Unaffiliated travel reward cards give you choices, bonuses
Use-anywhere cards compare favorably to airline-specific ones
By Tony Mecia | Published: August 25, 2015
Dear Cashing In,
I have a Citi AAdvantage MasterCard that I use almost exclusively to earn American Airlines AAdvantage miles, having started with TWA back in the day. I earn miles from the credit card, seldom from flying on American.
Yesterday, my husband saw an article about mileage earning cards, and the Capital One Venture card sounded appealing. You earn two miles for every dollar spent, you can use the miles on any airline, hotel, car rental. They give you 40,000 miles if you spend a certain amount in the first three months. There is no annual fee for the first year, $59 thereafter.
Our credit score should meet their requirements. The main reason I want to leave the American system is that any transatlantic flight through the AAdvantage program is on British Airways, which charges extremely high fuel fees, making it almost as expensive as if I were paying for the flight. I have never had a card through which you could use miles on any airline, so I'm apprehensive but very intrigued. Do you have any information that would help me decide? -- Karen
If you haven't seriously looked at new credit cards since the TWA era, you've got a lot of catching up to do. American Airlines bought TWA in 2001.
Back in the old days, the only option you had for free travel was the airline card, which earned miles in an airline's frequent flier program. Those were simpler times.
Today, there are many more choices in travel reward cards. There are still the airline cards, which operate in more or less the same way as they always have.
But in addition, as you note, there are a new breed of travel reward cards that are unaffiliated with any particular airline or hotel. Instead, they are issued by banks, and the reward points are held by the bank. You can redeem them for travel on virtually any airline, hotel, train, taxi, Uber or other travel provider. Like the airline cards, these cards have pretty good sign-up bonuses.
The Capital One Venture card has been around for a while and is probably among the best known in this category. Capital One has advertised heavily on TV, with ads featuring the likes of Alec Baldwin and Jennifer Garner poking fun at the difficulties of redeeming miles with airline cards.
The annual fee is $59 a year (waived first year), you receive two miles for every $1 you charge and each mile is worth 1 cent in travel expenses. In other words, you receive 2 percent back on your charges. The current sign-up bonus is 40,000 miles for spending $3,000 in the first three months, so that alone is worth $400 toward travel.
However, there are other cards in this category that are worth considering, as they are remarkably similar. For instance, the Barclaycard Arrival Plus World Elite MasterCard (annual fee: $89, waived first year) also offers 2 percent back on charges, to be used as a statement credit against travel expenses, and gives 40,000 miles for spending $3,000 in the first three months. When you redeem miles, you're automatically given 5 percent of them back.
There are also cards that award bonuses when you redeem points for certain categories, instead of giving a flat redemption rate for all travel expenses. For example, the Citi ThankYou Premier card ($95 annual fee, waived first year), gives you 50,000 points when you spend $3,000 in the first 90 days, and the points can be redeemed for $625 worth of airfare costs or $500 in gift cards.
There are plenty of other varieties of these cards, such as versions with no annual fees, or different category bonuses.
The obvious upside to this category of cards is that you quickly can receive some substantial value from the sign-up bonus, and using the statement credit is easy. You don't have to fiddle with navigating through airlines' frustrating unavailability of award flights, and the credits are available for a wide variety of travel charges.
Are there downsides? Not big ones. If you don't travel much, these cards might not be for you. If you prefer cash back, there are other cards that might be better, though they lack sign-up bonuses. And you might be able to wring more value from airline cards and other travel reward cards if you are willing to master the complexities of airline frequent flier programs and accept limitations on availability.
If you do sign up for one of this type of card, make sure to consider every year, before the annual fee comes due, whether you still want to hang on to this card. Be aware that if you cancel the card, you lose any unused points.
There's a lot to like about these cards, Karen, especially compared to a card you've kept for a while that has lost its appeal to you.
Meet CreditCards.com's reader Q&A expertsDoes a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- What counts as travel on a travel rewards card? – Find out how to make sure you're getting the points you are expecting for certain travel-related purchases ...
- Are airline cards worth the annual fee? – Airline cards come with big sign-on bonuses, but after that's used it's difficult to amass a significant number of points. However, there are other perks that make the annual fee worthwhile ...
- How does Priority Pass airline lounge access work? – With it, 1,000 airport lounges in 130 countries open their doors to you ...