The land of the free, home of credit card rewards
Moving across the pond can be an exciting and daunting experience for any American used to baseball games, poured drinks not measured in milliliters, and driving on the correct side of the road. However, some of you may not be surprised by what shocked me the most upon moving to the UK: the lack of quality credit card signup offers available to the UK consumer.
For those of you schvitzing June away along the east coast or midwest, take heart (or plan a vacation) as you live in the land of the credit card reward offer. No other country on earth offers 100,000 American AAdvantage miles, the equivalent of a $7,000+ business class ticket, just for opening a credit card. Below are just a few examples of the discrepancies between opening a credit card in the US vs. the UK:
US:
British Airways: Up to 100,000 Avios, after $10,000 spend
American Airlines: Up to 100,000 AAdvantage miles, after $10,000 spend
Virgin Atlantic: Up to 20,000 miles, and up to 15,000 bonus miles each year
United Airlines: 30,000 miles, after $1,000 spend
Delta Airlines :35,000 miles, after $1,000 spend
UK:
British Airways: 18,000 Avios, after £3,00 spend
American Airlines: 15,000 AAdvantage miles, after £1,500 spend
Virgin Atlantic: 30,000 miles, after £3,000 spend
United Airlines: No sign up mileage bonus
Delta Airlines: No signup mileage bonus
And it’s not like the UK is alone in a lack of great credit card signup bonuses. The same came be said of much of the rest of the world. Why is it that the American consumer gets such a good deal, whereas other countries do not? Below are a few UK centered thoughts:
1. As TPG contributor Jason Steele said correctly, “Perhaps we are living in the golden age of credit card rewards.” His table summarizing these signup bonuses can be found here: http://thepointsguy.com/2014/06/getting-the-most-rewards-for-your-minimum-spend/
2. In the UK, as in most countries, there are not a large number of hub and spoke carriers to choose from. The US has been comparatively unusual in that United, American, Delta, Southwest, Jetblue, Continental, US Airways (soon), and Northwest all vied for customer loyalty. While this has changed in the last few years with mergers, compare that to the UK with British Airways, Virgin Atlantic, EasyJet, and RyanAir. With EasyJet and RyanAir not participating in credit card rewards at all (or even in frequent flyer programs!), British Airways and Virgin Atlantic can offer measly signup bonuses to the UK customer. The lack of competition means less rewards for the consumer. If you don’t believe this, why does Virgin Atlantic, the underdog carrier in London, offer 30,000 miles for their credit card, while British Airways offers 18,000?
3. People spend more money and therefore more debt on US credit cards. This makes the US consumer more valuable to banks, which buy the miles from the airlines and issue the credit cards to customers. While this free flight may seem great in the short term, in the long term, the banks are essentially betting you will spend more than you save and pay them interest, recouping their expense of buying miles from the airlines.
4. The average US consumer holds 3.7 credit cards, while most UK consumers use a debit card, and do not necessarily view a credit card as something to be used all the time like an American would. It’s a subtle cultural difference, but one that makes a huge difference for the banks, since debit transactions are much less profitable for them. After all, you can’t charge daily interest or a huge annual fee on money coming out of someone’s checking account unless they overdraft.
Overall, there is no one set reason why the US is lucky and enjoying such lucrative credit card sign up bonuses. I say get them while you can! The mergers of Continental, US Airways, and Northwest in the US means your miles are worth less and more miles chase each other for similar rewards. The devaluations that many reward programs have undergone reflect this.
For me, the main question should be is the US moving towards a model more like the UK, where the discount carriers do not bother with reward travel offers and the few large airlines offer smaller and smaller sign up bonuses? If, for example, the IRS taxes reward points as they have discussed in the past, this could happen. If consumers get fed up with never being able to redeem reward points, will the credit card companies stop dangling such large amounts in front of Americans? Time will tell, but for now, if you have the credit, sign up for a credit card and get traveling!
