brands make rewards even riskier for consumers.
But if you decide to keep your points or miles, be sure to use them for travel once it is safe to travel again. Rewards shouldn’t be hoarded — they should be used to create travel memories with you and your loved ones.
The information related to the Chase Sapphire Preferred Card and IHG Rewards Club Premier Credit Card has been collected by ValuePenguin and has not been reviewed or provided by the issuer of this card prior to publication. Terms apply.
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