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Credit Card Mileage - Credit Card Mileage - A Frequent Flyer's Introductory Guide

miles program travel cards

The movie “Up in the Air”, in which George Clooney plays a frequent flyer approaching 10 million miles, may have given the impression that frequent flyer miles are earned exclusively from air travel. In actuality, however, many frequent flyer miles are accumulated through expenses paid with participating credit and debit cards.

A dedicated participant of an airline’s Frequent Flyer Program knows a more convenient and sometimes luxurious hotel and travel experience, including airport clubs and lounges; understanding this, any major credit card company or bank will participate with a specific airline’s Frequent Flyer Program as a means of attracting, and rewarding, customers. Because flying has become a necessity of many businesses, credit card and banking companies are constantly trying to revamp their mileage programs, offering better deals on their credit cards than their competitors. This was the case when American Airlines premiered the very first frequent flyer program, AAadvantage, in the early 1980’s, forcing United Airlines to immediately release their own Mileage Plus program to maintain their customer base. Then all of the airlines started participating in Frequent Flyer Programs, helping their customers use credit cards to generate mileage.

The kind of mileage program a customer should choose depends significantly on his/her flying habits and expenses. Since most people do not fly frequently, many banking and credit card companies configure their credit cards to incorporate their mileage programs into a package of bonuses programs for gas, shopping, entertainment, and gift certificates; on select purchases, the cardholder earns bonus “points” that he/she can redeem for whatever merchandise the credit card company’s bonus program offers, including the miles and travel-related expenses. The American Express Gold Card is an example of this. The cardholder earns 10,000 points if he/she spends $500 within the initial 3 months of membership; in travel expenses, this would amount to a $100 discount off any flight.

The points-to-miles bonus program is not as attractive, however, to a truly frequent flyer whose bonuses would be best spent solely on travel-related expenses like flights and hotels. To this end, Airline Specific Cards offer the most rewarding credit card mileage programs for people who travel often. These “co-branded” or “affinity cards”, with all their purchases contributing to miles, are the cards most associated with Frequent Flyer Programs. Miles earned through these cards can only be redeemed through the airlines associated with them. Some notable credit cards that earn mileage are American Airlines’ Citibank “AAadvantage” card, used solely for American Airlines flights, and United Airlines’ “Mileage Plus Visa Card”. US Airways uses the “World MasterCard”, and Delta Airlines teamed with American Express with their famous SkyMiles card.

Each of these has its advantages. The Annual Percentage Rate (APR) for AA’s CitiGold Card is above average, (15.24%, variable) and the card also charges a $50 annual fee, but its bonuses are substantial: 1 mile for every $1 in purchases, and 30,000 miles for $750 spent within the initial four months of membership. This is substantially better than the American Express Gold Card promotion, previously described. Virgin Atlantic’s Amex card, an affinity card with Bank of America, also produces significant rewards. The yearly fee, $90, is higher than Citigold’s, but the APR, at 13.24%, is a full two percentage points lower than CitiGold’s, saving considerably on interest; also, Virgin offers 1.5 miles for every $1 purchased, a significant upgrade from the 1:1 ratio proposed by AA. Simply put, $5000 in credit card purchases would yield 7,500 miles from Virgin to 5,000 miles from American Airlines. At 2c per mile (the average exchange rate of cash to miles), this is a $50 dollar difference, more than making up for Virgin’s more expensive annual charge.

To intelligently choose a specific program, a frequent flyer would have to come up with a very reasonable estimate of how often he/she will travel, and how much he/she intends to spend. In the two choices examined above, Virgin’s deal seemed weaker than AA’s, given the higher yearly service charge. Considering expenses, however, someone who spends more than $6,000 in credit card purchases, and who intends to travel, will find Virgin’s mileage deal very beneficial. Looking further into AAadvantage, there are other bonuses in that program that have not been considered here but that warrant perusal.

The choices are not simple, but the right choices can be rewarding. Deriving the hotel and mileage benefits of a well crafted Frequent Flyer Program through credit card expenses can transform ordinary flights into fun, peaceful occasions. “Up in the Air” might even be one of the in-flight movies.

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