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Frequent flier cards evolve: more complex, but more rewarding

Comparison shop carefully and you can boost your points, rewards

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After being pounded for years for running frequent flier programs that made it hard to book free flights, airlines are now freshening up their credit card reward programs to make them more appealing. As frequent flier rewards change, choose carefully to maximize rewards

They're offering new perks to cardholders, such as waiving those pesky baggage fees. They're jacking up bonuses to use the cards, so that now nearly every program offers enough miles for a free ticket, and occasionally two, for newcomers. And they're evolving more toward a system that ties the reward to the actual cost of the ticket, instead of the length of the flight.

Weigh choices and win
For consumers willing to weigh the costs and advantages of so many different reward programs, the changes can be a real boon. But there's also no denying that deciphering reward programs is becoming more complicated.

"If you're savvy, it's really, really good for you," says Randy Petersen, editor of Inside Flyer magazine, which tracks travel rewards programs. "But it's also bad because it's really confusing out there. The average person gets carried away with all these bonuses, and they're not looking at the details."

Remember those Capital One commercials a few years ago that featured comedian David Spade saying "no" to airline customers who wanted to redeem the miles they had accumulated on their airline credit cards? Capital One and other bank reward programs, such as Citi's, found success by tapping into the widespread perception that airline mileage awards were hard to redeem.

Changes take flight
Airlines took note of the attacks, says Michael Pool, partner marketing manager with US Airways, the nation's fifth-largest carrier. The credit card programs are important to airlines, because in addition to keeping fliers from defecting to other carriers, the airlines' banking partners pay them hundreds of millions of dollars a year for the right to issue the cards.

"We obviously are attuned to the competing messaging they were putting out," Pool says. "We understand customers want to use those miles when they want to use those miles."

So airlines adapted. In 2006, United Airlines unveiled its "Mileage Plus Choices" program, which for the first time allowed customers to redeem miles for purchases on the airline's Web site. In 2008, Delta followed suit with a similar program called "Pay With Miles." In the last year and a half, Virgin America and JetBlue have launched similar programs pegging awards to the cost of the tickets. Other airlines have recently reconfigured their awards programs to open more seats to frequent fliers, though at higher award levels. These moves have helped blunt the criticism from the bank reward cards by allowing the airlines to claim that award seats are available on every flight.

More perks
At the same time, airline cards are offering more perks than in the past because of changes in the airline industry.

With airlines adding fees for checked luggage and reserved seats, some cards offer ways to avoid those nuisances. For instance, the Continental Airlines PresidentialPlus World MasterCard, issued by Chase, allows cardholders not to pay baggage fees, which for two bags can run $50 each way. The card's annual fee is $375.

It's pretty much a matter of getting the most reward for least dollar spent.

-- Joe Rundell    
Frequent flier mile saver    

Airlines have also added perks to their cards, such as expedited check-in or boarding and access to exclusive lounges. United's Mileage Plus Access Visa by Chase, at $275 a year, includes year-long upgrades to Economy Plus class. Others, such as the $450-a-year Delta Reserve card from American Express, allow cardholders to more quickly gain access to elite flier status, which can set off a chain reaction leading to more miles, upgrades and free trips.

Because airlines control so many aspects of flying, it's hard to outdo them on travel reward cards, says Jay Sorensen, president of IdeaWorks, a Wisconsin airline consulting firm that works on loyalty programs.

"The airline makes the rewards," he says. "They always have the ability to give it away for hardly anything."

Sign-up bonuses earn more points
In addition, signing up for airline credit cards has become more lucrative. Cards used to come with bonuses of 10,000 or 15,000 miles. Now, 25,000- or 30,000-mile bonuses are standard. In December, British Airways offered 100,000 miles to people who applied for and used the British Airways Visa Signature card by Chase -- enough for two transatlantic round-trip tickets.

Bonuses like those appeal to Joe Rundell, a 27-year-old chemical engineer from Glen Ellyn, Ill. He signed up for a Citi AAdvantage Visa last fall to instantly earn 30,000 miles on American Airlines. Rundell hopes to amass 200,000 miles so he can fly first-class to Australia with some buddies in 2012. He charges almost everything onto the American Airlines Visa, except for gas, which he puts on a Chase BP Visa because he earns 5 percent back on gas purchases.

He also has a Bank of America World Points card, but he rarely uses it because he considers its rewards not worth the cost, though he says it makes sense for big purchases because the interest rate is lower.

"It's pretty much a matter of getting the most reward for least dollar spent," he says.

Choosing the right rewards card
Still, different cards appeal to different people. Those who want more flexibility in the kinds of awards, such as merchandise or cash back, might prefer a bank rewards card.

Chase, for instance, offers cards with Continental and Southwest Airlines. But it also has its own reward program, Ultimate Rewards.

Chase spokeswoman Gail Hurdis says it depends what customers are looking for: Airline or hotel cards are "best for accelerating their rewards in a loyalty program," while a bank rewards card "may work better for someone who is looking for more general rewards, such as points or cash back."

Features of co-branded airline travel cards vs. bank rewards cards
In choosing a rewards card that's right for you, experts say you need to understand what you want from a card and then evaluate your options.
CO-BRANDED AIRLINE CARDS
BANK REWARDS CARDS
Higher annual fees and interest rates Better for customers who want greater selection of awards
Include travel perks such as free luggage, expedited boarding and club access Easier to use and understand award qualification and redemption
Often more complex accumulation and redemption rules Lower (or no) annual fees and lower interest rates
Better for customers who primarily want flight rewards Can get rewards with fewer dollars charged, because award levels start lower
Better for frequent travelers, especially those who fly on one or a few airlines Able to stockpile points for longer periods before they expire
Comparison shop for airline rewards cards Comparison shop for bank rewards cards

See related: Pitfalls of pumping, dumping sign-up bonus cards, Have card, will travel: A guide to traveling with credit cards

Published: January 21, 2010


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