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New Capital One Card

By: Jason Steele
08/23/2011

Capital One has been trying to stake out a large sector of the cash back and travel rewards market, but they have a lot of competitors. Chase, Amex, Citi, Discover, and BoA are all right there, with many smaller banks and credit unions coming up with competing offers. This week, Cap 1 has introduced a new product to add to their already crowded stable of reward cards. Let’s see how it stacks up:

Capital One Cash

The simple name seems intended to convey a straightforward message: This is simple card without a lot of unnecessary terms and conditions. This card offers 1% cash back on all purchases with an additional 50% bonus (.5% cash back) offered each year on the cardholder’s anniversary.  There is no annual fees, no special spending categories, and nothing to enroll in. They are also offering a 0% promotional financing on both purchases and balance transfers for twelve months. Like all Cap 1 products, there are never any foreign transaction fees.

What I Like About This Card

With no annual fee, it is kind of a no-brainer, and 1.5% cash back is very competitive for a no annual fee card. Really, this card competes against other Cap 1 products like the Venture Rewards and Venture One card. The cards deliver 2% and 1.25% cash back on all purchases, but only as a statement credit against travel expenses. For those who spend at least 2% of their income on travel, this is the same as cash back, but it comes at a small price. Cardholders have to log on to Capital One’s web site, and claim their rewards, as I explained in this post.  The 2% card, Venture Rewards, also has a $59 annual fee, but it is waived the first year. There is no annual fee for the 1.25% card, Venture One.

What’s So So

I am not a huge fan of the idea of waiting a year for your rewards. There are all sorts of things that can happen to cause you to cancel your card or to have your card cancelled during that time period. In the event that you are not a current cardholder, you don’t get the annual bonus. This is the issue with the Costco Amex, and to a far lesser extent, the Chase Sapphire cards, both of which offer an annual bonus reward. The promotional rates are also competitive, but I am not a big fan of 0% rates in general. This encourages people to carry a balance, which violates my golden rule of credit card use. Offering promotional financing and cash back is kind of like ordering two big Macs, a large fries, and a diet Coke.  All the calories of the interest rate will far offset any savings from the diet Coke/cash back.

Conclusions

Cash back is always a great way to go. Merchants pay their credit card processors transaction fees, much of which goes to the banks. The banks, in turn, reward their customers by kicking back some of these fees while hoping to make up for it with interest charges. For those of you who always pay your balances in full and on time, there is never any reason not to use a cash back card with the best rate you can find.

Southwest To Announce Service To Atlanta Shortly

By: Jason Steele
08/22/2011

Update: You can now book flights to and from Atlanta on Southwest.  Non-stop destinations include Houston, Austin, Chicago, Baltimore, and DENVER!  These appear to be Southwest operated flights, not codeshares with Airtran.

 

It has been a long time coming. For years, I have been hoping that Southwest, my favorite airline, will eventually fly to Atlanta, one of my most frequent destinations. As an “Atlanta Refugee,” I still take the time to visit my old stomping grounds, just preferably not during their excruciating summer months of April-October. I exaggerate, but not by much.

Anyways, Southwest’s first attempt at dipping their toes in Atlanta came three years ago when they announce their intention to buy Frontier Airlines, which offered a few flights a day between Denver and Atlanta. That deal fell through, and Southwest regrouped and later announced their intent to purchase Airtran, which is the #2 carrier in Atlanta, after some other airline, I forget which.  That deal has been consummated, but the forces of Southwest have been looming at the edge of Hartsfield-Dead Mayors International Airport like General Sherman before the Battle of Atlanta (this is what you get from reading a snarky travel blog post written by a history major).

Let The Battle Begin!

Ever since the completion of the paperwork, Southwest has been biding its time, seemingly hoping for an smooth and orderly assimilation of the Airtranians (I am also a science fiction fan). My sources indicate that, after some silence on the subject, Southwest will announce this week that service to Atlanta will begin on February 12th.  This information is corroborated by the presence of Atlanta on their online route map as well as a destination guide for the city.   It is unclear if this service will be on Southwest planes (likely), just an Airtran codeshare (less likely), or some combination of the two (possible as well).

What is clear is that this will be an epic battle between Southwest and That Other Airline with a hub in Atlanta. I expect this battle to be waged on many fronts. There will, of course, be credit card offers galore, with lots of promotions targeted to Atlanta based fliers. Frequent flier points and miles will be handed out like Halloween candy, and people watching television in Atlanta can expect to see more airline advertisements than a well funded political campaign.

Who Will Win?

Delta’s business fliers who reach Medallion status are intensely loyal to their carrier, despite Delta’s recent boneheaded moves.  They enjoy non-stop flights to obscure destinations and first class upgrades.  Sure they pay an arm and a leg to fly Delta, but who cares when you can just expense it. Those traveling on their own dime to domestic locations are going to love Southwest. They offer more leg-room in coach than Delta, and two free checked bags. While their Rapid Rewards frequent flier program does not offer the possibility of as many flights to exotic destinations, it can make more sense to redeem awards for many short flights to nearby cities, a wasteful use of Delta miles. Finally, the huge Southwest advantage is in their no-change fee policies. For example, I will probably book Southwest flights to Atlanta when they go on sale, knowing that I can change the dates around and use the purchase price of my tickets as a credit towards any other flight. Delta charges a $100 change fee for that privilege.  While most airlines charge these fees, Southwest’s lack of fee really makes Delta seem like they are ripping you off for no reason other than that they can (a common thread when complaining about Delta.)

Conclusions

In the end, there will probably be a stalemate. Delta will enjoy the patronage of business travelers and those transferring from Moscow to Managua. Southwest will capture the leisure market for people like me traveling between Denver and Atlanta. Prices will continue to stay low from Atlanta to all Southwest/Airtran destinations, and if Altantans are extremely lucky, Delta could decide to compete with Southwest by lowering some of their fees. Expect many of these fee waivers to be granted to holders of their Amex Sky-Miles cards. The 21st century Battle of Atlanta has begun, and it Southwest will not have it as easy as Sherman did.

When Flights Go Bad

By: Jason Steele
08/19/2011

A relative called me yesterday from the Philadelphia airport. Her flight on US Airways had been cancelled, and she was only given standby for the next two departures. When she was not accommodated, she missed her dinner at her destination and was not happy.

How To Handle The Cancellation

She called me for my advice, but there wasn’t much I was able to offer her. Despite the beautiful day in Philly, the airline had cited weather, as they usually do, but it is very difficult to prove that weather wasn’t at least partially responsible. My research indicated that there had been weather and/or air traffic control delays earlier in the day, preventing the departure of the aircraft from its previous flight. In response, US Airways cancelled her leg of the flight, while the aircraft bypassed Philly and proceeded to her destination, Providence, without her.

My best suggestion was to find another carrier to Providence so she could arrive there on-time. Southwest flies that route, and has reasonable last minute fares ($159 one way), but their next flight left about the same time as the one she was confirmed on. What was news to her was that she would have been eligible for a partial refund of her ticket had she decided not to board her re-scheduled flight. She was astonished, but logically it makes sense. If I was about to depart Denver for the weekend, and there was a blizzard, the airline would cancel flights, and may not be able to accommodate me until a day or two later, perhaps after my scheduled return. In response, I might just choose not to fly. Since the airline failed to provide the service, they will have to refund my money. Likewise, if I choose to fly another carrier or to take ground transportation, the same conditions apply. Note that none of this is clearly spelled out in the contract of carriage, so there is some element of airline discretion. For example, if they cancel your flight and offer you another flight an hour later, you are unlikely to receive a refund if you choose to buy another ticket. In her case, the next flight they could confirm her on was five hours later, and she would have had a good case for a partial refund if she flew another carrier or took ground transportation to get to her destination.

In that case, the hard part would have been making sure her return flight was not cancelled. I advised her to contact US Airways and specifically inform them that she will not be boarding the newly scheduled flight, but I have no confidence that anyone at that carrier could successfully over-rule their computers and restore her return reservation. In fact, this is exactly what happened to my wife and I on our honeymoon in Brazil. We were told by the airline not to board a flight that would have misconnected us.  Nevertheless, the rest of our itinerary was cancelled and we had to spend hours resolving their screw up.

Trip In Vain

Another option that could have been available to her was to ask for a refund for a “trip in vain”. In the event that a delay or cancellation causes you to miss the event you are traveling to, you can choose simply not to fly at all and can usually get a refund. This would apply if you are flying out in the afternoon for a dinner and returning the next morning, and the delay or cancellation means that you will miss the dinner. In this situation, the entire trip makes no sense. Using the term trip in vain, any competent airline agent will be able to process your refund.

Conclusions

The only thing more frustrating than finding out your flight is cancelled is learning that the airlines are claiming no responsibility and are unable to get you a confirmed seat on the next flight. In these situations there is little recourse but to look for alternative transportation. Fortunately, passengers are entitled to a refund if the airline cannot get them to their destination in a reasonable amount of time and the traveler chooses to skip the flight entirely.

Extreme Credit Card Debt Collecting In Indonesia

By: Jason Steele
08/18/2011

What happens when you fail to pay your credit card bill. First, you can expect to pay interest and late fees. Next your interest rate will climb to what is called the “penalty APR,” a number much higher than what you normally pay. At the same time, your credit score will plummet while you can expect phone calls, emails, and letter from your bank demanding payment. Finally, the bank will turn your debt over to collections and/or attorneys who will take you to court, receive a judgement, seize your assets and/or garnish your wages to the extent permissible by your state’s laws. If you have no means of support, you can then declare bankruptcy in order to hold of your creditors while you re-organize your finances. It it isn’t a fun process, but at least it is fairly civilized.

How It Works In Indonesia

While the American system sound rough, take a look at what happened to this man in Indonesia who was unable to pay his credit card debt owed to his bank, America’s Citi. It is astonishing to learn that Citi invited him to visit their debt collectors, in person, at a branch location. There, Citi had placed the man in a room that exists for the purpose of interrogating their delinqent account holders. It appears that the individual agreed to the meeting because he was trying to negotiate down his debt with Citi. What happened in that room remains in dispute, with the bank contending he had a brain hemorrhage while multiple medical reports indicate the man suffered from suffocation and blunt force trauma. What is undisputed is that he never left that room alive! The case is so shocking that it has become one of the top stories in Indonesia, with their tabloid press seizing upon the smallest details as they emerge.

How It Works

The article is filled with information about how debt collection is more different there than most American can possibly imagine. Stories of face to face intimidation and violence are so common as to be expected. In contrast, the “harassing” debt collectors in the United States seem quaint by comparison.

The Fallout

The article makes it clear that Citi is suffering a public relations nightmare that has the potential to affect relations between the United States and Indonesia, the largest Muslim nation in the world. Citi has become a symbol of America there, and we are all be tarred with the same brush. The article also notes that Citi lost money on bad loans in the United States and has been working hard to try to make up for the losses by pursuing profits in other countries.

Conclusions

Don’t get into debt in Indonesia, or you might not make it out alive. If an Indonesian owes you money, expect him or her to laugh at your puny threats of debt collectors and court judgements. The rest of you can just be happy to be living in a country that does not tolerate corporate violence against delinquent account holders.

Capital One Buys HSBC's Credit Card Division

By: Jason Steele
08/16/2011

Last week, credit card giant Capital One decided to purchase the credit card division from HSBC, Europe’s largest bank for 2.6 Billion dollars. According to reports on the subject, this is another sign that the credit card business is healthy. Other reports have indicated delinquencies and charge-offs are down. At the same time, fewer customers are able to qualify for traditional credit cards, making store cards an attractive alternative. It is in the area of store credit cards that HSBC has focused. These store cards include such reatailers as Saks Fifth Avenue, Neiman Marcus, and Best Buy.

HSBC’s Branded Cards

The big bank doesn’t really have a huge presence in the personal credit card market using their own brand. My search of the HSBC offerings on their web site shows only two offerings, the HSBC Premier World MasterCard, and the their Platinum MasterCard.  Neither of these products offer cardholders anything unique, and their loss, while noted, will not be missed. Clearly Capital One is making a play for the store backed card business, which is low profile but high profit.

Putting This Latest Move In Context

Earlier this year, Capital One moved to purchase the ING Direct, moving it to the ninth largest bank in the US. This is all further evidence of the consolidation of the credit card business in the United States. It seems that most cards are now being offered by a handful of banks, American Express, Discover, Chase, Capital One, Bank of America, Barclay’s Bank and Citi. Smaller players include US Bank Wells Fargo. This consolidation does not necessarily mean that competition will decline. Unlike other industries, there are few barriers to entry in the credit card business. Even though there are now just a few banks issuing most of the cards, there are still dozens of smaller banks and credit unions that can and do compete for your business. For example, there are some great deals to be had to members of the Pentagon Federal Credit union (PenFed), hardly a major issuer of cards compared to Chase or Amex.

Other Factors Affecting Competition

Within each bank, there are dozens of different cards being offered. Barclay’s bank alone seems to offer a near infinite number of cards affiliated with some of the smaller players in the travel industry. In this respect, affiliates compete with each other even though their cards are being offered by the same bank. For example, Chase offers cards from Southwest Airlines, Continental/United, and British Airways in the airline market. In the hotel segment, they are partnered with Hyatt, Marriott, and International Hotel’s Priority Club. In these cases, the bank, Chase, is the same, but the customer is offered cards from multiple affiliates. I would argue that this is not the exact same thing as different products from different banks, but it accomplishes much of the same result as true competition. With several large banks offering dozens of products, the benefit to the consumer is similar to dozens of smaller banks offering a few products each.

Conclusions

I am a consumer advocate, and I look at all developments through the lens of people, not corporations. That said, large bank mergers and acquisitions such as Captial One’s purchases of HSBC’s credit card division do not concern me. As sure as there will be mountains of unsolicited credit card offers and huge sign up bonuses, there will continue to be great competition for credit card customers in the United States.

Delta SkyMiles Credit Cards Join The Airline Perks Race

By: Jason Steele
08/15/2011

For years now, I have been telling everyone who would listen that perks are the future of credit cards. Sure miles and cash back are nice, but those rewards cost the bank money. The cost of cash is clear, but banks also spend billions buying miles from the airlines. Yes, they have been ramping up the sign up bonuses being offered this year, but there is only so high that they can go. Not only that, but for some reason, there are still tons of people who just don’t care much about points, miles, and even cash back. For these people one or two percent off this or that is not considered very significant. Obviously, I disagree, but the banks are aware of this behavior and are trying to offer other types of rewards in order to attract and retain customers.

How Airlines Do It

Airline cards used to be very boring. One mile per dollar spent, two miles for purchases at that airline, and not much more. If you want an example of such a featureless card, look at the basic Delta SkyMiles card, which is terrible. For a $55 annual fee, you get nothing but miles for your purchases. Other Delta cards like the Gold and Platinum SkyMiles cards grant their customers checked bag fee waivers and complimentary companion certificates. Even those perks weren’t keeping up with the pace of other cards such as United’s and Continental’s that were offering priority boarding.

Delta and Amex Step Up Their Game

Last week, Delta pretty much said to the rest of the airlines, “I’ll see your priority boarding and raise you an in-flight discount.” It turns our that the their top of the line Reserve card already featured priority boarding, but they added that feature to the Gold and Platinum cards. The lowly basic SkyMiles card and fee-free Options card still get nothing. They also added a 20% discount on in-flight purchases such as food, beverages, and in-flight entertainment like movies and video games. These new features are exactly what the banks and the airline love. It costs neither much actual money. Certainly priority boarding is a free perk, and I wouldn’t be surprised to learn that Delta will increase it’s revenue by offering highly marked up in-flight purchases at a more competitive price.

The Downsides

Of course, this is just another layer of priority boarding to deal with when you fly Delta. First you get families and special needs passengers, then SkyMiles Medallions, then anyone with a credit card before finally, they board the last few people who don’t qualify for any of the special pre-boarding classes.  Another issue is that many of the prospective customers for the Gold and Platinum cards are already elite members in Delta’s program. For them, the priority boarding is pointless, just like the checked bag fee waivers are most of the time. (The bag fee waiver extends to eight others, but I am not sure if Medallion members normally receive that perk for their travel companions,)

Another Perspective

The other way of looking at it is that bag fees are now just a tool to sell credit cards. I bet you didn’t see that coming when they imposed these fees a few years ago, ostensibly to recover the high cost of fuel. Yeah right. Whatever their original motivation, it is now clear that their goal is to lock in customers to their credit card, and presumably their loyalty, by lavishing perks on card holders and retracting previous benefits from everyone else.

Conclusions

The airlines are merely on the forefront of this evolving trend. It is not difficult to imaging other co-branded credit cards offering similar perks when using the services of the affiliate. I would love to see priority check out lanes at the supermarket, or early access to the latest gizmo at an electronics store. The credit card industry remains extremely competitive, and reward card issuers continue to upgrade the perks being offered to their customers.

Delta Draws Some Serious Ire From It's Freqent Travelers.

By: Jason Steele
08/10/2011

Delta seems to have perfected a new technique for discouraging loyalty among its most frequent fliers. Two weeks ago, they made an announcement that fliers would forfeit miles redeemed for awards that were not flown. Previously, they could redeposit the award if they cancelled their plans. Some elites were allowed to have their miles returned without fees, while everyone else was stuck with a $150 change fee. While this change did not make anyone happy, Delta rationalized it by proclaiming there was a problem with people holding award seats that they were not flying. Frequent travelers were immediately skeptical of such claims as it does seem like finding, booking, and paying taxes for an award is not something people do if they don’t intend to fly, and I can only speculate how hard it is to get the tax refund upon cancellation.

The key to Delta’s strategy for upsetting its best customers was not just the first change, announced two weeks ago, but their most recent announcement that awards will actually be non-refundable and non-changeable 72 hours prior to travel. This has really upset people. Delta has long been known to release a deplorable number of “low” level award seats. They have reacted to this problem by releasing more of them closer to the day of flight. This, combined with their dropping of last minute booking fees makes Delta awards great for last minute trips that would otherwise cost an outrageous amount. Apparently, people have been booking medium and high level tickets on the hopes that they could change their flights to “low” level awards when Delta releases their inventory… 72 hours before the flight.

How Upset Are They?

On the discussion boards there are the usual threats to take business elsewhere, but there is a lot more ferocity this time. Particular hatred is reserved for the manner in which Delta has rolled out these changes. Two major announcements in two weeks is bad. Any PR person will tell you to always release all the bad news at once, not a little bit over a long time period. They also take great issue with the patronizing wording that Delta used to attempt to spin this downgrade as a feature.  As Delta put it:

Over the past year, more than 1,000,000 Award Tickets were reissued or canceled within 72 hours of departure. As a result, a significant number of these Award Seats departed unused as other members did not have time to rebook them. Effective August 15, 2011, SkyMiles members must now request Award Ticket and mileage upgrade redeposits at least 72 hours before their original flight departure. This change will make unused seats available to other members and ultimately increase Award Ticket availability.

Travelers are extremely skeptical of Delta’s statistics, noting that they operated 2.1 million flights last year, so nearly half of them would have had one award ticket canceled or reissued. The other major issue people are having is that these changes appear to be retroactive to affect awards that have already been issued. Finally, Delta appears to be blaming their best customers, never mind the fact that not returning SkyMiles will not fix the “problem” of unused award seats.

My Take

As regular readers know, I have always had mixed feelings about the carrier based in Atlanta where I grew up. I am proud of their role in transforming Atlanta into a global hub, but I find them obtuse and customer un-friendly. These latest actions hurt much of the goodwill they earned by releasing more last minute “low” awards. I generally accept the fact that loyalty programs will always make their rules more restrictive as time goes on, but I think that they are crossing a big line by changing the terms on awards that have already been issued.

 

How To Save Money With Airline Gift And Promotional Cards

By: Jason Steele

Recently, I booked a truly free flight for my family; Three round trip tickets to Albuquerque. I did not use frequent flier awards and I paid no taxes. How did I do it?  Over the weekend, I visited a bicycle race where Frontier Airlines was a sponsor. The nice people who were at the Frontier booth had hundreds of promotional cards, of which they were happy to let us have a dozen. Each card was worth between $10 and $50 each. After scratching off the codes and entering them into their web site, we found out we had a $50 card, two $40 cards, six $20 cards, and three $10 cards. The next day, Frontier announced their annual Colorado Day sale, with fares for as low as $9.99 each way to….Albuquerque! After we found a free Saturday with three seats open seats in each direction, I was able to use each of the six $20 gift cards to book six one way flights for three people to visit ABQ and return to Denver, the same day. With taxes, each flight came out to $17.99 per person, each way.  The fantastic thing is that the promo cards are just like gift cards, they actually cover taxes.  The last time I used one, I simply paid the taxes on an award flight with miles. Finally, the amazing thing about our little day trip is that we will all be receiving frequent flier miles for this flight that we didn’t pay for!

Red Or Green?

When visiting Albuquerque, red or green is the major decision you have to make. That is because the delicious New Mexican cuisine is always smothered in either red or green chiles. Note that New Mexican cuisine is entirely different than Mexican food. With no overnight stay and a Denver bus pass to the aiport, we won’t pay for parking or lodging for our quick day trip. Therefore, our major expense will actually be the food, but fortunately, that is a major motivation for visiting.

Other Gift Card Deals

Another trip we will be taking is to Chicago this fall. I was just about to book flights on American Airlines when I realized that I had read somewhere that gift cards could be useful on that carrier. Sure enough, I found out that Costco was selling American Airlines gift cards for .90 cents on the Dollar. Therefore $400 worth of gift cards were selling for $360. This is why I love Costco, another chance to save a quick $40. Like the promotional cards from Frontier, American treats these cards like cash for the most part. They can be used to pay for an airfare, but they are not valid for paying additional fees.

Yet Another Way To Save Money With Gift Cards

Many credit cards offer additional cash back for spending at grocery stores. Some offer this promotion at certain times of the year, while others give you the extra cash back year round. Most grocery stores also sell gift cards from many of the major airlines. Simply purchase these gift cards at the grocery store to add to your cash back. I certainly would only buy them just before booking a flight. In fact, if you have a card that gives you more cash back on grocery store purchases, you can use this trick to save money on all sorts of things, not just airfare.

Conclusions

Leave no stone unturned in the quest to cut down on travel expenses. If that means asking for a bunch of promotional gift cards, do it! If that means buying discounted gift cards at warehouse stores, why not? The airlines spare no expenses pricing their product so as to earn the maximum revenue, and we as customers should be trying just as hard to get the best value possible. Every now and then, that actually means you can travel for free. Now, all we have to do to prepare for our New Mexico trip is make sure our passports are up to date : )

Credit Cards Versus Unauthorized Charges

By: Jason Steele
08/09/2011

One of the little known facts about credit cards is that merchants must obtain a specific authorization each time the charge your card. They are generally not allowed to keep your card “on file” and just charge it whenever they see fit. Doing so opens them up to the possibility that the customer may request a chargeback. In such a situation, it is up to the merchant to prove that they were specifically authorized to make that charge.

Hotel Goes Crazy With Your Card

Over at travel columnist Chris Elliot’s site, there is an interesting story of a Priceline customer who returned from his vacation to find out that the hotel had added several unauthorized charges. The charges included cleaning and booking fees that exceeded the original cost of the reservation. Eventually, the traveler’s Visa card ate the charges, but the key moment came when the representative from Visa asked Priceline if the customer had authorized them to allow the hotel to directly charge the customer’s card. In the absence of such authorization, cardholders hold a strong case for a chargeback. In this instance, the hotel did not receive the customer’s authorization nor did it even notify them of the charges. The customer simply found the charges on his card when he returned.

A Similar Experience With United

One of the reasons I tried hard to avoid United is that I had a similar experience. I received a voucher from one of their inevitable customer service screw ups. In order to use this discount, I had to call the airline, pay for my flight with a credit card, and mail the certificate it. No this was not decades ago before the Internet,  but just a few years back. Anyways, I confirmed the correct, discounted price over the phone and mailed in the certificate. When my credit card statement arrived, I was charged the correct price, along with two additional charges that were labeled “ticket by mail fee”.  Of course, the ticket was issued electronically, it was not ticketed by mail, and I never authorized the charges. When I called United, they thankfully did not try to claim the fee was legit. Unfortunately, they simply wished to offer me more of the same vouchers instead of a refund. When they hesitated,  I indicated that my next step would be to submit a chargeback. I insisted that my credit card was charged without my authorization and they agreed to mail me a check. I eventually received the check, and that is the last time I remember doing business with them.

Conclusions

Before submitting a purchase, merchants must receive specific authorization from the card holder, each time. To do otherwise is to submit an unauthorized charge and that is tantamount to fraud. Consumers need to closely monitor their statements to look for unauthorized charges. Credit card use requires to parties to consent in order to be processed legitimately. By making sure that your authorization was given for each charge, you can ensure you are not the victim of an overzealous, or scamming merchant.

It's Back, Buy US Airways Miles With A 100% Bonus

By: Jason Steele
08/08/2011

US Airways just announced that for the second time in a year, it will be selling miles with a 100% bonus. It is days like this that I wonder if US Airways is an actual airline, or just a company that sells miles and markets award flights on its Star Alliance Partners.

What Is The Deal

First, you have to go to US Airway’s site and buy the miles. The offer is valid from now until September 15, 2011. You can buy miles according to the following terms:

For the purposes of this example, let’s look at the following example: Let’s say you were a student in Denver who was planning to go overseas next summer to study abroad in a place like Prauge in the Czech Republic.  You could purchase a ticket in economy class for about $1600. For that price, you will take a variety of carriers as there are few airlines that serve both cities, just Delta, British Airways, and Lufthansa. My proposed alternative would have you buying 50,000 miles and getting the 50,000 miles bonus, for only $1478. That 100,000 miles is enough for a business class ticket from anywhere in the United States to any European destination served by the Star Alliance.

Next, you would have to find award space to Europe. That is no small feat, but it is possible, especially if you are looking this far in advance and are a little flexible. The hard part is getting the flight overseas as well as the flight from your hometown to your trans-Atlantic gateway. Once you get to Europe, my experience is that there is almost unlimited award space availability on Star Alliance carriers such as Lufthansa, Austrian, Swiss and others.

The Issues

Finding award space is the key problem here. I have had great luck finding seats using third party tools such as ANA Airline’s web site and the KVS tool. First you just have to find the transatlantic legs, than the domestic, and finally the intra-european. Next you have to call US Airways to book the partner award. This is easier said than done. Many representatives there are poorly trained and they are relied on to enforce their partner award rules manually. The end result is that some will make up rules and others are just so unfamiliar with their systems that they have difficulty performing this task. In my experience, you often have to politely end the call and try again if the person you speak to is unable to “see” the award seats you already found.

But Wait, There’s More!

After you get past the issues of award space availability, there are several great thing about these award flights compared to paying directly flights. Award flights with US Airways allow you to include a stop over or an open jaw. This means that our hypothetical student could stop off anywhere there is a Star Alliance hub. For example, one of the Star Alliance carriers happens to be Brussels Airlines. If this student wanted to see the start of the 2012 Tour De France, he could ask for a stopover in the Belgian capital, near the city of Liege which will be hosting the first stages of next year’s bike race.  He could then c0ntinue on to Prague on Brussels airlines or other carriers, staying for as long as he would like.

One option here to avoid availability issues is to make the reservation first, and then to purchase and redeem the miles. US Airways allows reservations to be held for three days, while mileage purchases are instantly credited to your account.

Finally, by using a US Airways award for summer travel to Europe, you have the opportunity to enjoy some exception service on some great European carriers at a time when airfares are exceptionally high. Lufthansa, Swiss, and others are have business class service that is just so far ahead of US Airways and other domestic carriers, that they I don’t really consider them to be the same products.

Conclusions

This is not a case of free flights, as you will have to pay about $1650 when all taxes and fees are included. If you want something closer to free, you probably need to sign up for some incredible credit card bonus offer when it comes around. On the other hand, this is a great promotion that will let you travel in business class, with a stopover, for about the same cost as an economy ticket with no free stops. For most people, this is an offer that is seriously worth considering.

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