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Endangered Species: Frequent Flyer Miles for Debit Card Use

Endangered Species: Frequent Flyer Miles for Debit Card Use

Even before the Durbin Amendment took effect on October 1, it was a foregone conclusion that it would undermine frequent flyers’ ability to earn airline miles for debit card purchases.

The amendment to the Dodd-Frank Act restricts the amount large card issuers may charge retailers—so-called interchange fees—when consumers use their debit cards to pay for goods and services.

With their profit margins squeezed, the extra costs of awarding frequent flyer miles had to be pared down or eliminated altogether. (On a related note, some card issuers, including Bank of America, will begin charging consumers a fee to use their debit cards.)

The first shoe to drop was Chase’s, which stopped awarding miles for its co-branded United and Continental debit cards on July 12.

Then, late last month came the announcement that Citibank AAdvantage debit cardholders will no longer earn miles for purchases after December 9, 2011.

What’s left? Among the larger U.S. programs, just these three:

1. Alaska Airlines Visa Debit Card

  • 3,000 sign-up bonus miles
  • $30 annual fee
  • Earn one mile for every $1 spent on Alaska
  • Earn one mile for every $2 on other spend
  • Card type: Visa
  • Issued by Bank of America

2. Delta SkyMiles Classic Check Card

  • 2,500 sign-up bonus miles
  • $20 annual fee
  • Earn one mile for every $1 spent on Delta
  • Earn one mile for every $2 on other spend
  • Card type: MasterCard
  • Issued by SunTrust

3. US Airways Dividend Miles Debit Card

  • 3,000 sign-up bonus miles
  • $30 annual fee
  • Earn one mile for every $1 spent on US Airways
  • Earn one mile for every $2 on other spend
  • Card type: Visa
  • Issued by Bank of America

While the above are nominally alternatives, they’re largely moot—the miles earned for debit card use aren’t likely to be significant enough to warrant shifting one’s allegiance to a new airline program simply because it still features debit card miles.

And besides, the few debit card options still available today probably won’t be around much longer.

I say "probably" because there is a movement in Congress to repeal the Durbin Amendment, which, if passed, would give debit card issuers the financial wherewithal to resume offering frequent flyer miles as incentives.

For now, though, this is the end of an era. But it’s hardly a knockout blow for loyalty programs. While it may be a step in the wrong direction for mileage-earners, it’s only a half-step.

Reader Reality Check

How much will the disappearance of mileage-generating debit cards affect you?

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  • J Maxwell

    Continental Airlines’ debit card program through KeyBank was also recently cancelled, in September 2011. Earning miles through their old Chase debit card ended in July.

  • j d

    Maybe I’m a small potato here, but the loss of AA miles while using my debit card is going to affect me quite a bit. On average I gain 1000 miles a month, which isn’t tremendous but I am not eligible for their credit card so there you have it. Using the AA mileage mall is not going to cut it. I am very disapointed actually and hope that they will resume offering the miles again in the future.

  • Eric

    does anyone know if BoA will still charge that new debit card fee on top of the $30/year fee for their airline cards? I’m assuming yes since they’re a bank but I’m just wondering.

    Thanks God bless

  • Robert E. Bennett

    Dodd-Frank was a nightmare of top down, command and control, Socialist interference in the fnancial services pricing market. The Durbin amendment merely made awful legislation worse by instituting price controls. Hopfully this wretched legislation will be repealed!

  • J Maxwell

    @Eric: I assume you’re referring to the Bank of America USAir debit card? That’s the one I have, and it is currently unknown if BofA will apply the upcoming $5/month fee to that card. However, I believe it’s highly probable, and therefore I will close the account before the $30 annual fee is applied in February 2012. In the meantime, I have shunted all available funds to that account and am using it as much as possible this year, before the additional monthly fee kicks in.

  • J Maxwell

    Update: Now that BofA has announced that the $5/month fee for debit cards will not be implemented, it’s a moot point. However, I’m still closing the account before the next annual fee is charged, but may reapply next year to get the 3,000 mile bonus again – IF it’s still available.

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