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Occasional traveler? Hoard your rewards for an international flight

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Cashing In
Cashing In columnist Cathleen McCarthy
Cathleen McCarthy is a journalist whose articles on travel, commerce and consumer topics have appeared in dozens of publications. She writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com

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Question for the CreditCards.com expert Dear Cashing In,
What is the end game with airline cards, anyway? I've had a couple rewards cards for nearly three years, and I've converted purchases to miles and redeemed miles for flights, but are there eventually any other tangible benefits? I fly domestically probably half a dozen times a year, and I use miles pretty much as soon as I've collected enough to redeem. I don't see this pattern changing in the near future. -- Dave

Answer for the CreditCards.com expert Dear Dave,
Serious players of the frequent flier game would probably say the end game for airline credit cards is overseas travel. Why? Because the best return on your miles investment is not the domestic flights you've been cashing yours in for.

If you fly six times a year, you're flying more than most people, but you're getting less value for your miles when you redeem them than you would if you had enough for an overseas flight. The problem is that you're not logging enough miles to score one. As it is, you're probably getting a free flight every other year and -- assuming an average of $400 for a domestic flight -- that's saving you about $200 per year, on average.

Let's say you fly from Austin to Boston six times a year. A typical flight with one stop in each direction would net you about 3,500 miles for each round-trip. At that rate, you'd end up with about 21,000 miles in a year -- two trips short of scoring even the lowest-tier domestic fare (25,000 frequent flier miles). Paying for the next Austin-to-Boston fare with your miles, assuming there are seats available at that bottom tier, would return about 1.1 cent/mile ($400 fare divided by 25,000 miles).

Given your six-flight-per-year average, it would take you three years to score a round-trip fare to Paris in economy class for 60,000 frequent flier miles. (If you were willing to fly to Paris in the dead of winter, you might snag a flight for as low as 35,000 miles. However, let's shoot for shoulder season, when you can get deals but still walk the streets in comfort. The goal is Paris as reward, after all, not punishment!) If you flew to Paris in mid-September, a one-stop flight from Austin would start at about $900 and your miles would have been worth about 1.5 cents per miles. You would also return with another 10,300 frequent flier miles in your pocket -- a whole lot closer to the next free flight.

If you have the flexibility to follow the promotions your frequent flier program offers -- and the desire to see faraway places -- you can get much more out of those miles. If your miles are with United and you were really staying on top of the deals, for example, you could have booked one of those flights to Hong Kong that United mistakenly gave away on July 15 for four frequent flier miles each. (Whether United will have to make good on that deal remains to be seen.) However, even if you just check in once a month with the ''deals'' page of your airline's website, you may find a limited-time offer to fly somewhere you've always wanted to go for half the miles you might have expected to pay.

What is the end game of the serious frequent flier? Piling up miles and then getting to faraway places on as few as possible. The question really should be: What is your end game?

An airline card essentially locks you into a rewards system that produces airfare. Yes, you can get some deals by shopping online via the airline's portal and you can probably increase the miles you're currently amassing by keeping up with your airline's promotional deals -- but only if you have the flexibility to travel on their specified terms.

In the end, however, if barbequing with friends in your backyard or taking your kids to Disneyland on your annual vacation will make you happier than catching the next red-eye to Tokyo, playing the frequent flier game may not get you where you want to be.

See related: Want to be elite? Know that all miles aren't created equal

Meet CreditCards.com's reader Q&A experts
Vexed by a personal finance problem? CreditCards.com's Q&A experts answer questions from readers every weekday. Ask a question, or click on any expert to see their previous answers.
Gary Foreman, New Frugal You columnist Gary Foreman,
"New Frugal You"
Sally Herigstad, To Her Credit columnist Sally Herigstad,
"To Her Credit"
Cathleen McCarthy, Cashing In columnist Cathleen McCarthy,
"Cashing In"
Jane McNamara, Let's Talk Credit columnist Jane McNamara,
"Let's Talk Credit"
Elaine Pofeldt, Your Business Credit columnist Elaine Pofeldt,
"Your Business Credit"
Erica Sandberg, Opening Credits columnist Erica Sandberg,
"Opening Credits"

Published: July 24, 2012



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