Saturday, November 05, 2005
Credit Cards for the non-frequent flier: Are Miles worth it?
There are two routes to take to accumulate airline miles: one for the frequent fliers and another for people collecting miles via their credit cards. For the non-fliers, have you ever evaluated if the miles are actually worth collecting? Read on so you don’t get short-changed.
Non-filers need to spend $25,000 to qualify for a free domestic ticket which is in addition to a $60 annual fee. Valuing airline miles at 1.4¢ that domestic ticket is worth $290, assuming you spend $25,000 in one year. If it takes longer to reach the threshold, the award is worth less.
Now, consider the probability of actually redeeming miles for a seat when you want it. Let’s not forget blackout dates and the precarious state of many airlines’ finances. Thus it becomes more difficult to actually use the miles than buying a similar ticket for about $300 (or possibly less). Think about your last trip – did it cost $290 or less? Most likely, you can get anywhere in this country for under $300 – so for domestic travel, cash payment should be the preferred option.
So, “what else can I get,” you ask. The basic options are either a reward program from a company you frequent or cash back. LL Bean, Fidelity, Amazon, Bloomingdales and buy.com are examples of retailers that offer increased incentives for users of their cards. The yardstick to use for comparison is a cash-back card. The two best ones on the market are the Citibank Dividend Platinum Select Card and American Express Blue Cash.
With these cards you receive 5% cash back on purchases at drugstores, supermarkets and gas stations and between 1-1.5% back on everything else. There are caveats: with Citibank there is a reward limit of $300, and with American Express the payouts only really start kicking in after your first $6000 of purchases. By evaluating your own spending habits you can easily chose the one that is right.
There are two other important factors to consider. International tickets are more expensive thus potentially shifting the preferred purchase option to miles. So if your goal is to travel to Sydney after graduation, the sixty-thousand mile reward on United may be more economical than a $1400 ticket. Seat availability on popular routes is severely restricted, causing many to reevaluate the actual usefulness of their miles. Second, consultants swear by the perks and benefits from the Starwood Rewards Program so if you believe their high priced advice you might consider this card from American Express. Either way, make an informed choice about what value your “reward” offers and don’t be Short Changed by the airline marketers.
Links:
Are Airline Miles Worth The Hassle? http://www.msnbc.msn.com/id/9400672/
Citi Dividend Platinum Select Card http://www.citibank.com/us/cards/cardserv/divplat/index.jsp
American Express Blue Cash: https://www124.americanexpress.com/cards/loyalty.do?page=bluecash
Non-filers need to spend $25,000 to qualify for a free domestic ticket which is in addition to a $60 annual fee. Valuing airline miles at 1.4¢ that domestic ticket is worth $290, assuming you spend $25,000 in one year. If it takes longer to reach the threshold, the award is worth less.
Now, consider the probability of actually redeeming miles for a seat when you want it. Let’s not forget blackout dates and the precarious state of many airlines’ finances. Thus it becomes more difficult to actually use the miles than buying a similar ticket for about $300 (or possibly less). Think about your last trip – did it cost $290 or less? Most likely, you can get anywhere in this country for under $300 – so for domestic travel, cash payment should be the preferred option.
So, “what else can I get,” you ask. The basic options are either a reward program from a company you frequent or cash back. LL Bean, Fidelity, Amazon, Bloomingdales and buy.com are examples of retailers that offer increased incentives for users of their cards. The yardstick to use for comparison is a cash-back card. The two best ones on the market are the Citibank Dividend Platinum Select Card and American Express Blue Cash.
With these cards you receive 5% cash back on purchases at drugstores, supermarkets and gas stations and between 1-1.5% back on everything else. There are caveats: with Citibank there is a reward limit of $300, and with American Express the payouts only really start kicking in after your first $6000 of purchases. By evaluating your own spending habits you can easily chose the one that is right.
There are two other important factors to consider. International tickets are more expensive thus potentially shifting the preferred purchase option to miles. So if your goal is to travel to Sydney after graduation, the sixty-thousand mile reward on United may be more economical than a $1400 ticket. Seat availability on popular routes is severely restricted, causing many to reevaluate the actual usefulness of their miles. Second, consultants swear by the perks and benefits from the Starwood Rewards Program so if you believe their high priced advice you might consider this card from American Express. Either way, make an informed choice about what value your “reward” offers and don’t be Short Changed by the airline marketers.
Links:
Are Airline Miles Worth The Hassle? http://www.msnbc.msn.com/id/9400672/
Citi Dividend Platinum Select Card http://www.citibank.com/us/cards/cardserv/divplat/index.jsp
American Express Blue Cash: https://www124.americanexpress.com/cards/loyalty.do?page=bluecash
Labels: Credit Cards, Travel
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