In today’s world of consumer-focused business strategies and seemingly desperate marketing campaigns, consumers have a mountain of decisions to make every day and companies are constantly battling it out for market share and customer allegiance. In the past, this was restricted to your traditional consumer goods. But today, everything from chap sticks to credit cards are loaded with options and offers built in to win our loyalty.

Recently, my eyes were opened to the potential that some of these options offered. Over the next few months, I’ll be flying to destinations across the U.S. and Europe pretty much for free. Combine this great deal with the fact that I will have access to airline lounges offering complimentary drinks and food during the process, I’m basically being paid to travel. In this article, I’ll outline the basics of airline reward credit cards and credit card miles, their pros, their cons, and how you can start traveling for next to nothing with low risk and little effort.


The Basics of Credit Card Miles

Credit Card Miles by Seth Mason

Frequent Flyer Programs have come a long way since their inception by United Airlines way back in 1972. Today, nearly every traveler is enrolled in multiple programs through different airlines. However, few customers outside of business travelers ever claim any significant reward travel. With sites like Orbitz and Expedia becoming the norm, travelers are more likely to be loyal to their wallets than to an airline. This leaves most casual flyers with a few thousand miles between multiple airlines, unable to accumulate enough miles for even a cheap domestic flight. In fact, it is estimated that of the $48 billion worth of credit card miles earned every year, approximately one-third will never be redeemed.

In an effort to make miles more practical and usable, many frequent flyer programs are creating more diverse ways of spending miles. Nearly all of the major programs now offer shopping through a variety of partnerships. For example, Delta’s SkyMile program has quite a selection offered on their SkyMiles Marketplace. They even have a section for miles under 10,000, meaning that a transatlantic flight could earn you a pair of headphones or a new Belgian waffle-maker. Although the prices are usually highly inflated, they offer unique ways of redeeming rewards outside of just flying. SkyMiles, like many other loyalty programs today, no longer expire, meaning you have no need to rush and buy a cheap flight to see your family two hours away. Instead, you can choose to save up – years if needed – for a flight to somewhere you’ve been dreaming about.

On that note, let’s take a look at your basic loyalty program model. Based on the current Delta SkyMiles program (Check out the reward charts here), it would take approximately five round trip voyages from Atlanta to Paris to get one U.S. domestic reward trip. While it is still technically a “free” flight, the money spent (on average $5,000 USD) to money rewarded (approx. $300) is not so impressive, hovering around six cents per dollar spent. In 2015, Delta will be completely overhauling their program. Instead of being based on distance, miles earned will be based on amount spent, favoring those who spend more rather than those who travel more, and I suspect other miles programs to follow suit.

Ok, let’s go back to the miles. That flight from Atlanta to Paris and back cost you around $1,000 and earned you 8,700 miles, or 5,000 miles under the 2015 model. The cheapest flight on the reward model is a domestic US flight at low volume times – “saver” – which will put you back 25,000 miles and a booking fee of about $25.

While loyalty programs have been slowly devaluing their rewards over the past decade, it is easier than ever to earn credit card miles. Where before it required actually flying, today we can earn miles from pretty much everything such as groceries, gas, and appliances. This is where the article takes off. In the next section, we will look at earning credit card miles and how some offers can have you redeeming miles on time for your next trip.


Earning Credit Card Miles

Airlines and other major tourism industries (ie. Hotels) are partnering with credit card companies to make earning miles, and therefore flying, a more accessible activity. They know that if they can get their brand into your wallet, they are more likely to get your wallet into their brand. Before we get into the details, let’s keep the reward chart in the back of our mind. Remember that the cheapest reward flight was 25,000 miles, and if you want to extract any significant value, you’ll need at least 40,000 miles. Now, most cards offer 1:1 miles to dollars spent, with some offering 2:1 for certain purchases. Your average consumer, however, is not likely to rack up $40,000 in credit card purchases in a year. So, to help fight off that negative credit card stigma, they decided to make things more enticing. Cue sign-on bonuses.

Chances are, you’ve seen ads for these. They offer a variety of different bonuses, including cash back, statement credit, free hotel nights, and in most cases, bonus miles. The catch is that you have to spend a minimum amount on that card within an allotted time period, typically something like $3,000 within two to three months. The credit card miles that are awarded range from 20,000 all the way up to 70,000, depending on the airline and the offers currently available. While a lot of the cards have annual fees, they are usually waived for the first year. And since there is no contract to keep the card, you can easily cancel before the end of your first year.


Bean-Chicago---Seth-Mason
Chicago – My first destination paid for using credit card miles

My Experience

After quite a bit of research on rates, credit scores (more info on this later), bonuses, and general guidelines, I decided to sign up for my first reward credit card. I went with the American Express Delta Gold SkyMiles card to start. Here are some of the details:

  • $95 annual fee (1st year waived)
  • 50,000 SkyMiles after spending $3,000 in the first 3 months
  • 19.24% Interest Rate on purchases
  • 1:1 for everyday purchases, 2:1 for purchases with Delta
  • First bag checked free on all flights
  • Priority Boarding on all flights (Don’t undervalue this!)
  • 2 Free passes to Delta SkyClub
  • Rental Car Insurance Coverage
  • No Foreign Transaction Fees

After getting approved – about a week – the card arrived. I setup my online account and began spending. Now, here is where they get you. If you rack up that $3,000 for those bonus miles but then make the minimum payments, you would have been better off just buying that ticket to Paris from Orbitz. Interest racks up quickly so make sure to make payments ahead of time and pay off as much of your balance as you can each month. I found out that I was able to pay rent with my credit card for a $5 fee. So, I simply took my allotted money for rent, paid off my card with that, and within 3 months I had 53,000 miles in my account. Between my parents and I, we had about 30,000 miles that we had accumulated over the years, and I was able to get those miles transferred into my account. At this point, I’ve already booked my round-trip ticket to Brussels through Delta and will be taking advantage of the SkyClub along the way.

My second card was the Chase Visa Mileage Plus Explorer Card with United Airlines. The terms on this card were nearly identical to the Delta card with American Express, so I’ll spare the details. The only difference was that I could get an extra 5,000 miles by adding a second card under someone else’s name and making a purchase. So I added a friend who bought me lunch (on my tab), and I claimed my 5,000 miles. I’ve already flown round-trip from Raleigh to Chicago and have enough miles to get at least one more domestic flight. A ski trip this winter will take care of that.

I also need to mention that I had highly undervalued the priority boarding piece. Being among the first to board the plane made me realize just how stressful boarding can be. Not bumping into people as I walk down the aisle and always having room for my carry on in the overhead bins really made things a lot less chaotic and enhanced my flying experience as well.

In summary, I have paid $0 in interest, have taken just a 10 point knock on my credit score, and have not changed my spending habits in any way. I have already booked $1,400 in flights and have approximately $600 worth of credit card miles left to spend. I will save on checked luggage and will drink and eat for free in the lounge before my flight and during layovers. The only downside is that I cannot reapply and do it again, although there are tons of other cards to take advantage of in the future.


Things to Consider

If you are still reading, you are probably already weighing some options. Before you go on flying around the world on someone else’s tab, make sure to take some things into account first.

1. This is a Business

I feel like a lot of consumers today forget this far too often. Whenever something is too good to be true in the business world, it always is. Airlines make money off of these programs and credit card companies will usually rake in more in interest than consumers will make off of reward flights, so be sure to pay off your balance. Also, the minimal cost to airlines is more than compensated by the increased loyalty they receive in return. The average seat on a plane costs only $30 between fuel, food, and staffing.

2. Plan Ahead

Just like walking into a casino, it is important to have a strategy and know your limits. If you have to spend $5,000 to get your bonus miles, make sure that you have a plan to do so. For me, it was paying rent but it could also be tuition, medical fees, or monthly utility bills. Don’t spend needlessly though just to reach that minimum, otherwise, what’s the point? Also, I highly recommend starting with one card and see how it works out. There are many types of cards out there, and you could probably repeat this for years. Don’t go all in on the first hand.

3. Know your Credit Score

Before you even start thinking about getting into reward cards, understand the impact on your credit scores. The most important detail is that every time there is an inquiry about your credit score, which happens each time you apply for a credit card, it takes miles from your credit score. Why? Because the only time there are inquiries are if companies or banks want to know if you can pay them back what you owe them. So, for a credit card inquiry, regardless of acceptance, there is a 5-point deduction to your credit score. This is a relatively small impact, but still to be considered. If you are planning on taking out a significant loan in the near future (ie. Mortgage, car loan), then you may want to wait or at least talk to the bank. This is also another reason not to apply for more than one card at a time.

4. Know the Details

As with any agreement, ensure that you know exactly what you’re getting into. Understand the rates, the transaction fees, the late fees, and any limitations that the card may have associated with it. Also, if there are annual fees, make sure you are going to consistently use the card to make it worth the extra expense or cancel before the year is up.


Credit Card Miles Chicago United Club

Tips

In addition to the need to know items above, I want to offer some tips based on my experiences for those of you who maybe considering your first reward card. I’ll also provide some resources that helped me understand the rewards and risks. Everyone will go about this differently, but if you can follow some of these tips and do some additional research, you can certainly get the most out of your experience.

1. Wait for the Right Card

Card offers and bonus miles often vary. 30,000 miles is not a high bonus and will gain you just one free flight. Some cards will have specials throughout the year with up to 75,000 bonus miles. Do some research on the best card for you and then be patient for a good deal to materialize.

2. Book Rewards Wisely

Reward charts typically have low, standard, and high rates. The high rates will drain your miles quickly and at an uneven dollars/point ratio. It may only cost $200 more on that certain date, but it may be 80,000 miles in addition if booked with miles.

Also, before you book a flight, check the value in dollars first. If a flight from Atlanta to New York is only $140 at the time of booking, is it worth dropping 32,000 miles for? The flight to Paris for 60,000 miles is of far greater value.

3. Check Your Current Miles

If you have been traveling at any rate in the past and remember signing up for any programs, chances are you still have some miles out there. I was surprised to find out that I had 7,000 miles with United from a flight when I was a teenager, and I was able to have those added to my account. My parents had quite a few miles with Delta that they weren’t using and figured they would make a good birthday present. For a small fee, you can combine any number of accounts in any major program.

4. Choose the Airline for You

Depending on where you want to travel to and where you live, certain airlines may be a better match for you. Find an airline that fits your travel needs and has flights in your area before signing up for anything.

5. Explore The Data

There is a tremendous amount of information and analysis out there that cover and compare loyalty programs. Online articles, like recent coverage in Consumer Report, can help when you are just getting started. For those interested in a more in depth introduction, Million Mile Secrets is a fantastic online blog that will teach you how to take advantage of all of the possible reward programs out there. I recommend starting with the “Beginner’s Guide to Miles & Points” article if this post has peaked your interest!


Using these tips will have you zipping through the clouds in no time!

Do you have any trade secrets on how to make the most of your credit card miles or airline loyalty programs? Let us know in the comments below!


“Credit Card Miles” photos courtesy of Seth Mason; Top Gun is property of Paramount Pictures, title image via Wallpapers87

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Seth Mason

Seth Mason

Seth currently lives in Raleigh, North Carolina working in hospitality management. He has lived in El Salvador, Costa Rica, France, and South Korea. He lives by the motto "Work hard, play harder" and will take advantage of any time off to get out and notch another place off his list. Some of the things Seth enjoys most in life include soccer, languages, coffee shops, heights, perfectly cooked steak, and waking up to the sound of the ocean. When he grows up he plans to pursue his dream of opening a boutique hotel somewhere in the world.

Departful is a travel magazine that provides accessible, relevant, and thoughtful travel tips and ideas to inspire people to explore the world around them. We feature travel articles, travel tips, and photography based on our own experiences from over 100 countries covering all things adventure, culture, food and drink, technology, and gear. Made with ❤ in Toronto.

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