Weighing rewards cards in aftermath of airline changes

Cashing In columnist Tony Mecia
Tony Mecia is a business journalist who writes for a number of trade and general-interest publications. He writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com

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Question Dear Cashing In,
I read about the changes to airline frequent flier programs. But I can't decide whether to hang onto my American Airlines credit card. Is it still a good deal? -- Brian

Answer Dear Brian,
It is true that the changes with airline frequent flier programs alter the decision-making on reward cards.

And it's not just on the Citi American Airlines cards, but also on cards connected to the other big U.S. airlines: United, Delta and Southwest. All now have similar ways to earn miles. Instead of earning frequent flier miles based on how many miles you fly in a given flight, you'll earn them based on the ticket price.

Earnings from credit cards will remain the same: 1 mile per $1. But still you may want to rethink which cards you use to earn.

Determining whether a particular card is right for you will depend on your circumstances, including how much you spend, how much you fly and what kind of rewards you prefer.

Let's run through the numbers and examine how an airline card (the American/Citi card in this case) would stack up against a cash-back card that offers 2 percent back on every charge. You'll see some patterns emerge:

Fly a little, charge a little
Assumption: Fly three times a year on ticket costing $350 round trip. Charge $1,000 a month on your credit card.

Miles from flying: 5,250 miles (1,750 per round-trip)

Airline card: 12,000 miles

Total: 17,250 miles.

Cash-back card: $240.

Analysis: If you don't travel a lot or charge a lot, a cash-back card might be better, since after a year, you still lack the minimum 25,000 miles needed for a round-trip reward ticket. That approach would give you the freedom to find the cheapest fare, regardless of airline, which you could at least partially pay for with rewards from the cash-back card.

Fly a little, charge a lot
Assumption: Fly three times a year on ticket costing $350 round trip. Charge $3,000 a month.

Miles from flying: 5,250 miles

Airline card: 36,000 miles

Total miles: 41,250 miles.

Cash-back card: $720.

Analysis: This is a closer call. If you charge a lot, the amount you earn with cash back is substantial. You might get the same or better value from an airline card if you spend the 25,000 miles earned from the card on a flight that would otherwise cost $720 or more. But these days with advance booking you can usually find a better deal than that on a domestic flight.

Fly a lot, charge a little
Assumption: Fly 10 times a year on ticket costing $350 round trip. Charge $1,000 a month.

Miles from flying: 17,500 if no status, or 24,500 if you have Gold status.

Airline card: 12,000 miles

Total miles: 29,500, or 36,500 miles with Gold status.

Cash-back card: $240.

Analysis: If you fly this much, it clearly makes sense to try to keep your flights on a single airline, since that's when the rewards start multiplying. You might qualify for Gold status based on the number of flights and distances flown. The value of an airline card also increases because it gives perks such as free checked bags.

Fly a lot, charge a lot
Assumption: Fly 10 times a year on ticket costing $350 round trip. Charge $3,000 a month.

Miles from flying: 17,500 if no status, or 24,500 if you have Gold status.

Airline card: 36,000 miles.

Total miles: 53,500 or 60,500.

Cash-back card: $720

Analysis: Miles can really start adding up with an airline card, so that might be a good solution if you envision taking a lot of reward trips or are trying to redeem multiple tickets. With this level of spending, you have a lot of good options and are probably highly sought by card companies.

Generally, the more you fly on a single airline, the more having an airline card makes sense, since you will use the perks such as free bags and expedited check-in more, and you will earn more miles from flights if you have elite status. But where that tipping point is will vary by individual.

If you are contemplating a new card, be aware that this analysis does not factor the effect of sign-up bonuses, which typically range between 30,000 and 50,000 miles on airline cards but often do not exist for cash-back cards. That could make the difference in deciding which card is best for you.

See related: How to react when your reward program changes, 5 questions for picking a rewards card -- and 1 that shouldn't matter, Poll: Wealthy cardholders prefer cash-back rewards

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Updated: 03-21-2019