Are airline cards worth the annual fee?
By Tony Mecia | Published: July 18, 2017
Dear Cashing In,
I’ve played with points and miles for about a year now. My wife and I have both amassed enough of both to take multiple weeklong trips. But it feels like after everything we have learned and done, that airline cards don’t seem realistic for everyday spend. There are only so many sign-up bonuses and then the miles redemptions require flexibility that I don’t have. Is there something I’m overlooking to make better use of airline miles? A business class redemption to Europe through major carriers is more than 100,000 miles, and I feel like earning the same number of points with equivalent spending on the Chase Sapphire Reserve or hotel points has gone much further for us, personally. What are your thoughts? – Christopher
First off, congrats to you for quickly learning that credit cards can offer valuable, tangible rewards. It takes a little bit of study and understanding, but if you have already taken several big trips with miles and points, you seem to understand what is involved. (As always, these strategies should be undertaken only by those who pay off their cards in full and on time, and the best choice of cards goes to those with excellent credit.)
I would say that your observation is generally correct. As far as ongoing spending, airline cards are typically not as lucrative in amassing miles as other types of reward cards. If you look at the way to accrue points by spending on airline cards, you will see that most offer only the most basic one mile per $1 spent. If you use the card to buy tickets on their airline, you might receive two miles per $1 spent. In contrast, credit cards with reward programs run by banks tend to have more generous category bonuses, in some cases three or four points per $1 spent.
Obviously, on your ongoing spending, you are going to want to put most of it on the card that offers you the most points. Often, that will not be an airline card.
But let’s get a little philosophical here. There are all kinds of cards you can harness to meet your reward goals. We shouldn’t think of airline cards as worse than other kinds of cards. They just happen not to be as generous with category bonuses. They do have advantages in other areas.
In defense of airline cards, they do tend to come with significant sign-up bonuses. And they offer other perks that competitors’ cards cannot, such as a free checked bag and priority boarding. In many cases, depending on how often you fly, that alone can justify the annual fees, which tend to run in the $75-$95 range. They often waive those annual fees in the first year of card ownership.
Video: Credit card travel rewards tips from the pros
The other issue with airline miles, as you note, is that they are notoriously difficult to redeem when you want to use them. It can be tough to find precisely the flight you want with the routing you want on the day you want it. But if you know generally that you want to head to, say, Miami next spring, you can generally accomplish that goal. The values you can receive by using airline miles can sometimes be exceptional, far more than the fixed rates for buying flights offered by banks such as Chase.
It’s also important to understand that each major U.S. airline offers multiple rewards cards. There’s not just a single card per airline. For instance, Delta and American Express offer the basic Gold Delta SkyMiles card (annual fee: $95, waived first year), the Platinum Delta SkyMiles ($195 a year) and the Delta Reserve credit card ($450 a year).* Each is a separate card with a separate sign-up bonus. In addition to personal cards, airlines typically offer business versions, which are another way to take advantage of sign-up offers.
It is disappointing that we don’t see greater category bonuses on airline cards. Think about viewing them as one way, but not the only way, to help you achieve your rewards goals.
*The content on this page is accurate as of the posting date. Please see the bank’s website for the most current version of card offers.
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.
- Q&A: How do redeemed travel points get refunded if I cancel? – Most airline and hotel programs will issue a refund in points, but some, such as American Express, give you a statement credit ...
- What is the best rewards card to pair with Delta SkyMiles airline card? – Factors to consider when adding any rewards card include how much you spend, where you spend and what kind of rewards you prefer ...
- Is it time to ditch the Virgin America credit card? – The fate of the Virgin America rewards program is unclear as it merges with Alaska Airlines ...