Airline Rewards Credit Cards & Frequent Flyer Programs: An Overview

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Cash Money Life has partnered with CardRatings for our coverage of credit card products. Cash Money Life and CardRatings may receive a commission from card issuers. The world’s largest frequent flyer program, the American AAdvantage program, boasted over 74 million total members in 2013. And thanks to the completion of their merger with U.S. Airways…

Cash Money Life has partnered with CardRatings for our coverage of credit card products. Cash Money Life and CardRatings may receive a commission from card issuers.

Best airline rewards credit cardsThe world’s largest frequent flyer program, the American AAdvantage program, boasted over 74 million total members in 2013. And thanks to the completion of their merger with U.S. Airways that took place last year, that figure has now climbed to well over 100 million.

Over 200 billion airline miles were issued in 2013 as well, many of which were awarded through third party companies. These third-party affiliates, which typically include companies like rental car agencies, hotels, and credit card issuers, award customers with airline miles in exchange for making a purchase or using their service.

Yes, contrary to popular belief, you can earn frequent flyer miles without actually flying. And with co-branded airline rewards credit cards, you can even earn free flights, seat upgrades, and more just by signing up.

Featured Credit Cards

We’ve compiled the best airline miles credit cards below based on the offers that credit card issuers are willing to provide and if you own a card you feel deserves to be mentioned, leave a comment and we’ll be happy to add it on our list.

How Airline Credit Cards Work

Although each co-branded airline credit card has its own set of rules and perks, they all work similarly. The following list includes some of the basic rules each of these programs follows:

Airline credit cards allow you to earn points for regular spending – All airline credit cards reward you with points based on your everyday spending. In most cases, you’ll earn at least 1 point per dollar spent, although certain cards award more points for purchases made directly with an airline or specific vendor.

Many airline credit cards offer a sign-up bonus – Almost all airline credit cards offer a sign-up bonus in order to lure in new credit card customers. Although the value of these bonuses can vary, most award enough miles for at least one round-trip domestic flight. Sign-up bonuses are usually awarded to customers who are able to meet a minimum spending requirement within the first few months of card ownership, e.g. $3000 within 90 days.

Some airline credit cards help you earn special airline status – Although this can vary from card to card, some airline credit cards award you with special status simply for being a cardholder. Perks associated with special status can include priority seating, seat upgrades, and more.

You are responsible for government-mandated taxes and fees, even when your airfare is “free” – Using frequent flyer miles to pay for airfare doesn’t mean you’re off the hook when it comes to paying for government-mandated taxes and fees. For domestic flights, you should only be responsible for paying $5.60 per leg of your journey. For international flights, however, the taxes associated with your ticket could climb to several hundred dollars.

How Frequent Flyer Programs Work

With so many different airline credit cards available, it can be difficult to keep track of it all. However, it’s important to note that frequent flyer programs all work differently too. Although a number of factors help different frequent flyer programs stand out, most programs let you redeem your miles for airfare in one of three ways:

Distance-based redemptions – Some frequent flyer programs use a distance-based formula to determine how many miles you need for a specific redemption. With this type of program, shorter flights cost fewer miles and longer flights cost more. The most popular distance-based frequent flyer program by far is the British Airways Avios program.

Fare-based frequent flyer programs – Fare-based frequent flyer programs use the price of airfare to determine how many miles you need to redeem awards. Using this formula, the “price” of your award redemption could change from day to day. The most popular program that offers fare-based redemptions is Southwest Rapid Rewards.

Fixed-value frequent flyer programs – Some frequent flyer programs use a fixed-value strategy to decide how many miles are required for a redemption. When frequent flyer programs use this method, the “price” of your flight shouldn’t change unless the program goes through a devaluation. American Airlines AAdvantage, United MileagePlus, and Delta Skymiles are three of the most popular programs that offer fixed-value redemptions.

How to Select an Airline Credit Card

If you want to earn airline miles you can actually use, it’s important to be incredibly selective when you choose an airline credit card. Several factors can influence which card is best for your specific situation, including which airlines have hubs at your local airport, whether you want to fly domestic or international, and whether your travel dates are flexible or fixed.

But that isn’t all you need to consider; you should also compare different cards to find one that is compatible with your lifestyle and spending patterns. Here are some factors you should consider as you begin your search for the perfect airline card:

Consider your spending – If you hope to rack up airline miles with a sign-up bonus, it’s important to choose an airline credit card with a minimum spending requirement you can handle. Meanwhile, it might be wise to choose a card that offers extra points on the type of purchases you make most.

Make sure the airline you choose operates locally – Frequent flyer miles are worthless if you can’t redeem them. Before you choose a specific airline credit card, check the affiliated airline’s website to make sure they operate flights out of your local airport.

Don’t forget about taxes and fees – Although frequent flyer miles can take care of the fare portion of your flight, you’ll still be on the hook for government-mandated taxes and fees. For international travel especially, these fees can run into the hundreds of dollars. Doing some research ahead of time can help you prepare for these fees and minimize them whenever possible.

What other perks do you receive? Free flights are awesome, and are often worth opening a new account. But the best travel cards offer more than just a handful of bonus points. Common perks include free checked bags for you and your party, priority boarding, access to the airline lounge, double points on purchases through the airline or its partners, increased program status, and more. You also want to look at whether or not you can transfer your points to another mileage program if you need to.

Know your credit score – Almost all of the most lucrative airline credit card offers are only available to those with excellent credit. In most cases, excellent credit means having a credit score that is 720 or higher. Finding out your credit score ahead of time is a great way to determine if you might qualify for one of the best airline credit cards on the market.

Don’t forget about annual credit card fees – In addition to any interest charges you may accrue for carrying a balance, many airline cards charge an annual fee for their use. Usually, between $75 and $350, these fees are often waived for your first year of card ownership. However, sometimes the annual fee may pay for itself. For example, some of these cards will offer bonus miles good for a free airline ticket or companion ticket each year you renew your card. This will essentially pay for itself each year. The savings from free checked bags can also help make up for annual fee.

Good Rates on Balance Transfers – Many of the airline cards will allow you to move your balance from another card and get 0% interest for a set amount of time. If you are carrying debt, when you sign up for your rewards make sure to get one of the 0 percent interest credit cards so you can save money each month.

How easy is the card to use overseas? Frequent overseas travelers should carefully consider their credit card needs. Merchants in Europe and many other places almost always require credit cards to have a Smart Chip and a PIN in order to process purchases. Thankfully, Smart Chip technology is becoming easier to find on US credit cards. Certain credit card networks such as Visa and MasterCard may be easier to use in overseas locations than other networks. Finally, you overseas travelers will want to consider using a credit card that does not charge foreign transaction fees – which often add 2%-3% to the final amount charged.

Although using airline credit cards for free airfare might seem overwhelming, it’s probably not as complicated as it seems. Choosing the right card for your situation will go a long way towards helping you get the best deal possible with minimal effort. And if you’re able to master the art of redeeming frequent flyer miles for airfare, the savings will be well worth it.

Cash Money Life has partnered with CardRatings for our coverage of credit card products. Cash Money Life and CardRatings may receive a commission from card issuers.

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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