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Earn Miles With Credit Cards (Bank Cards and Series Summary)

SmarterTravel

In this final installment of the credit card series, we’ll look at bank-issued credit cards, the newest permutation of travel-rewards cards, and discuss why they’re better for frequent buyers than frequent flyers. Then we’ll wrap up with a review of the four major categories of cards, with some thoughts about which card types might be best suited for consumers with various travel and purchasing profiles.

Bank cards: Variation on a theme

In the history of travel-rewards cards, the most recent development is, for lack of a better term, the unaffiliated bank card. This is a MasterCard or Visa that rewards users with “miles” or points for charges, just as the credit cards linked to airline and hotel programs do.

Credit card series

Read the first three installments of Tim Winship’s series:

Part one: Airline cards

Part two: Hotel cards

Part three: Multi-program cards

Because these card programs developed along the same lines as the airline programs—whose success they hoped to emulate—they initially adopted miles as their currency, even though no actual travel was required to earn awards. For that reason, some refer to them as “fake mile cards.”

In fact, the sense in which the miles are “fake” illustrates the bank cards’ distinguishing characteristic: the miles are proprietary. In other words, miles can only be earned and redeemed within that card’s rewards program.

Therein lies the big disadvantage of the bank cards: the miles you earn are not combinable with traditional frequent flyer miles. And the bank cards award miles only for charge-card activity, unlike airline programs, which award miles for flights, hotel stays, car rentals, and, through the programs’ airline-affiliated credit cards, charges. So travelers who participate in a traditional airline program and a bank-card program can end up with two separate types of miles that are not combinable.

The following chart summarizes the key features of the dominant bank cards:

Card Annual fee APR Bonus Maximum monthly miles Miles for round-trip domestic award [1] Maximum value of domestic award Miles expire
Bank of America Platinum Travel Visa $30 10.9% variable 1,000 6,250 35,000 $500 Five years
Capital One MilesOne Rewards Visa $19 9.9% fixed Up to 5,000 for balance transfers 8,000 35,000 $450 Five years
Chase Travel Rewards $25 program fee [2] 8.49%-19.24% variable [3] N/A 10,000 25,000 [4] $500 Five years
Citibank Diamond Preferred Rewards Card $0 9.9% variable Double points for first six months No limit 35,000 $300 Three years
MBNA Elite Rewards Platinum Plus MasterCard $0 8.9% fixed 5,000 7,000 30,000 [4] $400 Four years
U.S. Bank Visa Travel Rewards Card $55 14.4% variable 2,500 10,000 25,000 $500 Five years

[1] Round-trip coach ticket for travel within the continental U.S. booked at least 21 days in advance, including a Saturday-night stay
[2] Travel Rewards is a $25 extra-cost add-on to Chase Classic, Gold, and Platinum MasterCard or Visa credit cards, which have no annual fees
[3] Depending on type of card and pricing level
[4] Round-trip within the 50 U.S. states

Earning

Like their airline-program counterparts, the bank cards typically award one mile or point for every dollar in net purchases charged to the card.

Unlike airline miles, bank-card miles have limited life spans. As the chart shows, miles expire after three to five years. This is in sharp contrast to airline miles, most of which can be extended indefinitely, with a single account transaction every 36 months.

While it won’t matter to most consumers, it should also be noted that there’s generally a limit to the number of miles that may be earned monthly and annually.

Awards

For comparison purposes, the chart above indicates the number of miles required for the award that is most requested in airline programs: the free, capacity-controlled round-trip coach ticket, for travel within the continental U.S.

In the majority of airline programs, that award requires 25,000 miles. In the bank programs, the requirement ranges between 25,000 and 35,000 miles.

How bank-card programs work

Unlike the airline programs, which have direct access to award seats, the bank programs work through affiliated travel agencies to purchase airline tickets when members redeem their miles. That explains the strict advance-purchase requirements and the related price cap on award tickets. It also explains why the award tickets may be on any airline.

On the upside, the bank awards are not restricted. If a seat is available that meets the advance-purchase and price criteria (see below), the member may claim it. And there are no blackout dates. Another significant plus over airline-program awards is that the award ticket may be issued for travel on just about any major airline.

On the down side, award tickets must be requested at least 21 days in advance, and a Saturday-night stay is required. The dollar value of the award ticket is also capped. For a free U.S. domestic coach award, the maximum value is between $300 and $500, depending on the program.

Costs

Annual fees for the cards range from $0 to $55. In the case of the Chase product, the cards themselves carry no annual fee, but the rewards program, which is marketed as an extra-cost option, costs $25 after the first year.

Annual percentage rates are a mixed bag as well. Some are variable, others fixed; some are less than 9%, others more than 14%.

Best for frequent buyers

While other types of cards are probably better options for true frequent travelers, bank cards are an attractive choice for those who earn most or all of their miles for charges. The costs are low, and the wider award availability is decidedly attractive.

The bank cards also hope to steal customers away from traditional airline programs, principally by capitalizing on growing frustration among members unable to redeem their miles for choice awards. For example, a recent direct-mail pitch from Capital One for their MilesOne card dismisses other travel rewards for their seat limitations, blackout dates, and often indirect routings, and then claims:

MilesOne Rewards gives you miles you can actually use. You can travel anywhere and anytime on any major U.S.-based airline.

All true. But it’s not the whole story.

Summing up

There is no one perfect travel-rewards card. If there were, it might combine the following features:

  • Widest range of conversion options (Diners Club)
  • Superior customer service (American Express, Diners Club)
  • Linked to the most robust programs (airline cards, hotel cards, Amex, Diners Club)
  • Low costs (hotel cards)
  • Revolving credit (MasterCard, Visa)
  • Double miles for most purchases (American Express)
  • Universal merchant acceptance (MasterCard, Visa)
  • Awards on any airline (bank cards)

Or to put it differently, all cards have their particular strengths and weaknesses.

But there is a best card, or combination of cards, for everyone who places a premium on earning travel rewards, depending on where they travel and how often, and on their charge activity.

In summary form, here are some general guidelines for linking the cards’ strengths with consumers’ different patterns of travel and spending behavior.

Credit card type Strengths Weaknesses Best for
Airline cards Most earning opportunities
  • Higher costs
  • Most desirable awards are capacity controlled
  • Frequent flyers who can consolidate earnings in a single program
    Hotel cards Low cost (often free) Unsuitable as primary card for frequent air travelers Good secondary card for airline-program participants
    Multi-program cards Points convertible to miles in multiple programs
  • Highest costs
  • Limited merchant acceptance
  • Frequent flyers who participate in several programs, or who are worried about the safety of their miles
    Bank cards
  • Redeemable on most airlines
  • Low cost or free
  • No capacity controls on awards
  • Miles earned only for card use
  • Cap on award-ticket cost
  • Miles expire
  • Frequent buyers who would not earn significant miles for flights or hotel stays

    Two final thoughts

    Now that we’ve sifted through the minutiae of the cards, it’s worthwhile to step back and revisit two caveats to bear in mind when choosing and using rewards credit cards.

    First, be prepared to compromise. There’s no single card that will meet everyone’s requirements or be exactly right for any individual’s entire range of needs. But if you follow the guidelines above, you should be able to find a card that’s at least a good match for your spending and travel habits.

    And second, consolidate. Splitting your earnings among multiple cards and programs can be expensive. Even in the case of cards with no annual fee, spreading miles among multiple incompatible programs is a recipe for fewer awards and more bookkeeping headaches. And your goals should be exactly the opposite.

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