Business or Personal AA Card - Which is "Better"?

Discussion in 'General Discussion | Credit Cards' started by Ed Chandler, Nov 19, 2013.  |  Print Topic

1. Original Member

Ed ChandlerSilver Member

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Question: Which is “better” the personal AA card or the business version? (Spoiler: Probably neither)

It’s easy to get distracted by signup bonuses and miss some of the fine points of a card’s benefits. Since I haven’t seen this discussed here yet, I’ll throw it out there for commentary.

In almost all ways, the Citi Business and personal AA cards are identical, but there are two (that I see) differences:
• The personal card will rebate 10% of the miles you redeem, per year, up to a maximum of 10,000 miles.
• The business card gives a renewal bonus of 5% of the miles you earn (on the card), per year. (no limit)
Interesting: The business card rewards you for spending while the personal card rewards you for redeeming.

My first thought was that someone who didn’t redeem very often wouldn’t be getting the rebate benefit of the personal card very often, and might get better utility out of holding the business card. For instance, someone who spends \$25,000 and doesn’t redeem anything that year, would net 26,250 miles on the business card while the personal card would net only 25,000.

That thought lasted about a minute before it occurred to me that the only purpose of acquiring points is to redeem them, so I went back and looked again, assuming some redemptions along the way. All of these are 5-year figures. Yes, I realize the game will change by then, but you have to start somewhere.

Scenario 1:
Assume \$25k spend per year with 25k redemptions (i.e. redemptions as soon as possible)
Personal: 5 redemptions, 12,000 miles remaining Winner!
Business: 5 redemptions, 6,250 remaining​

What if we don’t redeem as often, thus triggering the rebate less often and favoring the business card)?

Scenario 2:
Assume \$25k spend per year with 50k redemptions (i.e. redemptions every other year)
Personal: 2 redemptions, 35,000 miles remaining Winner!
Business: 2 redemptions, 31,250 miles remaining​

The gap is closing. How about if we redeem only once, at the end of the five years?

Scenario 3:
Assume \$25k spend per year with 125k redemptions (i.e. redemptions every fifth year)
Personal: 1 redemptions, 10,000 miles remaining Winner!
Business: 1 redemption, 6,250 miles remaining​

Even though we “wasted” some of the rebate in this scenario - hitting the 10,000 cap – it made no difference. The personal card still wins. That made me wonder whether there was ANY scenario under which the business card wins. It turns out there are two, but they’re not very likely for most of us.

The first involves very high spending - so that the capped 10% bonus is overcome by the unlimited 5% bonus.

Scenario 4:
Assume \$225k spend per year with 25k redemptions
Personal: 47 redemptions, with 0 miles remaining
Business: 47 redemptions, with 6,250 miles remaining Winner!

The second involves very low spending – so that the 5% earning bonus is what triggers the first redemption.

Scenario 5:
Assume \$4,763 spend per year with 25k redemptions
Personal: 0 redemptions, with 23,815 miles remaining
Business: 1 redemption, with 6 miles remaining Winner!

However, this victory is short-lived. Another \$37 of spend triggers a redemption on the personal card and a 2,500 rebate.

Conclusion:

Unless you’ve got a lot of business expenses and/or a lot of employees with cards contributing to your spend, the personal card will always earn you more. Then again, this assumes that you have nothing better to do with all of that spending.

So far I’ve ignored the other difference between the two cards, because I don’t really see it as a game-changer:
• The personal card gives a \$100 “flight bonus” after you spend \$30,000 in a year.
• The business card gives a “companion pass” after you spend \$30,000 in a year. (domestic economy only, roughly \$150 in fees)
Whoop-dee-doo. So, if your domestic economy “companion” flight retails for more than \$250, the companion pass pulls ahead in value, but this still assumes you don’t have a better use for \$30k of spend.

Yes, yes, people … I can hear you screaming that I should be using my SPG AMEX. Let’s go back and run those same scenarios with an SPG card in the mix:

Scenario 1:
Assume \$25k spend per year with 25k redemptions (i.e. redemptions as soon as possible)
Personal: 5 redemptions, 12,000 miles remaining
Business: 2 redemptions, 6,250 remaining
SPG: 6 redemptions, 5,000 SPG points remaining Winner!

Scenario 2:
Assume \$25k spend per year with 50k redemptions (i.e. redemptions every other year)
Personal: 2 redemptions, 35,000 miles remaining
Business: 2 redemptions, 31,250 miles remaining
SPG: 3 redemptions, 5,000 SPG points remaining Winner!

Scenario 3:
Assume \$25k spend per year with 125k redemptions (i.e. redemptions every fifth year)
Personal: 1 redemptions, 10,000 miles remaining
Business: 1 redemption, 6,250 miles remaining
SPG: 1 redemption, 5,000 SPG points and 25,000 AA miles remaining Winner!

Scenario 4:
Assume \$225k spend per year with 25k redemptions
Personal: 47 redemptions, with 0 miles remaining
Business: 47 redemptions, with 6,250 miles remaining
SPG: 56 redemptions, 5,000 SPG points remaining Winner!

Sure, you don’t get priority boarding, a free checked bag, a companion pass, or a \$100 rebate, but that’s a pretty compelling difference, and don’t forget that annual fee is \$30 cheaper.

“But wait!”, cried my inner math nerd. “Is there any scenario under which the SPG AMEX isn’t the best deal?” It seems like it might be possible. After all, the 5k transfer bonus only triggers when you transfer 20k points, so you ought to be able to “break” it’s advantage if your spending is low enough to avoid triggering the bonus. The answer turns out to be … it depends (but probably not).

From a strictly points perspective, you CAN break the SPG card’s advantage if you spend less than \$4,000 per year.

Scenario 6:
Assume \$3,999 spend per year with 25k redemptions
Personal: 0 redemptions, with 19,995 miles remaining
Business: 0 redemptions, with 20,995 miles remaining Winner!
SPG: 0 redemptions, 19,995 SPG points remaining​

It’s a Pyrrhic victory, since you haven’t earned a redemption anywhere. Of course, most people would rather take the 19,995 SPG points, especially considering their next latte will push them over the threshold to trigger the transfer bonus.

If you ignore the points and focus on the redemptions, the answer is more clear. The SPG card earns its first redemption in year 5 with exactly \$4,000 of spend per year. As we showed in Scenario 5, it takes \$763 more spending to earn the first redemption with the AA Business card and \$1,000 more with the AA Personal card.

Ultimate conclusion:

The SPG AMEX earns AA redemptions faster than either AA card, provided you spend \$4,000 or more per year. (Even if you don’t spend that much, you’d probably rather have the SPG points anyway.)

I’m sure plenty of people already knew this, but I think there’s value in sharing our thinking as well as our conclusions. Every time I hear someone else’s conclusion, my first thought is to see if I can “break” it. (Yeah, … I wasn’t very popular with my grade school teachers.) By all means, let me know if I’m in error, and feel free to let me know what you think.

2. marcwint55Gold Member

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.

Another consideration is the protections offered with the personal card are much greater than with the business card.

The SPG card will certainly be a better way to earn, however for establishments that do not take American Express, the AA cards come in visa or mastercard formats.[/quote]

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3. Original Member

Ed ChandlerSilver Member

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Indeed, but AMEX probably wins here too.

Granted.

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4. LauraPDXSilver Member

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Thanks Ed, I like your comparison posts!

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5. Original Member

Ed ChandlerSilver Member

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Requests? (No promises, but I enjoy the hobby and I enjoy writing, so ... )

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6. gconnerySilver Member

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Okay I'll bite... the obvious comparisons: United Personal Mileage Plus, Personal Club, Mileage Plus Business or pick a UR Card, say the Ink Bold or Plus or CSP...

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7. Original Member

julielou2Silver Member

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Ed...wow! Did you leave enough space on this forum to even allow us to post a response?

8. Original Member

Ed ChandlerSilver Member

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I did one on the incremental value of the CSP if you already hold the Ink Bold at about this time last year: http://milepoint.com/forums/threads...r-math-on-the-chase-sapphire-preferred.49007/

I did some work earlier this year when trying to decide whether the UA Club card was "worth it" to me. I'll see if I can whip that into "sharable" form.

9. LauraPDXSilver Member

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Now that I have been a "miles junkie" for the last couple of years, I have a drawer full of credit cards. They were exciting at first, but now less so. Maybe a post on "thinning" the pile (assuming you are in the same boat). I find it much harder to cancel them then to apply (no adrenaline rush.....)

10. traveltoomuchSilver Member

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I don't pay much attention to the AA cards, so I'll apologize now for the naive questions.

First, this seems to assume unbonused spending. If you're buying AA tickets as part of that spend, don't the AA cards come out ahead of the SPG Amex?

Second, is there a case to be made for getting both AA cards, putting the spend on the business card, and still getting the rebate on redemption? Does double-dipping work?

11. Original Member

Ed ChandlerSilver Member

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Good questons, traveltoomuch.

Yes, it assumes unbonused spending. But it's not quite so bad as 1x:2x. With SPGs 25% bonus you're looking at 1.25x:2x. So you have to weigh the .75x loss against the utility of SPG transfers to everyone under the sun while only being able to use your AA miles on AA. Of course, the AMEX BRG or PRG beats 'em both with 3x MR. Sure it's go a \$175 annual fee, but if you're buying enough airfare to tip the balance in favor of any given airline's card on the basis of spend, then you're probably spending enough to warrant one of the gold cards ... and still enjoy 3x MR on all direct air purchases instead of being limited to the airline who's co-branding your card.

Second, heck yes there's a case to be made for both. If you have both, then it absolutely makes sense to spend on the business card while keeping the other one in the drawer just to get the 10% redemption rebate. (I'm doing this right now.) And, of course, ... there's that second signup bonus.