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Sometimes, collecting frequent flyer miles with a credit card pays off
Are frequent flyer miles worth collecting anymore? I've asked that question elsewhere, and have been advocating the use of credit cards paying up to 5% cash back as a better alternative for many travelers who rack up most of their miles using airline-affiliated credit cards. For many people, now that there are new fees associated with cashing in miles, the answer is no. Most of us travel domestic economy, and $25,000 spent on a frequent flyer credit card only gets you a domestic coach ticket, assuming you can even find available seats and aren't paying a fee to cash in the miles at short notice or to redeposit them if you change your mind. That same $25,000 spent on a 5% cash back card gets you $750 which you can spend anyway you wish. You might even be able to find a seat to Hawaii. Try that with your frequent flyer miles.
So do I personally collect miles with a frequent flyer credit card? You bet I do. Recently, I applied for a British Airways Chase Visa card ($75 annual fee), but only because they were awarding 100,000 miles after you charged a paltry $2000 to the card (caveat: sadly, this offer is no longer available). My BA Executive Club account had something like 300 miles in it, so it was time to top it up. I wasn't planning on going anywhere in particular, but just a few days ago I learned that my Oxford college was having a reunion, and I thought, fun, might as well go.
So I went to spend some miles. What I found at ba.com was pretty shocking. On the day in April that I wanted to fly from New York to London, I had exactly one option: a first class seat for 75,000 miles. And the return didn't look much better, although there were several business class seats on BA's new London City Airport to JFK all-business-class flight for 50,000 points. Award seats in economy (not that I was devastated) were sold out in both directions.
Needless to say, I didn't have enough points, but BA kindly suggested that I buy the outward-bound first class flight with miles plus $285 in cash and $163 in fees and surcharges. Not that my return flight was free either. I got hit with a fuel surcharge plus taxes and fees of $358.
So my "free" flight, including the BA Chase card's $75 fee, ended up costing me $881. Still, not bad considering that when I checked on Expedia.com, these same flights would have cost over $14,000 had I bought them with cash. Lesson learned: if you play your credit cards right, collecting frequent flyer miles with them can indeed pay off. Just don't expect to have a lot of seat choice or to get something for nothing.
George Hobica is the founder of Airfarewatchdog™, the most inclusive source of airfare deals that have been researched and verified by experts. Airfarewatchdog compares fares from all airlines and includes the increasing number of airline-site-only and promo code fares.
Reader Comments (Page 1 of 1)
marierabbit Feb 22nd 2010 10:45AM
Very useful info! I'm on the verge of dumping my United mileage Visa, since I can barely find frequent flier seats when I need it. Definitely will consider a cash back card - something I used to have, but never thought it was worth it. But with the changes in the availability frequent flier tickets and fees and what not, cash back is starting to look good again.
jackal Feb 22nd 2010 11:09AM
If you play your miles right, you can exceed what you can get with a cash-back card.
I only use my miles for premium international long-haul flights. In late 2008, I redeemed 150,000 Alaska Airlines miles for a trip to Sydney--the LONG way around the world. If I were to book my LAX-LHR-SIN-SYD-SIN-LHR-LAX trip on ba.com, I would have spent over $27,000. Do the math: that's a redemption rate of 18 cents per mile.
If I'd have spent $150,000 on a 5% cash-back card, I would have ended up with (assuming no restrictions on that cash back) a measly $7,500—barely enough to get me one-way from LAX to LHR.
Now, granted, I didn't spend $150,000 on my Alaska Airlines Signature Visa to get this award--probably less than 25% of the miles for the ticket came from my credit card. Most came from flying (~30,000 miles per year, earning me 45,000 miles after my 50% MVP bonus), partner activity (ALWAYS start your online shopping at http://www.mileageplanshopping.com, or the appropriate one for your frequent flyer program), and otherwise paying attention to the tips and tricks learned at places like flyertalk.com, freefrequentflyermiles.com, and, of course, airfarewatchdog.com. ;)
But if given the chance to earn a few dollars back or to get that much closer to a killer deal like the one I got (or the countless other great international award values out there), I'll pick the latter.
Anyone who spends any amount of time dealing with frequent flyer mileage programs will tell you that domestic coach awards are about the *worst* value for your miles, so that's not a fair comparison. Long-haul, premium-cabin awards are where anyone collecting frequent flyer miles should be looking.
georgehobica Feb 22nd 2010 11:22AM
In general I'd strongly agree, except what about the folks whose only desire is to use miles to fly from LAX to Hawaii, one of the most popular routes among Airfarewatchdog subscribers. They tell me that they can almost never find coach class (or any class) frequent flyer seats on that domestic route. However, were they to approach the airlines with cash from their cash back card... clearly, as you say, the real value is in international/premium flights, but most of our readers would go out of their way to save $5 on a ticket!
jackal Feb 22nd 2010 11:24AM
True, audience is a key factor. But I haven't given up hope that we can convert everyone into a mileage junkie like us! :D
Tboz Feb 22nd 2010 11:17AM
Agreed! There's just too much trickery and b.s. involved in frequent flier miles. A money back card is clearly the way to go!
Luxe Latin Feb 22nd 2010 5:14PM
Yes it depends greatly on where you're going and how flexible you are. I've scored coach tickets to Peru, and Ecuador pretty easily on two airlines, but it required taking what I could get in terms of dates. Getting to Mexico has been much tougher though, even when it's a brand new route. I feel like the only way to really make out with airline credit cards is to churn them. You make out great in year one, but after that it's hard to justify the annual fee. Some will let you scale back to a no-fee card, but you only get half a mile per dollar on non-airline purchases. Better to just use Amex and top off when needed.
The other problem with airline cards is most charge 3% on international transactions. With a Capital One card that has no transaction fee and gives you cash back (or their no hassles rewards), most people will be better off.
Lester Mar 19th 2010 4:36PM
My wife just redeemed 80,000 Delta Skymiles Plus $100 for a round trip ticket Tampa-Larnaca (Cyprus).
She could have bought the ticket on www.travelocity.com for $900-ish BUT.............. Delta gave her business class on all 3 sectors of the return trip plus free lounge access at both stops; sweet !