Should You Apply For El Al’s New US Credit Card? Here’s Why It’s A Hard Pass For Me

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Airlines around the globe have tapped the lucrative US credit card market to sell tens of billions of dollars worth of miles to major banks. It’s a win-win-win situation where the banks gain from consumers using their credit cards, consumers are awarded with lucrative miles, and airlines make a fortune selling those miles to the banks.

American, Delta, and United have been able to stay afloat during the COVID-19 crisis by mortgaging their mileage programs for billions of dollars in low interest loans thanks to lucrative credit card deals. Mileage programs are far more profitable than regular airline operations and you can even say that airlines exist today to support the credit card and miles business.

Enter El Al.

Their convoluted Matmid mileage program doesn’t use miles like practically every airline in the world. Rather it obfuscates its program with confusing point levels and restrictions that require a PhD to understand and seems designed to hide its shortcomings.

Unlike most US programs, Matmid has points that expire after 36 months regardless of activity, and awards have hefty fuel surcharges. That makes the program a poor value compared to the US competition and it discourages consumers from investing in it. It also lacks redemption partners or the ability to redeem for flights that don’t begin or end in Israel. As Israel has blocked most foreigners from entry since March, that means there’s no way to take advantage of those points now for many people.

El Al also killed the ability to easily search for saver level Matmid award tickets when they redesigned their website to make it even worse than the mess it was beforehand. The saver award tickets are the least expensive way to book awards and they price according to the award chart rather than dynamic pricing. However now you can only see saver award rates if you already have sufficient points in your account, otherwise you are shown much more expensive dynamically priced awards! That makes it nearly impossible to even have a goal to redeem for as you don’t know what’s available until you have enough points for it.

If I were Eli Rozenberg, El Al’s new controlling shareholder, I would burn Matmid down to the ground and create a brand new loyalty program along with compelling US and Israeli credit card offerings. A reimagined and innovative frequent flyer program could prove to be more lucrative than the entire airline.

But El Al will launch their own US credit card product called Fly Card Preferred based on its Matmid program. Targeted mailers are being sent to Matmid members to apply for the new card.

The USBank issued El Al card has an intro bonus of 800 Matmid points after spending $3,000 in 90 days.

Currently it takes 40K AMEX points to transfer into 800 Matmid points. However El Al has announced that they will sever ties with AMEX on 1/1/21.

If you transfer 5,000 AMEX points into 100 Matmid points you get 12 months of Executive status, which gets you roughly 20% off of award flights. However, going forward, only El Al cardholders will have access to that discount due to the end of AMEX point transfers to El Al.

The card claims to offer up to 20% off award tickets, but that’s just the standard Executive status discount that is available now to people who transfer 5K AMEX points.

El Al’s award chart is truly one of a kind. While every other award chart out there is based on regions or distance, El Al’s has a different price for every city and for every season.

Here’s a rough guide to El Al award pricing for Executives (those who have an El Al card or have transferred 5K AMEX points to El Al in the past 12 months) and for non-executives. Note that in addition to the points listed below, taxes and fuel surcharges will add another $200-$500 onto each round-trip ticket.

The El Al card will earn 1 point for every $40 spent on everyday items and 3 points for every $40 spent on El Al tickets. Yup, just try to wrap your head around that…

It’s hard for most people to compare the value of those points to every other points and miles currency, but you can follow the card’s lead of earning 1 point per $40 spent and say that regular miles are 40 times an El Al Matmid point. That means the card’s 800 point intro bonus is worth about 32,000 regular miles, a weak signup bonus.

The 800 Matmid point signup bonus will get you about 45% of the way to a round-trip coach ticket (1,760 points in the summer) or 15% of the way to a round-trip business class ticket (5,100 points) from NYC to Israel. Note that you will still owe about $350 in fuel surcharges and taxes.

Compare that to United, where a new credit card will get you about 75K miles or 88% of the way to a round-trip coach ticket using the award chart (85K miles) or 50% of the way to a round-trip business class ticket (150K miles) to Israel. And with United you will only owe about $50 in taxes and no fuel surcharges.

For arguments sake, let’s say the value of the NYC-TLV capacity controlled award ticket is $850 and the business class ticket is $2,500. After about $350 in taxes and surcharges that would mean 1,760 points are worth $500 and 5,100 points are worth $2,150, a value of 28-42 cents per point.

Let’s say the value is at the high end of the equation, or 40 cents per point.

Since you need to spend $40 to get a point worth 40 cents, you are effectively earning just 1% back everywhere or 3% back on El Al flights. And it’s locked into a currency that expires after 3 years.

If you value the points at 35 cents per point you are effectively earning just 0.88% back everywhere or 2.63% back on El Al flights.

If you value the points at 30 cents per point you are effectively earning just 0.75% back everywhere or 2.25% back on El Al flights.

No matter how you slice it, that is one horrendous value proposition.

El Al does occasionally have award sales, but typically those are for coach travel where the value isn’t great in the first place.

You also have to take into account that points expire after 36 months and can’t be renewed with activity.

Did I mention the card also has a $99 annual fee?

Compare that to a no annual fee card like Chase Freedom Unlimited® that earns between 1.5-3 points per dollar everywhere, where every point earned is worth 1.5 cents or more, for an effective 2.25%-4.5% back everywhere with the ability to earn more via mileage transfers.

Or compare that to the no annual fee Citi Double Cash Card that offers 2% cash back and the ability to earn more via mileage transfers, such as flying United round-trip to Tel Aviv in coach for free after $32,000 in spending or flying United round-trip to Tel Aviv in business class for free after $47,000 in spending. On the El Al card you would need $70,400 in spending for an El Al coach ticket or $204,000 in spending for an El Al business class ticket and you would still need to pony up some $350 in fuel surcharges and taxes.

Plus, with cards that issue bank points you are shielded from points expiration policies and the ability for any one airline to devalue your points.

Granted, there are other El Al card benefits that some may find valuable:

• Cardholders can request seats like exit rows at checkin at no charge if available and they will be assigned at the gate. However cardholders will be prioritized behind elites and customers paying for those seats.
• 20% of points earned from spending will count towards earning El Al status, but this is capped to keep you far from earning each level.
• If you spend $200,000/year you’ll earn Gold status and if you spend $400,000/year you’ll earn Platinum status. But that comes at a massive opportunity cost for spending on more lucrative cards.
• Standard World Mastercard benefits like cell phone insurance and a $10 monthly Lyft credit if you take 5 Lyft rides apply.
• There are no foreign transaction fees.
• You get 40 points, worth about $12-$16, every card anniversary.

But overall based on El Al’s notoriously weak Matmid program, I can’t think of any compelling reason for Americans to carry the El Al credit card under its current value proposition.

Will you apply for and spend money on the El Al credit card?