Consumer Tips on Airline Miles Credit Cards

August 3, 2011, Written By Lynn Oldshue

LowCards is a Citi partner. These offers, valid when the article was written, may have expired. View our full editorial disclaimer here.

As the costs of flying continue to climb, buying airline tickets with reward points can save a lot of money.

But there are many cards that offer airline rewards and it can be confusing to find the right card. In addition, even if you have the right card and earn enough miles, getting the free flight you want is not easy.

Limited options around free flights is one of the frustrations of generating airline miles with your credit card, whether it is a generic travel credit card (such as Miles by Discover or Capital One Venture card) or an airline
sponsored credit card (like the Continental OnePass Plus card). In the last five years, the number of Americans who use cards that accumulate points for merchandise and/or airline tickets has increased 23%, according to a study by Vertis.

“Everybody who has a frequent flyer credit card is dealing with more and more people chasing fewer and fewer seats. As a result, redeeming your miles through an airline sponsored credit card is becoming more difficult because you are captive to only one airline,” says David Robertson, publisher of the Nilson Report. “With generic travel reward cards, you have a tiny bit more leeway because you are not tied to one particular airline.”

Regardless of whether you have a generic travel reward card or an airline sponsored credit card, here are some tips in using your miles in the most efficient way:

* Be aware of any expiration dates. You spend money and time earning points, but they may not be yours forever. Read the fine print for expiration dates.

* Pay your credit card bill on time every month. If you have a late payment, the bank or credit card issuer can withhold the miles you earned during that billing period. If you want them back, you will have to pay a steep reinstatement fee.

* You may have to pay a fee to redeem your points for tickets. Wells Fargo charges a $24 airline ticket redemption fee. Delta recently eliminated the redemption fee for Skymiles frequent fliers. The fee ranged from $75 to $150.

* Don’t waste your points on a cheap flight. Points are worth about 1.2 cents and it typically costs 25,000 points for a round-trip domestic flight, so a round-trip would cost $300. If a flight costs less than $300, it is cheaper to pay in cash and save your points for a flight that costs more than $300.

What is more advantageous for the consumer: a generic travel reward card or an airline sponsored credit card? Here are some differences between the two types of cards:

1. Generic Travel Reward Cards Less Likely to Charge Annual Fees

From January 2010 to March 2011, only 23% of generic reward card offers contained an annual fee compared to 99.5% of airline cards, according to a direct mail study by Mintel Comperemedia. Most cards waive the annual fee during the first year.

The generic travel reward credit card is not as restrictive and is less likely to require an annual fee than an airline credit card. With a number of airline sponsored credit cards, you have to charge a significant amount on the card before you can just break even with this annual fee.

2. Generic Travel Reward Cards Offer More Airline Options

Airline selection is the biggest difference between generic and airline cards. Airline credit cards limit travelers to the card’s issuing airline and its partners. This works out best if your airport is dominated by one carrier or if you are loyal to one airline.

Generic cards offer more airline options for a free travel ticket. Most generic cards advertise that you can use miles on any airline at anytime. There are no seat restrictions and sometimes no blackout dates.

Generic cards also offer other redemption options. If you have difficulty redeeming your points for a plane ticket, you can use the points on a hotel.

3. Generic Travel Reward Cards Offer More Introductory Interest Rates

About 52% of airline cards did not offer introductory pricing compared to 18% of travel reward cards, according to a Mintel Comperemedia study.

Introductory periods are shorter with airline reward cards. Since these cards sometimes have slightly higher interest rates, these are not a good option for balance transfers. If you are transferring a balance, look for a card with the lowest rate.

 

4. Airline Sponsored Credit Cards Offer Better Bonus Point Incentives

According to a study by Mintel, eight out of 10 credit card offers in 2009 were for rewards cards offering points, miles or cash back, up from six out of 10 offers the previous year. Both types of airline reward cards use bonus offers to attract applicants, but the airline cards with annual fees offer the bigger bonus.

Currently, Southwest is offering 50,000 bonus miles after your first purchase with their Rapid Rewards Premier Card, enough for two free flights to almost anywhere Southwest flies. Continental Airlines OnePass and United Plus Visa Signature cards offer 25,000 bonus miles with your first purchase.

The generic Chase Sapphire card offers 10,000 bonus points after you spend $500 in three months. Discover Miles offers offers 1,000 Bonus Miles each month you make a purchase for twelve months from the date your account is opened (maximum 12,000 points).

In addition, many airline rewards cards like the Continental OnePass and Southwest Rapid Rewards Premier card will double miles (2 miles per $1 spent) when you use the card to purchase airline tickets. Most frequent flier programs have partnerships with other merchants like hotels, car rental companies, and restaurants. You can also earn more miles with these.

5. Airline Sponsored Credit Cards Offer More Flight Perks

Airline credit cards can give customers perks which generic travel reward credit cards don’t have access. For instance, the recently-introduced United Mileage Plus Explorer Card gives the cardholder and a traveling companion one free checked bag. Continental and Delta do not charge their cardholders for the first checked bag on a flight. A number of airline sponsored cards also offer upgrades to elite status, seat upgrades, discounts on flights, and access to airport lounges.

6. Claiming Miles is Automatic With Airline Credit Cards

Airline credit cards may be more convenient than general purpose travel reward cards to register mileage credit after a flight. Airlines automatically post mileage onto a traveler’s frequent flyer account when the account number is used during booking or check-in.

With generic travel reward credit cards, the cardholder must claim and monitor reward earning. There are additional steps for converting points to airline miles but this can be done online. Some issuers like Citi will charge a fee for redeeming rewards by calling the Citi Thankyou Service Center.


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The information contained within this article was accurate as of August 3, 2011. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.