After flying, the second-most lucrative source of frequent flyer miles is credit cards that reward users with miles for their charges.
Today there’s a co-branded mileage card affiliated with every major airline and hotel program, and with many of the smaller programs as well. American Express joined Diners Club in deploying a card that earns points convertible to miles in multiple programs. And many credit-card issuers offer cards with proprietary rewards programs, not linked to airline or hotel programs.
Most travelers who participate actively in mileage programs supplement their flown miles with credit card miles. And the cards have given rise to an entirely new category of program participant—frequent buyers—who rarely travel but still want to reap the rewards offered by travel programs.
Whether you’re a frequent flyer or a frequent buyer, or fall somewhere in between, there’s a credit card with your name on it.
Credit card series
Read the next three installments of Tim Winship’s series:
We begin a four-part series by reviewing the airline cards—still the dominant species in the rewards space. In the next installment, we’ll continue with a discussion of hotel-affiliated cards. In part three, we’ll look at the multi-program cards, such as Diners Club and American Express. And in the final chapter, we’ll consider bank cards with travel-rewards programs, and wrap up with a recap of the strengths and weaknesses of the various types of cards, and some thoughts about who might be best served by each.
Airline-affiliated credit cards
Although there are now many other options, rewards cards linked to the airlines remain the first choice of mileage-oriented consumers.
For the nine largest airlines’ frequent flyer programs, the comparison chart below shows the costs and first-use bonuses of their affiliated credit cards.
|Alaska||Alaska Airlines Visa Classic||$45||Prime + 9.99%, currently 14.24%||3,000|
|Alaska Airlines Visa Gold||$45||Prime + 6.99%, currently 12.24%||3,000|
|Alaska Airlines Visa Platinum||$75||Prime + 7.99%, currently 10.24%||5,000|
|American||Citi AAdvantage MasterCard||$50||Prime + 9.99%, currently 14.24%||3,000|
|Citi Gold AAdvantage MasterCard||$85||Prime + 9.99%, currently 14.24%||4,000|
|Citi Gold AAdvantage World MasterCard||$50||Prime + 9.99%, currently 14.24%||5,000|
|Citi Platinum AAdvantage World MasterCard||$85||Prime + 9.99%, currently 14.24%||7,500|
|America West||America West FlightFund Visa||$45||Prime + 9.99%, currently 14.24%||3,000|
|America West FlightFund Platinum Visa||$75||Prime + 6.99%, currently 12.24%||6,000|
|Continental||Continental Airlines Classic Credit Card||$45||Prime + 9.4%, currently 13.65%||4,000|
|Continental Airlines Platinum Credit Card||$65||Prime + 9.4%, currently 13.65%||6,000|
|Delta||Delta SkyMiles Card||$55||Prime + 9.99%, currently 14.24%||5,000|
|Gold Delta SkyMiles Card||$85||Prime + 9.99%, currently 14.24%||10,000|
|Platinum Delta SkyMiles Credit Card||$135||Prime + 9.99%, currently 14.24%||15,000|
|Northwest||WorldPerks Visa Card||$55||Prime + 9.75%, currently 14.0%||3,000|
|WorldPerks Visa Gold Card||$90||Prime + 9.75%, currently 14.0%||3,000|
|Southwest||Rapid Rewards Visa Card||$39||Prime + 8.65%, currently 12.9%||4 credits|
|Rapid Rewards Visa Platinum Card||$59||Prime + 8.65%, currently 12.9%||4 credits|
|United||Mileage Plus Visa||$60||Prime + 9.9%, currently 14.15%||15,000|
|Mileage Plus Gold Visa||$85||Prime + 9.9%, currently 14.15%||15,000|
|US Airways||Dividend Miles Visa Classic||$50||Prime + 9.99%, currently 14.24%||3,000|
|Dividend Miles Visa Gold||$70||Prime + 9.99%, currently 14.24%||4,000|
|Dividend Miles Visa Platinum||$90||Prime + 9.99%, currently 14.24%||7,000|
* Prime rate as of April 2003
Which card should you choose?
Fees, rates, bonuses, earning rates, caps—it’s all too easy to become overwhelmed by the minutiae that differentiate the various airlines’ cards. The antidote to detail overdose is the big picture.
Credit cards play a supporting role in most consumers’ mileage-earning endeavors, with earnings for airline flights usually remaining the single largest source of miles. So in most cases, the overriding goal is to align your credit-card miles with your flying miles. And that means using the card affiliated with your primary airline program.
Conversely, for someone whose primary airline program is, for example, Alaska’s Mileage Plan, using a credit card that awards miles in a different program will result in fragmenting your earnings among non-combinable currencies.
As you make a decision about which of the airline-affiliated credit cards is right for you, these are some of the other factors you may wish to consider:
The normal earning rate for airline-affiliated credit cards is one mile for every $1 charged to the card. If we value airline miles at 2 cents each—a good rule of thumb, based on the potential value of award tickets—the mileage award amounts to a two percent rebate.
In addition, the typical card awards two miles for every $1 spent on tickets for travel on the airline that hosts the program.
One notable exception to the above: the “Always Double Miles” feature of the Delta SkyMiles card. While the double miles are earned only at qualifying stand-alone supermarkets, drugstores, gas stations, home improvement and hardware stores, and the U.S. Postal Service, there’s the potential to significantly accelerate earnings. Through July 15, SkyMiles cardholders can earn double miles on all charges.
With annual fees ranging from $39 to $135 for credit cards associated with the major airline programs, and most between $50 and $60, airline cards are somewhat more expensive than the average Visa or MasterCard. And with a majority of cards currently charging a 14.24% annual percentage rate (APR) on outstanding balances, they are pricey in that respect as well, for consumers who carry a balance.
Given that cheaper cards are readily available, does it make financial sense to pay extra for a mileage card?
Comparing a mileage card which carries a $50 annual fee to a non-mileage card with no annual fee, a consumer would have to charge $2,500 a year—about $210 per month—on the typical card to earn enough miles, valued at 2 cents each, to offset the fee difference. As the fee for the non-mileage card increases, the gap narrows.
Annual earning cap
Most cards impose an annual cap on mileage earning, which may be waived for higher-priced cards or for elite members.
For example, the annual maximum is 60,000 miles for the regular United Mileage Plus Visa card and 100,000 for the Gold card, but there is no mileage cap for Mileage Plus Premier, Premier Executive, or Premier Executive 1K members. And Continental imposes an annual cap of 80,000 miles for its Classic card, but no cap for Platinum cards.
Classic vs. gold vs. platinum
Doubting the prestige value supposedly associated with the more exotic metal-denominated cards, many consumers wonder whether the different card types amount to a distinction without a difference.
They’re right to be skeptical, since the price premium to “upgrade” from a basic card to Gold, or from Gold to Platinum, can be substantial.
In most cases, the salient difference—what you’re paying extra for—is the aforementioned higher cap. But that should only be a compelling reason for those who anticipate charging more than $50,000 to $60,000 annually.
With their high household incomes and heavy-spending ways, members of airline frequent flyer programs represent a highly desirable demographic for credit-card issuers. So they’re often willing to make generous up-front offers to lure new cardholders into the fold.
Continental, for example, offers a low fixed-rate APR for the first six months, and double miles at selected merchants for Platinum card charges. Delta will waive the annual fee for the first year. And United’s current first-use bonus is a whopping 15,000 miles.
But caution is in order here. Credit card use is a long-term proposition, and a great introductory deal is no substitute for choosing the best card for the long haul.
Most credit card issuers that offer airline-affiliated cards for individuals also offer mileage cards for businesses.
Business cards are issued in the names of eligible employees, whose purchases earn miles into the account of a designated individual—usually the business owner.
The cards are typically bundled with other business-friendly benefits, like periodic account summaries, discounts on business services, and higher annual mileage-earning limits.
Such cards can be a good option for small-business owners, as the annual fees and APRs are comparable to those associated with individual cards, but the number of miles which can be earned yearly is much higher.
Because they are less profitable for the banks that issue them, debit cards (also called check cards) only recently gained a mileage-earning component. But they’re now widely available. Most debit cards award one mile per $2 spent, half the usual credit card earning rate.
For example, American offers the Basic Citibank AAdvantage Debit Card for a $25 annual fee. New cardholders earn a 2,000-mile bonus, plus one AAdvantage mile for every $2 spent on signature-based transactions.
Also—and atypically—American offers a Premium Citibank AAdvantage Debit Card. For $65 per year, cardholders get 4,000 bonus miles, and earn one AAdvantage mile for every $1 spent.
If credit-card use is your primary source of miles, with little or no additional miles being earned for travel, then an airline-affiliated card may not be your best choice. We’ll look at the alternatives to airline cards in upcoming installments of this series. In our next chapter, we’ll examine the credit cards that are affiliated with the major hotel rewards programs.