Rising Fuel Costs Impact Airline Rewards and Travel Expenses

Travelers using airline miles and points may find their rewards less valuable this summer as rising jet fuel prices have led to higher airfares and fees. In April, airfares were 21% higher than the previous year, according to the Labor Department. This increase means that more miles or points are required to book flights, and travelers might need to pay additional cash, choose alternative destinations, or fly at less convenient times to maximize their rewards.

Airlines have shifted to dynamic pricing models, where the number of miles needed for a flight fluctuates based on demand. This approach has made it more challenging for consumers to find consistent value in their rewards. Brian Kelly, a travel and credit card rewards expert known as The Points Guy, noted that while dynamic award pricing and higher redemption rates have made it harder to find the deals travelers enjoyed a decade ago, it doesn't necessarily mean points have lost value. He emphasized the need for consumers to be more strategic in redeeming their points.

Despite these challenges, there are still opportunities to accrue airline miles. Joining an airline's frequent flyer program is a straightforward method, often free of charge. Members can earn miles through flights and partner activities, redeemable for perks like discounted flights and seat upgrades. Co-branded credit cards offered by airlines and banks also allow users to earn miles on everyday purchases. Adam Morvitz, CEO of point.me, a travel loyalty platform, highlighted that using a travel rewards card can turn everyday spending into points that can fund future trips.

To offset increased fuel costs, some U.S. airlines have raised checked baggage fees. United Airlines increased the first checked bag fee from $40 to $50, while Delta Air Lines raised it from $35 to $45. However, customers in higher tiers of loyalty programs or those holding specific airline credit cards may still check a bag for free.

Financial institutions like American Express, Chase Bank, and CitiBank offer travel credit cards that provide points with purchases, often including perks such as airport lounge access and travel insurance. Morvitz recommends flexible points cards over airline-specific options for beginners, as they can be transferred across loyalty programs and offer more redemption options. He advises consumers to match a card to their actual spending habits and consider whether annual fees are justified by the benefits they'll use.

Many banks are promoting sizable sign-up bonuses, offering 100,000 miles or more to new customers who qualify and meet spending requirements within a specific period. Kelly mentioned that these bonuses make it a good time to get one of these cards, potentially making trips more affordable for those needing extra points. Morvitz added that sign-up offers can be among the most valuable features of rewards cards, sometimes worth more than $1,000 in travel, but consumers should carefully track minimum spending requirements to qualify.

It's crucial to pay off credit card balances in full each month to avoid high-interest rates that can negate the benefits of rewards. Morvitz emphasized that travel rewards cards are best suited for responsible cardholders who treat them like a debit card, spending what they would anyway and paying the balance in full each month.

Hotel loyalty programs are also undergoing changes. Hyatt recently expanded its loyalty program from three tiers to five, potentially requiring more points for stays at upscale properties. The travel blog One Mile at a Time estimated that some of Hyatt's most elite properties would cost up to 67% more in points under the new system. Sally French, who covers credit cards and loyalty programs for Nerd Wallet, advised travelers not to hoard hotel points, as they seem to be getting less valuable over time.