How to choose a travel reward card
Aug 26 '02
The Bottom Line The basic consideration that goes into choosing a travel reward card is: How much benefit would you get from the reward? All else in commentary. Go now and study.
(So I'm still not good with titles.)
Note: This review (including the Bottom Line) is based on my earlier review on how to choose a reward card at http://www.epinions.com/content_2752422020. If you feel I haven't added adequate additional material, please let me know.
OK, now, on to the detailed considerations....
Type of Reward -- and can you actually use it?
Reward types include:
Airline cards If you don't fly, you're unlikely to be able to use the benefit. Of course, if people come to visit you, you can offer them the airline, hotel, and rental car coupons. Most airlines have a frequent flyer program and an associated credit card. However, if neither the airline nor any of its affiliates fly where you want to go, this would also not be a good choice for you. For example, if you live in Kentucky, a Southwest card probably won't help you, because they don't fly there.
Also Diner's Club and American Express have reward programs where you can transfer the points to one of many affiliated airline's program, although often at a lower number of credits (miles, points, etc.) per dollar spent than a card directly affiliated with that airline.
Hotel cards These are usually issued in conjunction with hotel frequent stay programs. As I was rejected from the last such program I've been with in 1992 for lack of use, I don't remember much about these programs. (Does Motel 6 have a frequent stay program?)
Cruise line cards I know someone who had one, but, having never been on a cruise (or, while employed, having enough vacation time for a cruise), they haven't interested me.
What transactions are eligible?
Most travel cards only make purchases eligible. If the one you're considering makes cash advances, balance transfers (or only account opening balance transfers) eligible, keep that in mind.
What is the credit assignment schedule? Most airline cards allocate 1 mile per dollar spent, up to a limit depending on the annual fee you pay for the card. (There may be other advantages to upgrading the card to gold, platinum, diamond, plutonium, etc., but I haven't found any of them useful.)
Many cards have additional ways to earn points. For example, both the American Airlines and United Airlines cards offer a program that will give you 10 miles per dollar spent at specified restaurants (no more than one time per restaurant per month).
Many cards also have a one-time bonus for signing up with the card; I've seen 4000 miles to 15000 miles, dependent on the offer, and how much you argue with the telemarketer. One of my airline cards has offered a 2000 mile bonus for referring other cardholders (up to 4 bonuses per offer). (If any reader is interested, E-mail me, and I'll see if the offer is still open.)
What is the credit redemption schedule? Most airline cards require 25,000 miles for an advance purchase single round-trip ticket (within the US and Canada) -- with an assignment rate of 1 mile/dollar, this could take a while. If you're outside the US, Your mileage may vary. (Sorry, I couldn't resist.)
Southwest issues a round trip certificate with 16 credits.
What is the credit expiration schedule? Most airline programs used to have miles at the calendar year 2 or 3 years after those specific miles are earned. Now, however, many airlines have the miles expire 3 years after ANY points were earned, so if you use the credit card at least once every 3 years, your miles won't expire.
Southwest's credits expire one year after they're earned.
What is the other costs of the card? The annual fee, interest rate (if you don't pay off the card in full each month), cash advance fees (if you use the card for cash advances) come into play here.
The annual fee for a standard airline credit card seems to be $65, but some cards go up to $150.
What are the other benefits of the card? Many travel reward cards offer travel services. The plans associated with specific airlines and hotels often offer special reservation numbers and discounts. (If you are issued the card, you're registered with the plan.)
Finally: Look at the Bottom Line. Consider your current purchases. Calculate the value (to you) of the rewards you would expect (on, say, an annual basis). Subtract any annual fees or interest charges you would expect to pay.
Compare this for different cards.
Don't assume that you will (or should) change your buying habits because you have a new card.
A final literary note: The story is that when Rabbi Hillel was asked to define the law of the Torah while standing on one leg, Rabbi Hillel replied: "What is hateful to you, do not do to your neighbor. All else is commentary; go now and study."
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