Understanding how airline rewards programs work
Airline credit cards still have value amid industry consolidation
By Tony Mecia | Published: October 4, 2016
Dear Cashing In,
What airlines offer rewards? – Julie
The short answer to a short question: All of them.
Understanding how these airline rewards programs work is a slightly longer and more complicated answer. It’s a timely question, because in the past few years, there have been a number of changes in the airline industry and the rewards programs are changing.
First, the airline industry has continued its long-term trend of consolidation. Do you recall any of these names: Continental, US Airways, AirTran, Northwest, American West, TWA? In the past 15 years, all of those airlines have been gobbled up by competitors.
As a result, today there are only four major U.S. airlines: Delta, American, United and Southwest. There are a few smaller ones, but the big four account for more than 75 percent of passengers. Their reward programs have merged, too.
Second, airlines have altered the way passengers earn frequent flier miles. The two major ways to earn miles are by flying and by using a credit card affiliated with the airline. In the past few years, all major U.S. airlines have changed how passengers earn miles for flying, while the structure of earning miles with credit cards has stayed the same.
Generally, airlines have moved from a system that awards miles based on the distance of the trip to a more complex system that awards miles based on the fare you paid for your seat. Compared with the old way, occasional travelers will earn fewer miles, while the most frequent travelers and those who purchase more expensive seats will earn more:
Credit card: Citi AAdvantage Gold MasterCard ($50 annual fee, waived first year). 25,000 miles after spending $750 in three months. More elite cards also available.
Earning: On tickets, Aadvantage members earn 5 miles/$1 spent; more for elite-level frequent fliers. 1 mile/$1 spent for all credit card purchases. (Platinum card is $95/year, waived first year, gives 2x miles on American purchases.)
Redeeming: One-way redemptions start at 7,500 miles. Availability based on demand.
Credit card: American Express Gold Delta SkyMiles card ($95 annual fee, waived first year). Bonus of 30,000 miles after spending $1,000 in three months. More elite cards also available.
Earning: On tickets, 5 miles/$1 spent; more for elite-level frequent fliers. Two miles per $1 spent on Delta with affiliated credit card; 1 mile/$1 on all other purchases.
Redeeming: No award chart, but one-way redemptions start at 10,000 miles. Availability based on demand.
Credit card: Chase Southwest Rapid Rewards Plus card ($69/year). Bonus of 50,000 miles after spending $2,000 in three months. There’s also a $99 version with a few more perks.
Earning: On tickets, depends on fare paid, starting at 6 miles/$1 on cheapest fares. On credit card, 2 points/$1 on Southwest purchases, 1 point on all else.
Redeeming: No award chart. Number of miles required depends on price of ticket. Lots of availability but number of miles required ranges based on demand.
Credit card: Chase United MileagePlus Explorer card ($95 annual fee, waived first year). 30,000 miles after spending $1,000 in three months. More elite cards also available.
Earning: On tickets, 5 miles per $1 spent; more for elite-level frequent fliers. Two miles per $1 spent on United with affiliated credit card; 1 mile/dollar for all other purchases.
Redeeming: One-way redemptions start at 10,000 miles. Availability based on demand.
You can see that the credit cards associated with the airlines can be a good deal, especially for the sign-up bonuses. They often come with other perks, too, such as priority boarding and free checked bags.
Signing up for frequent flier programs costs nothing, and you should do that before taking a flight. If you are considering an airline card, be on the lookout for deals at the airport or on board, as they might offer specials you can’t find on the Internet.
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.
- 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 ...
- Maximizing card rewards after you've earned the sign-up bonus – So, you've signed up for a bunch of rewards cards, now what? Even if you've already earned the sign-on bonus, there are still some strategies to getting every point available ...