Airline credit-card deals are going sky-high.
Sign-up bonus miles for these cards have jumped 20% over last year's 30,000- and 40,000 mile-deals, according to CardHub.com. Experts say new cardholders can now count on earning enough miles with their first purchase to get at least one free round-trip ticket, and often, more. British Airways even brought back its 100,000-mile bonus.
The ongoing cardholder benefits keep getting richer, too. Last week, Citibank and American Airlines added perks to the $95-a-year Platinum Select AAdvantage card, including a free checked bag and priority boarding. Chase meanwhile introduced a new benefits-laden United MileagePlus Club card -- its $395 annual fee includes a membership to the airline's airport lounges worth $475, plus extras like two free checked bags and priority security and boarding lines. "The incentives have been ratcheting up," says Tim Winship a contributing editor for travel advice site SmarterTravel.com. "It's one thing to get a card into somebody's wallet, and it's another thing to keep them using that card."
The competition to lure cardholders comes as travel cards become increasingly attractive to banks and airlines. Banks like that cardholders in that segment tend to be big spenders with good credit scores, and thus, unlikely to default, says Dennis Moroney, a director of research at Tower Group. Airlines get the extra revenue and bookings boost at a time when high gas prices may otherwise keep travelers grounded, he says. "It's a combination of timing, opportunity and consumer preference," he says.
Whether such cards are a good option depends largely on what type of traveler you are, experts say. Consumers who tend to fly a particular airline more often than not should take a hard look at the latest crop of airline cards, says Winship. "These are benefits that you wouldn't otherwise get unless you're an elite frequent flier," he says. With more cards adding perks like free checked bags ($50 round-trip) and priority boarding (about $40), a traveler can often now come out ahead of an annual fee with just one round-trip flight a year.
But deal-hunters that live near a hub with plenty of airline options may be better off with a cash-back or generic travel card, which allows them to earn rewards to put toward a fare and still shop around for the airline with the best deal, says Odysseas Papadimitriou, the chief executive of CardHub.com. Those rewards can still be lucrative, he says -- the $59 CapitalOne Venture, for example, offers two miles per dollar spent and is free for the first year. New Chase Sapphire Preferred cardholders get $500 worth of travel rewards after spending $3,000 in the first three months. (The card, regularly $95, is free for the first year.)
It's also important to review terms of the deal. Initial bonus offers may be less attractive if the ongoing rewards aren't sweet, or the deal comes with spending strings, says Papadimitriou. British Airways' offer, for example, awards 50,000 miles after a cardholder's first purchase, a 25,000-mile bonus for spending $10,000, and then another 25,000 miles if they hit the $20,000 mark within the first year. And then there's the elephant in the room: redemption rates. Some airlines make it easier to redeem miles than others, and tickets may also be subject to expensive fuel surcharges and other fees that reduce their value, says Winship. "Free miles are potentially your trip to Hawaii, but don't expect to be flying to Hawaii during the period around Christmas or New Year's when everybody else is using their miles, or paying for tickets to Hawaii," he says. "Consumers redeeming miles still come in at the bottom of a long list of people looking for tickets."