Picking the right Airlines Miles Credit Card – Part I

This article (in two parts) is going to help you travel thru the maze of choices of Airline Miles Credit Cards and help you pick the right card for you. Part one here is a survey of the landscape of the cards available. Part two will contain a series of questions and a flowchart to help you pick the right card.

Search on Airline Miles Credit Cards on Google and you will get pages and pages of all kinds of cards out there. Some of the offers seem absolutely unbelievable – 2 roundtrip tickets free, just for signing up! But as they say – ‘What the bold print giveth, the fine print taketh away’. The offers usually come with several clauses and sub-clauses. I just saw one that gave 50,000 points for signing up. Reading the details showed that they were really 20,000 to sign up, 20,000 for spending $1,500 in the first month, 2,500 for each additional card member added (upto four). So, unless I have four other adults in my household who I am willing to give the right to charge to my card , there is no way I will really get 50,000 points.

Another important fact to check is all the fine print associated with the ‘free’ ticket being awarded. There may be blackout dates, Saturday night stay needed and/or limits on the price of the so called free ticket.

The most important questions you want to ask yourself are – what are your goals with the card? What kind of Airline reward are you looking for? And will you be able to redeem it when you need it? My goal is to help you think of the right questions to ask when picking a credit card that earns airline miles.

The Airline Miles Credit Card landscape – What choices do I have?

Credit Cards that award airline miles or some form of air travel benefit fall into three main categories:

1. Credit Cards affiliated to Airline Mileage programs
2. Credit Cards affiliated to Rewards program with travel benefits
3. Credit Cards with their own Travel Benefit programs

Lets look at these in depth.

1. Credit Cards affiliated to Airline Mileage programs:

These are the Credit Cards branded by an Airlines Frequent Flyer programs. They earn airline miles in the airline whose program is branding the card. Some popular cards of this type are – United MileagePlus Visa Card (by Chase), Delta SkyMiles American Express Card, US Airways Dividend Miles Mastercard (by Barcklays Bank). Your earning rate is 1 mile for $1 spent. Some cards may give double or even triple miles on certain purchases.

Pros:

1. Such cards usually have special airline benefits only available to card members. For example, United Airlines awards status miles (EQM) for every dollar spent on purchases made on united.com using the MileagePlus visa card. Another example, USAirways gives priority boarding to passengers with tickets purchased using their Dividend Miles Mastercard.
2. Such cards have a significant amount of miles awarded when you make your first charge on the credit card. Typical awards are of 25,000 miles, enough for a domestic round-trip ticket. The card may have an anniversary award to miles every year too or annual companion ticket discount coupons.
3. Such cards are usually free for the first year and have a fee there after. The fees are typically pretty nominal, given the benefits available.
4. Having such a card ensures that your miles never expire. Even if you charge $1 every 18 months, the one mile awarded to your account keeps all your balance miles from expiring.
5. Even if you cancel the card, your miles are safe with the airline. They do not get voided when you cancel the card.
6. You have the flexibility to redeem the miles on award tickets or on upgrades.

Cons:

1. You are stuck with the airline associated with the card. You cannot pick and choose where you want to use the miles. If the airline does not fly where you need to or has no seats available, the miles are not much use.
2. Any award ticket has blackout dates. No matter how many miles you accumulate, you cannot use them during those dates.
3. Award tickets are not free. The cost of the tickets will be the booking fee and taxes and also the annual fee of the credit card for the all the years you used the card to accumulate the miles
4. The minimum miles you have to spend to get a free round trip domestic (US) ticket is 25,000, irrespective of the actual ticket price. This might not be a good deal if the ticket you are redeeming the miles is low priced (under $300).
5. Once you have redeemed the miles, you may get stuck with an oddball number of miles in your account that is too little to amount to any award anytime soon. You cannot redeem or transfer them elsewhere easily.

2. Credit Cards affiliated to Rewards program with travel benefits:

These are Credit Cards that are affiliated to reward programs that allow you to transfer their points to Airline miles programs. I have a very detailed analysis of three such cards issued by American Express in this article.

Pros:

1. You can transfer the points earned to the airline of your choice only when you need them. You don’t have to pick the airline to earn the miles on upfront.
2. Points in such programs never expire.
3. The program may have a rate of transfer such that it earns you more than 1 mile for every dollar spent. The SPG card is a good example. See my article here.
4. You only transfer the amount of miles you need at any time. You can use the rest later in another program, as needed.

Cons:

1. You get no special airline benefit or status miles as there is no airline affiliated to the card.
2. The card may not have an option to transfer the points to the airline you need.
3. The transfer rate may not be good for the airline you need the miles on.
4. You may have to pay taxes on the transfer. See details of this in my post here.

3. Credit Cards with their own Travel Benefit programs:

Probably the most well known of such types of cards is the CapitalOne card. Who has not seen one of their “What’s in your Wallet?” ads? Another popular example (one I use personally) is the Quicken Rewards card by Chase. The way these cards work is pretty simple. You earn 1 point for every $1 spent (or more, depending on the program). You accumulate points and can redeem them for discounts towards travel expenses. Every 100 points gives you $1 credit towards you travel expense, with a minimum amount you have to redeem being 10,000 points. So, for example, if you spend $320 on an airline ticket, you can get a credit of upto $320, based on how many points you redeem. If you redeem 10,000 points, you get a $100 credit towards your ticket. If you redeem 25,000 points, you get a $250 credit and so on.

Pros:

1. No blackout dates or redemption rules.
2. Any seat of any class of air travel qualifies. You don’t have to depend on award seats being available or using them for coach seats only.
3. The minimum points you have to spend is 10,000 which is much better than the 25,000 minimum for airline miles. So, you can redeem these for credit towards a very cheap ticket too.
4. You can redeem the points towards the taxes part of your ticket too!
5. Most such programs allow redemption of points towards any kind of travel expense – airline ticket, hotel stay, car rental, etc.

Cons:

1. You get no special airline benefit or status miles as there is no airline affiliated to the card.
2. Any unused points get voided when you cancel the card.
3. There is no option to combine these points with, or to transfer them to any other program.
4. You cannot use these points to upgrade a ticket you have already purchased.
5. You have to make the travel purchase on the card you are earning the points on.
6. Typically such cards do not give any points for first use of the card. You start from zero.

In Part 2 of this article, I walk you thru a series of questions ( as a flowchart) to help you decide which is the right kind of Airline Miles Credit Card for you.

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