There has been some grumbling on the credit forums that Southwest’s upcoming changes to its Rapid Rewards program — and its recent acquisition of budget airline AirTran — could be bad for cardholders.
(By the way, Southwest’s credit card is still one of my favourite travel cards, aside from United Mileage Plus. Use the published link here to sign up, and you’ll be awarded a free Southwest flight after your first use of the new card — that includes purchases or balance transfers.)
If anything, the opposite might be true: the purchase of AirTran vastly increases the combined company’s flight routes, which means higher inventory for reward travel redemptions… So a greater chance that your flight can be booked for free with existing Rapid Rewards points, rather than paying outright.
One other criticism of the card is that there’s a $59 annual fee. Does it still make good economic sense to get a card with a fee attached?
Let’s do the maths: you get a free flight credit after your first purchase. So let’s say you buy a cup of coffee using your new Southwest card at Starbucks for $1.50 (Pike Place Roast, tall). Now you have a flight credit that is worth approximately $225 to $275, according to the various popular flight routes I plugged in on their site this evening.
You would have to pay the annual fee for nearly four years for this not to be a great deal.
Two things to keep in mind: once you have the card, you’ll be accruing more Rapid Rewards points on all of your everyday purchases. This will likely lead to more “free” flights over time, significantly outweighing the annual fee. Secondly, it’s always possible to get an annual fee waived — I shouldn’t be saying this, since I like to keep these secrets to myself (so I can use them!), but if you are a loyal cardholder who has a pretty solid charge volume each month, it’s fairly easy to get the annual fee removed.
Just call a few years down the road and threaten to close your account and take your business elsewhere… Airline credit cards, in particular, spend a lot of money and marketing energy to acquire a new customer. They won’t want to lose your business over a mere $59.
Be sure to view more of my credit card offers and promotions over on Outlaw.
Disclosures: I used to review credit cards for a living. Also, my web site has a financial relationship with Chase — we participate in their affiliate program. No financial relationship or position on Southwest Airlines, United Airlines, or any other company mentioned in this story at time of publication.