Do Airline Credit Cards Offer Value?

Airline credit cards offer a wide variety of rewards programs, designed to appeal to consumers. However, without a clear understanding of the real-world value of airline reward "points", consumers may find themselves dissatisfied with their card. Therefore, before applying for an airline credit card, consumers should take a detailed look at the sometimes-complicated real-world value of their particular "points" system.

In the past few years, the promises extended to prospective applicants by airline credit cards have been both enticing but also somewhat vague. The promises are enticing because they seem limitless, with large application bonuses of thousands of frequent-flier miles, promises of rewards from any number of popular travel-related organizations, and even the possibility of "free cruises", "free hotel stays", and the like.

However, the promises are also vague because there's very little information available about exactly what these points mean, in terms of real-world buying power. While the 12,000 bonus miles offered upon a successful application for Discover's Miles Card seems like a large number, does it offer significant value? Unfortunately, unless you're willing to put in the research, the answer may be: less than you think.

Since the terror attacks on New York City, airlines have been losing money, in some cases even being forced to declare bankruptcy. Because of this, free airline mileage programs (including airline miles credit cards) have become significantly less useful to the common traveler, with flights becoming much less frequent and free seats much less common. The price in mileage "points" of a typical airline flight reflects this.

According to the fine print on the American Express "Blue Sky" airline credit card, mileage points can be redeemed exclusively in 7,500-point increments for a value of up to $100 per 7,500 points off of your travel purchases (meaning purchases made with a partner airline, hotel, car rental agency, or similar companies.) The "up to" there reflects the fact that your 7,500 points don't just mean $100 in your pocket: they mean $100 off of your travel purchases, with the difference discarded. So if you have 7,500 points, and you're renting a $59-a-night hotel room, those extra $41 disappear. Additionally, you can't apply your points until the after the initial charge actually appears on your billing statement, meaning that promises made by airline miles credit cards of "free cruises" and "free hotel stays", although potentially accurate, are not the entire story, and function more than anything else like a mail-in-rebate.

Add to all of this the typical airline credit card exchange rate of purchases to points--one point for every dollar charged, up to 75,000 redeemed points annually on the "Blue Sky" card--which works out to a rebate of just over 1% on your travel purchases, assuming that your travel purchases come exclusively in $100 increments, allowing none of the extra value to disappear into nothingness. So you begin to see some of the complexities behind the simple promise of airline credit cards.

This isn't to say that airline credit cards are altogether a bad idea. In fact, used in conjunction with the bonus mileage programs offered by certain hotel chains and airlines, frequent travelers may find airline miles credit cards a very good way of cutting back on travel expenses. But without a willingness on the part of the card user to research exactly how their card's particular "points" system works, be forewarned -- airline credit cards may not take you quite as far as you think.