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Q: United Airlines Visa vs American Express /Costco ( Answered ,   0 Comments )
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 Subject: United Airlines Visa vs American Express /Costco Category: Miscellaneous Asked by: pherz-ga List Price: \$25.00 Posted: 10 Nov 2005 18:39 PST Expires: 10 Dec 2005 18:39 PST Question ID: 591715
 ```I currently use a United Airlines visa card for nearly all of my purchases, but am fed up with United telling me "no" when I want to upgrade a class or purchase flights with my accumulated miles. Costco and American Express are now offering a joint card with no fees, that will give me cash back for all purchases at any store(not restricted to Costco). They give 1% back for store purchases, 2% back for resturants, and 3% for any travel expenses(plane flights,, car rental, hotels etc). Since it's very difficult to redeem visa miles with United for travel, would I be better off to switch all purchases to the Costco/American Express card and drop the United mileage program, and then just use the cash back from Costco/American Express to purchase airline tickets outright? Please calculate the differences between the two cards based on \$10,000 charged monthly, paid off monthly(no interest charges). Retail purchases represent 85% of my monthly bill(1% cash back), resturants 10%, and travel 5%. Since I Don't know what formula United uses to convert miles into purchase prices, I've decided to give the experts a shoy at it.```
 ```Thank you for your interesting question. I obtained the United point award formula from the following website: "Mileage Plus Platinum Visa" United Airlines (2005) http://www.united.com/page/article/0,1360,3865,00.html. I assume that is the card you have since it is the only one that would allow you to earn miles on \$120,000 in annual spending. It has an annual fee of \$140, and it includes one free roundtrip companion ticket each year. Its point calculation formula is: "Earn 2 miles per \$1 spent on groceries, dining, gas at the pump and home improvement purchases - Earn 2 miles per \$1 spent on United and Star Alliance purchases - Earn 1 mile per \$1 spent on all other purchases" Based on your spending habits, that amounts to (2 miles x 0.10 x \$120,000 + 2 miles x 0.05 x \$120,000 + 1 mile x 0.85 x \$120,000) = 138,000 miles/yr. The question is then how to derive a dollar amount for these. As this article explains ("Assessing the value of frequent-flier miles" Joe Brancatelli, USAToday (March 8, 2005)http://www.usatoday.com/travel/columnist/brancatelli/2005-02-28-brancatelli_x.htm), this is not a straightforward conversion. I have used the old standby of \$0.02/mile, but you could wind up with less than \$0.01/mile or as much as \$0.04/mile, depending on where, when, and in what class you travel. So, you should wind up with something like 138,000 miles/yr. x \$0.02/mile - \$140 annual fee = \$2,620. However, this could range from being less than half that to being double that, depending on how you redeem your miles. I am excluding bonus opportunities to earn additional miles, like they are running now, as well as the value of the free companion ticket. The terms of the Costco card are "Eligible Purchases earn a rebate of 1, 2 or 3 percent, as follows: 3% at restaurants, 2% for travel purchases from airline, lodging, car rental, cruise line, travel agency and tour operator merchants (excluding bus and train travel purchases); or 1% on all other Eligible Purchases." The terms are available at "TrueEarningsSM Card from Costco and American Express" Costco https://www.costco.com/Membership/amexplat.aspx?whse=BC&topnav=&hierPath= by clicking on the Terms and Conditions link at the bottom of the page. There is no annual fee. You receive your rebate annually in the form of a certificate you can redeem for merchandise or cash at any Costco location. Your rebate looks like this: 0.03 x 0.10 x \$120,000 + 0.02 x 0.05 x \$120,000 + 0.01 x 0.85 x \$120,000 = \$1500. So, assuming you are getting \$0.0108/mile or better when you use your miles to buy airline tickets, the United Airlines card is more advantageous. Of course, this assumes you can get the flights you want and use the miles. Cash certainly gives you a great deal more flexibility. I hope my answer helps you to figure out what the best card is for you. Sincerely, Wonko Search terms: value of frequent flier miles; Costco/American Express card; United Airlines visa card```
 pherz-ga rated this answer: ```Thanks for the prompt amswer, which was clear, logical, and comprehensive without being too long.```