Forex Invest for Success

A Complete Guide on Airline Reward Card

FFPs (Frequent-flyer programs) have become an important part of modern travel. Considering all the travel programs and options where you can get free miles, it would seem natural to immediately jump on board with a mileage credit card. Don't jump too fast, take a couple of steps back and thoroughly evaluate the situation. Obtaining free miles with your credit card is not always the best course of action.

Usually the fastest way to earn free miles is to fly with an airline FFP. It might be a good idea to pair off an FFP with a credit card branded or affiliated with an airline. These branded cards allow you to combine points received on a card with points that you’ve earned from flying, (this might not be applicable with cards issued by American Express and Diners Club International).

However, if you spend more on things other than airline costs, think about using a general bank card that isn’t affiliated to an airline. Those credit cards generally provide annual fees of approximately $20, compared to the fees on any branded cards, which are generally around $70. The other big advantage is that you can redeem your earned miles with a top airline. However, branded cards only allow you to redeem those miles with a specific airline.

Non-frequent flyers should consider how many times in a given year they are most likely to fly. For example, on holidays, there is a higher chance of seating restrictions and blackout dates. If you are traveling with your family, it may take many years and tremendous spending to get free tickets for everyone.

Fees may get significantly higher for airline rewards than for other kinds of reward cards. If cardholders don't charge aggressively on their cards, the high fees could cancel out offered reward benefits. You should consider this example, let's say you are spending $10,000 annually on your card, earning one mile for each dollar spent (which is commonplace) and paying a $100 annual fee. It may take about 3 years to get one free domestic ticket on an affiliated airline, assuming the usual 30,000 miles are needed for a free ticket.

But with the $100 annual fee, that ticket isn't entirely free. At $100 annually for three years, you spent $300 in cold, hard cash. It should be easy to calculate whether it is really worth the free ticket.

But, the story could be different if you use a cash-back card that offers no annual fee. If we assume that you charge the same $10,000 a year and earn one percent cash back, you can easily get $300 back in just three years. It would be better if you just pay the ticket with the earned cash-back.

Certainly, a fee might be excusable, given your present lifestyle, particularly if you charge a large amount each year and pair off your miles with FFP, which will make it easier to get a free ticket faster. As with most credit card rewards, consider charging monthly expenses such as utilities, gas, and groceries to increase your cash-back each year.

However, many programs set an expiration date for earned miles or require accounts to help monitor activity during a given time frame. Others, especially bank cards, have permanent expiration dates (frequently within three years) that are not extendable for any reason. Check the small print and ensure you understand all the requirements.

The following is a more complete illustration to help you understand about the actual benefit of an airline reward card.

1. To find out how long it may take you to earn one free ticket, divide 30,000 (the typical miles required to get a free ticket) by the annual charged amount of your credit card. For example, 30,000 ÷ $10,000 is 3 years.

2. To estimate the real cost of a ticket, multiply the number of years needed with your annual fee. If you carry a balance, the calculation could become more complicated as you need to include the amount of interest for three years.

3. To see whether you spend or save more money for the free ticket, subtract the amount from Step 2 with the ticket price.

4. Some experts advise that you use 2 cents per mile on frequent-flyer miles if your round-trip ticket price is $500, or 1 cent per mile for a $250 ticket.

Despite all the unfavorable factors related to airline cards, there is one possible benefit to applying for on; some cards give generous bonus miles just for applying. Branded issuers can be quite generous with the free complementary miles, somewhere around 25,000 miles.

For example, one of the best credit card deals I found recently gave you 25,000 miles for signing up a card and 10,000 miles soon after the first purchase.

In short, you need to:

• Watch your current spending levels with the airline reward card. Steer clear of the urge of spending extravagantly just to earn the airline reward.

• A free reward ticket could be taxable if you got them during a business travel and then use it for personal or leisure travel.

• Always consolidate! Miles spread out over various FFPs, cards, and airlines won't get you the desired reward.

• If you can't use all the earned miles, you should consider using a cash-back card instead. Determining the right card may take some research and math skills, however the payoff is always worth it. Use some online resources, such as to make it easier to compare and evaluate each airline reward card.