United is Mad at Chase Because the Bank’s Other Credit Cards are Too Good

Frequent flyer program revenue – and in particular the sale of miles to banks – is the biggest driver of US airline profitability. However United’s MileagePlus is stagnating. Their revenue growth can be accounting for entirely by points transfers from Chase Ultimate Rewards. As Chase Sapphire Reserve gained popularity that meant more points earned which could be transferred to United.

United re-upped its credit card co-brand deal with Chase in September 2015, extending out to 2025. However the airline has been talking up how their deal with Chase lags what other airlines – American and Delta – have.

The airline’s President Scott Kirby was intimately involved in negotiating a deal as President of American with Citibank and Barclays, and knows AAdvantage has a sweeter proposition. However American was in a unique position with two banks each with installed cardmember bases motivated to maintain their business, and in my view willing to overpay in order to do so.

For two years United has been having conversations with Chase. They re-launched the card product changed benefits and started pitching the card to customers inflight.

To United’s leadership, though, the problem is their deal with Chase — and has nothing to do with making the program worth less to members indeed United’s President believes the airline’s presence in a market dictates card acceptance rather than the value proposition of the program itself.

However the Wall Street Journal reports that the airline has zeroed in on something that frequent flyers have long known:

  • Banks have gotten increasingly competitive in their card offerings. It makes little sense for most customers to spend on an airline card. Get the card for benefits like free checked bags and earlier boarding, but you can earn more valuable rewards faster with bank currencies whose points transfer to miles.
  • Even if you want to earn United miles you can earn more United miles for the same spending with a Chase Ultimate Rewards card (plus have the flexibility to spend points directly for travel or transfer to a different airline or hotel program).

Copyright: jetcityimage / 123RF Stock Photo

Unsurprisingly when there are better card products out there, the United card suffers. And when there are better cards even for people who like United miles, the United card suffers even more. The same situation prevails with American Express and Delta of course yet reports are that Delta’s card portfolio continues to prosper.

According to the Journal,

  • United card applications slowed after the introduction of Sapphire Reserve. In fairness, the airline has been upbeat about card acquisitions lately, and the Sapphire Reserve product took a lot of air out of the room for other cards too. (And it, too, has since been surpassed.)
  • United has complained that Chase “was offering a more generous sign-up bonus for Sapphire Reserve than the United cards” however that hasn’t consistently been true the past couple of years and doesn’t speak to what’s actually troubling the United portfolio.
  • The airline wants Chase to “pay it more for miles” despite having 6 more years to run on its deal. They want more for their existing business, while I believe the focus should be improving the value proposition of MileagePlus or the card.
  • However Chase “insists the cards aren’t direct competitors and believes the airline should be doing more to earn traveler loyalty.” They are direct competitors for acquiring United miles (although perhaps Sapphire Preferred is more on point here given each card’s price point) however the answer certainly lies in improving the United value proposition, not gutting Sapphire Reserve’s — because Sapphire Reserve itself faces competition from other premium card products, some of which are better still.

United can’t stop competition from banks. The airlines in many ways pushed banks to become so competitive, building their own programs. As the airline industry consolidated and the price of co-brand deals rose for the banks, the banks saw a need to build their own business independently. United is squeezing Chase further, which only furthers this dynamic.

The airline is faced with a dilemma. Chase’s products are better, but United still gets a piece through mileage transfers. MileagePlus is the number one Chase transfer partner by volume, by far, and these transfers have driven the program’s growth.

The existence of these transfers reduces the need for even more lucrative co-brand card product spend. But it’s not clear United would get that spend in any case as it eliminates award charts and raises redemption costs for the program’s best awards.

Delta Airlines prospers while remaining a Membership Rewards transfer partner. American isn’t a transfer partner with any bank currency, a result of Citi’s unwillingness to pay the cost the airline demanded. However the Journal reports that conversation is being revisited as a way to improve Citi’s ThankYou program and drive more revenue to American’s bottom line.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. The so-called “value proposition of MileagePlus” has become quite poor, and that’s why my United card stays in a drawer unused. I’m not interested in earning more Worth-Less miles.

  2. United should take a breath, sit down, and compare their credit card product with Delta’s credit cards. They will learn that the value proposition of the Delta credit cards are way better (especially the more premium ones) and Delta has a far better cooperation with AMEX.

    AA has the same problem as UA except AA was able to extract larger contracts due to the product split between two banks, however it’s not a secret the ROI is not living up to expectations and I blame this squarely on lack of integration and strong collaboration.

  3. Interesting timing – literally yesterday I took a survey from United MileagePlus and told them exactly this: I have the United card but basically keep it for the lounge passes and discounts on WiFi/food (I’m platinum so don’t care about bags or priority boarding). All other spend, including airfare, goes on my Chase UR cards.

  4. Everything changes with time. United got too Greedy, devalued their program and Chase provided a superior product. I dumped my United cards two years ago.

  5. Here’s to hoping that Chase stands strong. In my opinion, increasing revenue from miles while decreasing the value of those miles is not something that can go on forever. You can fool some of the people some of the time, but you cannot fool all the people all the time. United is just going to have to deal with it.

  6. I always enjoy the thoughtful analysis you bring to these subjects. Thank you, Mr. Gary!

  7. And coincidentally, or maybe not, I just got an email promotion from United about upping their points for gas purchases…I think the value was 5X…for a limited time of course.

    However it was United that eliminated extra points for Safeway grocery purchases many years ago. They cut something that at the time made the card more attractive so it’s not just Chase making their cards too good when United itself has at times made their card worse.

    And besides, the primary thing that has driven me away from putting spend on the United Card instead of the Sapphire Reserve, is United’s continued award devaluations. My spend stays with Chase because my Ultimate Rewards points are more valuable and give me flexibility that United’s Mileage Plus does not. And if I need to fly United on points, I can simply transfer from Chase.

    BTW Gary, not everyone is a business traveler who is on the road a lot. I can’t get an Ink card because I don’t have a business, have no need for a World of Hyatt card because I don’t stay there very often (can’t remember the last time I did), and American Express has limited utility given my travel and dining requirements.

    For me, and I assume others like me who don’t fit in the the lifestyle world you exist in, a lot of the things that for you make Sapphire Reserve take a back seat to other premium cards do not really apply. Maybe some day I’ll downgrade to the Preferred (especially if Chase starts rolling back benefits on the Reserve), but for now it’s still the top card in my wallet. I had looked at maybe expanding or switching over to the top Citi card but after they just slashed and burned a lot of benefits I expect on a card, there’s little chance I’ll move.

  8. The only reason I maintain the United card is the flight reward options available to card members that others cannot get. I consistently see flights available to me that my wife cannot get with her miles since she no longer ahs the United card. If that goes away then the card will no longer be renewed.

  9. How can United claim that Chase was the cause of the decreased performance of their cards when around the same time the CSR/CSP was becoming popular they took several significant steps to devalue their frequent flier program. I maintain that those frequent flier program devaluations led to less engaged members which led to less credit card applications and more cancellations.

    1. Decreasing mileage earning for most fares.
    2. Increase monetization of the forward cabin.
    3. Award chart devaluations including dynamic
    4. Spend thresholds that caused members to defect to other programs.

    Had they not instituted these changes and kept the program as it was circa 2013 would they have seen the dropoff in the credit card business? They think these program devaluations somehow don’t impact their business, I suspect they are mistaken. As customers, the number one way you can let them know you dislike their program changes is to cancel your United credit card.

  10. To me, the biggest problem that all of the airline credit cards have (beyond poor rewards for everyday spend) is that their benefits are the least valuable to the customers who should be the primary customers for their cards: elites. As a 1K, I get no benefit from this credit card’s priority boarding or free bag benefits, which are the primary highlights of the card. They need to get creative and find some ways to offer benefits that add value to the airline’s elite status.

  11. Folks apologies for the rookie question as by comments you all are warriors. I have chase 300000 points . With Chase I have flexibility to purchase airline tickets anywhere. Which airline offers the best conversion and availability of business class seats? Is 300000 chase reward points really = 300,000 miles or worth more?

  12. Oh, I’m going to add another wrinkle to this discussion: The card may not even be worth it if you live in a United hub.

    I live in Houston, and fly United 90% of the time, out of necessity. I’m planning on upgrading to some more cards later this year, and went back and forth about the United card. It has a LOT of good benefits for someone who flies United a lot.

    But, I decided on the Chase Sapphire. Why? Because I don’t trust the United program. I would like to have more flexibility with my miles rather than trust and airline that doesn’t always put customer needs first. THAT is the real issue here, not other credit cards.

    I live in United’s largest hub and don’t trust them. It’s that simple.

  13. Agree with Doug, the card does nothing for me as an elite. They try to throw you a bone by waiving the PQD requirement if you spend on the card but PQD isn’t my problem. I spend $15K on flights a year but will never get anywhere above 90,000 miles, so I’ll never hit 1K even though I spend as much as one.

  14. I fly United frequently. The Club Card offers value to me, but the yearly fee represents my only spending on the card. Even the paltry (by comparison to CSR) 1.5 miles/non-United dollar is losing worth with the end of the award chart. United has itself to blame, since their co-branded cards offer little to their most frequent fliers.

  15. Issuing United Club Passes that weren’t being accepted at major hubs for months and months probably did them no favors with once a year flyers who held the MP card.

  16. I have a small business with lots of credit card spending mostly on Chase and Capital One. First, I can’t believe that i can’t even get a United credit card because of 5/48 rule even though I use Chase cards for spending. I just searched a points flight to Costa Rica in January to see if i even wanted to transfer Chase points to United. None of the flight options were same day. What a joke, Capital One is looking better all the time. So is Delta.

  17. Yup. I actually *had to buy a ticket* the other day (heresy, I know) on UA. I looked at the bonus for putting UA spend on the UA card vs the CSP. It was *the same*. WTF? I really, truly expected to get like 3x bonus miles on UA spend on a UA card. To just match the CSP 2x travel is asinine.

    The thing loyalty program providers hate is the two-way street. They absolutely *love* that engagement. But they absolutely *hate* the associated costs. Sadly, they don’t realize you can’t have it both ways.

    What UA may (or may not) realize is that their *partnership with Chase* helps engage me as a customer. Yes, I may put my travel spend on the CSP and transfer the miles to UA, but I fly UA in part because they partner with Chase for other mileage transfers. My preferred loyalty (in order) is UA, AA, and DL. Where I live, both UA and AA are strong players, so I have some choice. But all in all, Chase flexibility rules and it will take a lot to overcome it. But for the love of god, put a stronger bonus on putting UA travel spend on the UA card.

  18. Just reinforced in a survey on M+ a concern that the program has been progressively devaluing and that other Chase cards offer better propositions, including access to other programs.

  19. I received the same survey and gave the exact same feedback. I was brutally honest and said I fully defected to Delta. I even mostly gave United a pass on customer service, operations, product, etc. (though I did mention it). Said my decision was based on (i) superior cards, that provide legitimate rewards for investing in the ecosystem (ie MQMs which afford me a materially better travel experience) and (ii) a watered down Mileage Plus that’s almost as bad as Skymiles. I still earn miles on bank cards for premium redemptions, but I put significant amounts on Delta and fly them almost exclusively. Zero regrets.

  20. I have a unique Chase UA Visa that was for 1K members. They closed new applications 12 years ago.
    Perks: 5K PQM with $5K spend on UA and 5K PQM with $35K spend. (Great until UA implemented $ minimum for 1K qualification.) Only the Continental Pres Visa was grandfathered and exempt from the $ qualification. (Stick it to the UA 1Ks.)
    Annual Fee: Was suppose to be waived as long as 1K status met. But, after the Cont-UA merger, Chase started to charge an annual fee of $140, but, credited $80 back. They changed the terms.

    *Required annual 1K requalification, or the annual fee would apply.
    *Companion ticket: Based on zones. Only for Econ. No upgrades allowed. (Always prices higher compared to lowest price on UA search.) Sucks!
    *Only earns 2x miles for UA purchases, and, gas; restaurants and home improvements.
    *Never offers bonus opportunities. Sucks!
    *Comes with foreign conversion fees. Sucks!

    This year, I had to fight with Chase and UA MP to post my missing EQM that I earned during Q1. I asked for a retention bonus; they offered nothing.
    I had already moved most of my spend to my BofA Rewards and earn an avg 2.75% cash back. Much better value.

  21. The United card does not offer other benefits for flyers with status that they already have due to status (e.g. priority boarding, free bags).

  22. United again and again tries to tempt me with their Explorer card; I live in LA and while it’s a major hub, I generally fly out using AS or DL (and sometimes even AA). I’m spoiled with choices given LAX (and to a lesser extent BUR/ONT/PSP, all of which I use), travel regularly (though no road warrior, so no status) and I still can’t bring myself to get the card. Everyone in the comments and Gary’s usual excellent analysis has pretty much summed it up: there’s no value. Miles are devalued on a regular basis, $20 here and there for baggage is less than the annual fee and there are many times I’ve tried to visit the lounge but it’s “over capacity” and not able to allow additional people in when I do end up flying UA. So if a single airline card isn’t making it worth my while, I’ll go for a card that has flexibility. Enter the Chase Reserve (or Sapphire, depending upon your liking). I KNOW I can get seats on Southwest and JetBlue if I transfer them there. It’s easier to spend on hotels, especially with the Ultimate Rewards discount. I get Priority Pass and while there is certainly an overcrowding situation there on occasion, there are at least a few options versus having to be stuck with a single solitary lounge. Bottom line: if you want me to use the card to charge purchases to earn miles…I would like the ability to redeem those miles at a value greater than other cards. If you’re telling me I can earn all these miles but in the end they add up to less than what I earn on other cards, it’s a no-go. It’s not rocket science and yet the heads at UA are outraged at Chase’s better value on the Reserve/Sapphire lines? If you sell me something that I find our is worthless, am I really going to keep that buying habit?

  23. I’m preparing myself to bail out on both Chase and United. The recent United announcement that they were converting to dynamic award pricing got me worried, because it affects both the value of my United frequent flyer miles and the value of my Chase Ultimate Rewards points, most of which get redeemed through transfer to United. I’m also worried by the rumors that Chase might add a dining credit to the CSR, because I know that, if they do, they will either reduce the $300 travel credit, or they will increase the $450 annual fee, and my business case for holding the CSR will no longer work, forcing me to close the card. So I decided it was time for me to burn up some points and miles. Last week I transferred most of my UR points from Chase to United and bought two award tickets to Europe, one for fall 2019 and one for spring 2020. This will leave my points balance at Chase at about 15,000 (which I’ll probably transfer soon to Jet Blue) and my miles balance at United at about 900. On the other hand, I plan to keep the United Explorer card because I easily recoup the $95 fee by using just three of the Explorer card’s benefits: additional award seat availability, two lounge passes a year, and boarding in group 2. (By the way, when I booked those two award flights, it was much harder than usual because United’s new dynamic award pricing has already jacked up the number of miles required for many of the flights I wanted.)

  24. IF Chase is smart they will tell UA to shove off. UA desperately needs the Chase revenue more than Chase needs the transfer option for worthless UA points and the MP card portfolio.

    The UA value proposition is rapidly tanking, and you can’t fill the planes with Corporate customers alone. That will put further pressure on fares, as the devalued UA miles are no longer a motivator.

  25. I wonder if Citi’s recent gutting of its purchase protections is to free up cash for an AA transfer partnership….

  26. Am a United 1K who has seen a decline in value every year in the value of earning UA Mileage Plus miles. Last year it was a decrease in PQM, this year it’s “dynamic” pricing”. Enforcing dynamic pricing is like a Coffeeshop wanting to charge their customers an unpredictably higher price when they say the shop is more busy with the result that customers prefer to take their business elsewhere.

    This is 100% a United problem. Chase should be proud of the CSR I’m completely program agnostic at this point and just credit where it makes sense and then am happy to use the Chase and Citi cards to top off points I need. Unless United massively improves Mileage Plus it’s not just the credit card that is the problem since they are getting less of my fare spend as well.

  27. I closed my United cards 3 or 4 years ago. Now With Chase’s 5/24, you can’t necessarily just get all the chase cards you want. I “would” get both the United and car, but I can’t.

  28. The answer for United is simple:
    1) Allow United-brand CC spend to waive PQD requirement for 1K status.
    2) Bring back the United Select card. 3 miles/$ on United, 2 miles/$ on gas grocery and home improvement stores (grocery and home improvement are not common bank card categories), and 5,000 PQM on United.com spend.

  29. @Antonio: groceries is not a common category?

    2X TYP (+ round-up) on Citi Rewards+
    2X AA on Citi AA MileUp
    2X MR (2.4X w/20+ transactions) on Amex EveryDay
    3X MR (4.5X w/30+ transactions) on Amex EveryDay Preferred
    4X MR on Amex Gold
    3% on Amex Blue Cash
    6% on Amex Blue Cash Preferred
    5X HH (typ. 2.0-2.5%) on Amex Hilton
    6X HH (typ. 2.4-3.0%) on Amex Hilton Ascend
    2% (2.2% w/checking account) on Bank of America Cash Rewards
    2% on Capital One SavorOne
    Quarterly 5% on Discover it
    Quarterly 5%/5X UR on Chase Freedom

  30. Whether groceries is common as a category across card from all issuers is a matter for debate. What is not debatable is the fact that Chase cards, with the sole exception of the quarterly category on the Freedom card, do not reward groceries.

  31. Why am I paying so much in annual fees for this card? They stopped giving me 10k extra miles ever year when I spent so much.
    There are easier ways to keep my miles with United and way better cards out there.

    It’s time to shred this one

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