Air-miles credit cards deserve careful study

By Bruce Mohl, Globe Staff, 08/18/02

		Sensible traveler  Destinations  Where they went  Travel gear  Student travel

Sharon wanted to start leveraging her credit card purchases to earn airline miles, but she wasn't sure where to start.

"How do I find out what the best deals are?" asked the Watertown resident, who didn't want her last name used. "Orbitz has sent me an e-mail offer for a card that lets me choose any airline booked through the Orbitz site, but I don't have any basis for comparison."

The trick in comparing the multitude of credit cards out there offering airline miles is finding the one that fits both your flying and financial needs. How much you charge each year, how often you fly, and whether or not you carry a balance are all factors that will influence your decision.

Greg McBride, a spokesman for Bankrate.com, a company that compiles and analyzes financial data, said airline rebate cards are not for everybody. "Depending on how much you charge, the annual fee on the card may or may not be worth it," he said.

Airline reward cards typically carry annual fees and don't offer the lowest interest rates. As a result, they work best for someone who charges a minimum of $9,000 a year on their credit card and pays off the balance each month. At that pace, it would take just under three years to earn a flight to a US destination, assuming a typical redemption rate of 25,000 miles. The cost of that flight would be the sum of the annual fees for the three years.

Evaluating airline reward cards means evaluating a number of tradeoffs. Try to find the card with the lowest annual fee and the best terms (low interest rate, long grace period, and good rental car insurance coverage) that also has the biggest miles payoff and the greatest flight flexibility.

Two good places to start are the Web sites Bankrate.com and Cardweb.com for helpful tips and card comparisons. Before making a final decision, study the card's fine print and the participating airline's frequent-flier program.

The Citibank American Airlines AAdvantage Card typifies many cards affiliated with a specific airline. It has a $50 annual fee and offers 3,000 miles for signing up and then one mile for every dollar spent up to a cap of 60,000 a year. (Other Citibank cards with higher fees offer more features and more liberal mileage policies.)

This type of card is attractive to business travelers, who can earn miles with the charge card and when they take flights on American for work. American's frequent-flier program requires 25,000 miles to earn a flight in the continental United States (including Alaska) and Canada. There are no blackout dates, but, as American's Web site says, "Seats for award travel are limited and may not be available on all flights."

Someone charging $10,000 a year on the Citibank card would net a US flight on American in just over two years at a cost of $150 in annual fees.

American Express markets a number of typical rebate cards affiliated with Delta Airlines, but it also offers a Delta SkyMiles Options card that has no annual fee. The tradeoff is it takes a lot longer to earn a free flight. The Options card offers a 1,000-mile bonus at the time of the cardholder's first purchase and then one mile for every $2 in purchases, or one mile for every dollar spent with Delta.

Someone charging $10,000 a year with this card could trade their miles in for a US flight in approximately five years at no cost in annual fees.

Diners Club is one of several cards that offer a lot of flight flexibility but at a higher price. The annual fee is $95, but that higher fee allows the cardholder to convert his Diners Club points into miles that can be used on 26 airlines instead of just one. As with most other cards offering miles, the Diners Club cardholder still runs into airline restrictions on seat availability.

Two big online travel agencies, Orbitz and Travelocity, recently unveiled cards that try to offer the less-frequent traveler the flight flexibility of the Diners Club card and the guarantee of a seat when the cardholder wants to travel.

The Orbitz card, for example, has a $49 annual fee and offers one point for each dollar charged, or two for each dollar charged on the Web site. Orbitz is currently offering 5,000 bonus points with the first purchase made with the card.

The chief advantage of the Orbitz card is that the cardholder faces few airline or seat restrictions and benefits kick in at relatively low point levels. One disadvantage is that air miles earned on flights for work can't be combined with the Orbitz points; the only way you can increase your point level is by charging purchases.

For 7,500 points, the Orbitz cardholder gets $100 off any flight purchased through the Web site. It takes just 20,000 points to get a round-trip ticket in the continental United States, but the ticket cannot cost more than $400 and must be purchased 21 days in advance and include a Saturday night stay.

For someone charging $10,000 a year with the Orbitz card, it would take two years and $98 in annual fees to build up enough points to get a US ticket with a maximum value of $400. Foreign travel rewards are in the works.

Orbitz books tickets on most big airlines, the one exception being Southwest, which flies out of Manchester (N.H.) Airport in and T. F. Green Airport in Warwick, R.I. Michael Sands, chief marketing officer for Orbitz, said a cardholder redeeming points for a flight provides Orbitz with the travel route and preferred times, and the Web site, rather than the cardholder, books the flight.

A seat is guaranteed as long as one is available. To get similar seat access with an airline frequent-flier program would cost a lot more. Many airlines double the miles requirement if the customer wants a seat outside the normal frequent-flier allotment on the plane.

"At Orbitz, we treat you like a frequent flier even if you're not a frequent flier," Sands said.

rrBruce Mohl can be reached at mohl@globe.com.