Are Air Mile Cards Worth It?
One of the most popular trends in the credit card world over the last 10 years has been the emergence of reward cards. Every card company and every bank offers a different kind of card with a different reward that you work towards by spending money on your card. For those that have never owned a reward card, the process can seem a little odd. By spending tens of thousands of dollars, you are rewarded with a one-way airline ticket that you could have just bought for a few hundred dollars. What kind of incentive is that? It’s true, there are different programs out there that are better than others. Let’s take a look at air mile cards and try to see which ones are the best ones to go with.
Perhaps no single incentive has resonated with more people than free travel. For millions of Americans, travel is something that they wish they could do, but they can rarely afford. The logic goes that since they are going to use their credit card anyway for daily expenses, why not spend toward a free reward in the process?
At last count, there are just under 40 different airline mile programs out there attached to credit cards. The usual formula that is used is that you earn one air mile for every dollar you spend. Pretty straight forward. But what you have to look out for, is how you can spend the miles and where, and how many miles you need to get to your dream destination. Here are some things you need to look for:
• How many miles do I need? – For many cards, the formula works that by earning 25,000 miles, you earn a free, one-way flight anywhere in the continental United States, so if you were hoping for a free flight to Hawaii, think again. The major problem with this equation is that the average person doesn’t spend that much on their credit card all year long, and the overwhelming majority of airline mile cards feature miles that expire, if not at the end of the year than one year from the purchase date that earned those specific miles.
• How many partners and what are the restrictions? – For those that use their card enough to earn miles, small business owners are a great example, you need to double check when you can use your miles and how. Almost all airlines have restrictions on the time of year you can use miles for flights. Wanting to travel during the holidays? Better double check. Same goes for Thanksgiving and even July 4. And even if your air miles card has no blackout dates, you might have to book months in advance to get a seat because many air miles programs are only good for coach seats, and then even then they are restricted to so many seats per flight. If you try to book last minute, you may be out of luck.
• Interest rates vs. Rewards – Recent studies have shown that the interest rates on rewards cards are higher than non-rewards cards. There are almost always annual fees, as well. If you were to use a non-rewards card and simply take the money you save on interest and fees and put it in the bank, chances are, you would have enough for a flight a lot quicker than using a rewards card.