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What’s the ‘best’ credit card for earning miles?

Our questions don’t get any simpler than this: “What is the best airline mileage credit card to apply for?” Unfortunately, while the question is simple, the answer is not. “Best” means many different things to different travelers, and one size definitely does not fit all. For that reason, I’ve developed a chart to help each of you answer that question for yourselves. I cover the three basic types of cards that earn “free” air travel:

  • Airline cards are MasterCard and Visa cards issued by a handful of large banks, each co-branded with one individual airline. These cards are available for five legacy lines (American, Continental, Northwest, United, and US Airways) plus AirTran, Alaska, America West, Frontier, Hawaiian, Midwest, Southwest, and a bunch of foreign lines. AmEx issues similar cards for Delta and JetBlue. You receive credit (usually one mile per dollar) for every purchase you charge to the card plus bonuses for air tickets and other specified purchases; JetBlue and Southwest provide roughly equivalent awards. The credit you earn through the card goes directly into your frequent flyer account with the co-branding airline and mixes with the miles you earn by flying.
  • Bank-buys cards are MasterCard and Visa cards, issued by various banks, and not affiliated with any individual airline. Instead, you accrue points based on how much you charge in a separate frequent flyer account with the bank; you cannot combine these miles with the miles you earn by flying in any airline’s program. When you accrue enough points, the bank buys you a ticket on any of several airlines, at the lowest available price, usually with a dollar maximum for each ticket class.
  • T&E (Travel and Entertainment) cards from American Express and Diners Club were the original travel-oriented credit cards. Both award one point per dollar (with some promotional bonuses), which you can convert into miles in several airline programs.

In the chart below, I’ve outlined the strengths and weaknesses of airline cards, bank-buys cards, and T&E cards. Each type of card is rated based on several factors, including how you use credit, how you earn credit, financial factors, and a few other factors. Take a look, and then I’ll explain my evaluations below.

How you use credit Airline card Bank-buys card T&E card
Economy flights Poor Good Poor
Premium flights, upgrades Good Poor Good
Long-term build-up Good Poor Good
Fly mainly one line Good Poor Good
Fly lots of lines Fair Good Good
How you earn credit
Mainly flying Good Poor Good
Mainly buying Poor Good Good
Financial factors
Fees and APRs Poor Good to poor Poor
Foreign exchange gouge Poor Good to poor Fair (1)
Other factors
Loss when converting to miles Good Good Poor
Rental car collision coverage Fair Fair Good (2)

(1) Poor on Diners Club
(2) Fair on most AmEx

Here are some of the details behind the chart’s entries:

How you use credit

If your main interest is economy-class travel, the miles required for a bank-buys ticket are about the same as the airline miles required for a restricted frequent flyer seat, but your chances of getting a seat are much higher with the bank miles. The airline cards are rated “poor” because (1) travelers find it so hard to get restricted frequent flyer seats when and where they want them and (2) to bypass those limits, travelers have to use double miles.

On the other hand, the only practical way to the front cabin—through upgrades or premium-class awards—is to use airline miles. The bank-buys cards are virtually worthless for premium-class flying.

If you like to build up your credit over a period of many years, the T&E cards are your best option, since their credit never expires (as long as you keep your account in good standing). Also, while most airline credit expires if your account is idle after three or fewer years, your accumulated miles remain good as long as you keep using your card. But most bank-buys credit expires after a few years.

If your award travel, whether leisure or business, generally directs you to one primary airline, you’re probably better off with a card that earns credit in that airline—either its own card or a T&E card that transfers credit to your preferred airline.

But if you frequently use different lines, either a bank-buys or a T&E card can give you more options. You can theoretically use credit from bank-buys cards on any airline in the world. You can convert AmEx credit into miles on Continental, Delta, Frontier, Hawaiian, JetBlue, US Airways, and several foreign lines; you can convert Diners Club credit into miles (or equivalent) on Alaska, American, America West, Continental, Delta, Frontier, Hawaiian, Midwest, Northwest, Southwest, United, US Airways, and several foreign lines. Airline-card credit is limited to the individual airline that co-brands the card, plus its partner lines—more than a dozen for some of the larger lines.

How you earn credit

If you earn most of your miles by flying, it makes sense to use a card that generates miles you can combine with your airline miles—either an airline’s card or a T&E card. But if you earn most of your miles through the card, a T&E or bank-buys card provides more flexibility than an airline card.

You can use MasterCard, Visa, and Diners Club (now co-branded with MasterCard) at around three times as many places worldwide as AmEx. That doesn’t matter much if you use your card mainly for air tickets, hotels, and upscale restaurants, but a lot of small merchants and restaurants don’t accept AmEx cards.

A few specialty cards, such as AmEx “Blue,” award less than one mile per dollar charged. While those cards have some advantages, they’re not a good idea if you want to maximize your miles.

Financials

Some bank-buys cards combine low or no annual fees and relatively low APRs. Most airline and T&E cards have stiff annual fees—$50 or more—and most airline cards have above-minimum APRs.

All of the airline co-branded MasterCard and Visa cards add a surcharge of three to three-and-a-half percent to purchases charged outside the US: one percent to cover the conversion fees from the international MasterCard and Visa associations; the remainder pure gouge. Diners Club also adds three percent. Most bank-buys cards also impose such surcharges, although a few, most notably Capital One, does not. AmEx charges two percent, total. While a difference of two to three percent in your overseas purchases may not amount to many dollars over the course of a year, the gouge still rankles.

Conversion loss

With bank-buys and airline cards, you get to keep all the credit you earn. But the T&E cards devalue your credit when you exchange it for airline miles—four percent of the value of the credit with AmEx, nine-and-a-half percent with Diners Club.

Ancillary benefits

For travelers, by far the most important ancillary benefit of a credit card is no-cost collision coverage for rental cars. Diners Club is the standout here; its cards provide primary collision coverage, which means that the card picks up the tab for damage whether or not you have other insurance. A few MasterCard and Visa cards also offer primary coverage. AmEx, Visa, and most MasterCards provide secondary collision coverage, which means the card picks up only what you can’t first recover from other insurance sources.

Choosing your card

To choose your “best” card, you need to wend your way through all of the factors, weigh their importance, and evaluate the tradeoffs among them. Because the differences are so great, lots of travelers carry two or three different cards, using whichever one is best for each individual transaction.

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