If you're one of the millions of people who use a credit card connected to a particular airline -- cards that typically award frequent-flier miles for every dollar spent -- you probably earn more miles by swiping your card than by flying.
But given how difficult it is becoming to redeem frequent-flier miles for free tickets and the fact that credit card companies are developing their own reward programs -- some with better travel benefits than those that airlines offer -- it may be time to rethink which card is front and center in your wallet, especially if the card's primary selling point is the ability to rack up free flights.
Although there is no perfect travel-rewards card for everyone, those that offer points instead of miles might be a better option for people who aren't particularly loyal to a single airline, because points can usually be redeemed on many airlines.
I recently reshuffled my credit cards after a year of frustration trying to redeem Delta miles earned with an American Express Delta SkyMiles card for a free ticket. Although the card's promotional materials promise that the 25,000 bonus miles one can earn just by signing up are "good for a free flight," every time I tried to book a Delta award ticket, the cost was usually 40,000 miles. So when my American Express statement arrived with a charge for the card's $95 annual fee (which had been waived for the first year), I canceled the card.
My current go-to credit card is U.S. Bank's FlexPerks Visa card, which is unaffiliated with any airline and was named the best credit card for travel perks by Kiplinger's Personal Finance magazine last year. Instead of earning frequent-flier miles, I get one point for every dollar I spend, and those points can be used to book free tickets on dozens of airlines. Once I earn 20,000 points, I can cash them in for a ticket worth up to $400 using U.S. Bank's booking partner, Travelocity.
Airlines limit award tickets
The switch accomplishes the neat trick of allowing me (and other cardholders) to avoid something airlines refer to as capacity control, which limits the number of seats on a flight that can be bought with frequent-flier miles. Since I wasn't exchanging miles, but effectively buying a ticket, there were no restrictions on the flights I could choose from.
For a trip from New York to Los Angeles in April, I cashed in 20,000 FlexPerks points for a round-trip ticket on JetBlue. (Delta wanted 40,000 miles for a similar nonstop itinerary.)
Bob Daly, a senior vice president with U.S. Bank, said that when the company set out to design a travel-rewards program -- after its previous Visa card partner, Northwest Airlines, merged with Delta -- delivering on the promise of free flights was a primary objective.
"It had become more and more difficult for people to get award seats," Daly said, adding that users of the card, which first became available last year, had cashed in more than a billion FlexPerks points in the past 60 days, which adds up to 50,000 airline tickets at the 20,000-point level.
Other travel-rewards cards that earn accolades are also awarding points instead of miles. Some even allow customers to use them toward hotel stays -- an often overlooked benefit.
For three years in a row, the Starwood Preferred Guest American Express card (a card affiliated with the hotel company) was voted the best travel card in the Americas by members of the frequent-flier site Flyertalk.com. That card, which charges a $45 annual fee after the first year, was also recently rated the best travel-rewards card for domestic use by the editors of SmarterTravel.com.
Cardholders earn one "Starpoint" for every dollar spent, and each point can be converted to one mile in 30 frequent-flier programs; there is a 5,000-mile bonus when users transfer 20,000 points. Starpoints also can be used to buy airline tickets -- 30,000 points gets a ticket that costs $345 to $410 -- and free nights at Starwood hotels.
Another card that earns free flights on multiple airlines is Capital One's Venture Rewards card (annual fee $59 after the first year). In this case, cardholders do earn miles -- two for every dollar spent -- but Capital One's miles can be redeemed for monetary credit: Every 20,000 miles earns you a $200 credit on your card statement.
Chase's Sapphire card is another option for travelers who want to exchange points for tickets on any airline. Cardholders earn one point for every dollar spent; points can be used for tickets on multiple carriers (it takes 30,000 points to buy a $300 ticket).
Benefits of airline cards
But despite the flexibility offered by this growing breed of card, Tim Winship, editor of FrequentFlier.com, said credit cards connected to particular airlines still have some benefits that bank cards can't match, such as the ability to use miles for upgrades.
Chase's Continental cards and the American Express Delta SkyMiles card (which I just jettisoned) have recently introduced another perk: allowing cardholders to check one bag free.
But Winship emphasized that travelers should choose a rewards card based on their individual spending and flying habits: People who fly a lot on one airline may benefit from concentrating their spending on a card affiliated with that airline, whereas a less loyal traveler might prefer a card that awards points that can be redeemed for flights on multiple airlines.
"If there were a categorically 'best' travel credit card," he said, "that's the one everybody would have in their wallet."
But before you jump to sign up for a new credit card, there's another issue to consider: the effect of such a switch on your credit score, which can suffer if you frequently open and close credit card accounts. Switching can be tempting when card issuers offer generous bonuses when you sign up for a new card -- typically 10,000 to 25,000 miles (or points) -- and waive the annual fee for the first year.
Adam Levin, founder of the advice site Credit.com, said that opening and closing credit card accounts can affect your FICO score in two ways. First, consumers who cycle through cards fail to develop the kind of long-term history with a particular card that enhances a credit score; second, users might make the mistake of swapping a card with more credit for one with less.
Levin also pointed out that travel-rewards cards often have stricter standards than other types of credit cards (meaning you might not get approved if your credit score is low). They also tend to have more expensive annual fees and charge higher interest rates -- which you should consider carefully if you typically carry a balance on your card.
"Your eye should be toward the lowest fees and the lowest rates," Levin said. "Rewards are a perk on top of that."